Understanding the Top 3 Industrial Sectors in Mexico

June 26, 2020

Though many industries are taking advantage of the benefits that manufacturing in Mexico has to offer, three main sectors – automotive, aerospace, and medical devices – are the most prominent. Learn more about the top three manufacturing industries in Mexico and how shelter services are an excellent option for companies looking to enter these competitive markets.

Mexico is a highly attractive option for nearly any industrial business considering the benefits of expanding to Mexico. From electronics to furniture and everything in between, manufacturers have flocked to Mexico to take advantage of its many benefits: low-cost labor, well-developed infrastructure, and easy access to global markets. However, there are three primary industries in Mexico that have been mostly responsible for the country's explosive manufacturing growth: automotive, aerospace, and medical device manufacturing.

For any business considering manufacturing in Mexico, it is beneficial to understand these three industrial sectors:

Industry #1: Automotive Manufacturing

Photo of Automotive Factory in Mexico where cars are made for export

Automotive manufacturing in Mexico has led the way in the country over the past ten years. Manufacturers from Canada, the U.S., and China have all recognized the benefits of manufacturing in Mexico and have chosen it as the ideal location to produce both products and parts. According to some estimates, investment in Mexico's automotive industry is expected to increase by USD $10 billion over the next several years. Major automakers have confirmed this trend, with BMW investing in a new plant in San Luis Potosí for over USD $1 billion, and Nissan recently investing USD $278 million into their Aguascalientes A1 plant.

Located close to the U.S., Mexico's western ports allow OEM manufacturers and Tier 1 and Tier 2 suppliers to export goods to Asia, Australia, and New Zealand. As a result, Mexico provides a desirable supply-chain solution for manufacturing countries across the world. Companies manufacturing in Mexico rely on the country's strong support network of suppliers, which has been built up over a century of supporting automotive manufacturing. With strong automotive clusters throughout the country, Mexico's 30 automotive OEM assembly plants are supported by hundreds of Tier 1, 2, and 3 suppliers.

Further, Mexico's participation in USMCA, among numerous other Free Trade Agreements, makes it a prime location for the auto industry. With more Free Trade Agreements (FTAs) than any other country, Mexico serves as a robust export platform to its U.S. neighbor and the world. The Center for Automotive Research notes that Mexico's strong network of FTAs lead to tariff savings of more than $4,000 per vehicle in exporting a $25,000 vehicle to the EU, with the tariff advantage growing proportionally with vehicle value.

As automakers manufacturing in Mexico adapt to shifting consumer demands, innovation, low-cost manufacturing, and market proximity will play an increasingly critical role in helping automotive manufacturers stand apart.

Must Read: Overview of the Automotive Manufacturing Industry In Mexico

Industry #2: Aerospace Manufacturing

Aerospace Factory in Mexico where engine components are manufactured

Aerospace manufacturing in Mexico is another critical component of Mexico's booming manufacturing industry. According to a 2019 report on the Mexican aerospace industry, Mexico is the 14th largest aerospace supplier globally, and the sixth-largest exporter of aerospace components to the United States. From aircraft engine components to electrical systems, manufacturers such as General Electric, Bombardier, Honeywell, Airbus, and other suppliers choose to locate their manufacturing operations in Mexico.

The aerospace influx began in the 1970s when U.S. companies began sending their parts manufacturing operations into the country. In recent years, Mexico has leveraged its manufacturing strengths in the automotive industry – including experienced labor, industrial infrastructure, and well-connected supply chains – to develop its aerospace expertise.

In the past decade, the aerospace manufacturing industry in Mexico has grown tremendously due to political reform that welcomed its participation in NAFTA and its highly advantageous "maquiladora" model. The maquiladora model offers ease of implementation and trade benefits and gives businesses greater control over the manufacturing of highly expensive aerospace parts. 

A key reason for the tremendous growth in aerospace manufacturing in Mexico is the high number of college graduates with degrees in engineering. In fact, the Mexican government has made investing in education a priority, and highly-skilled workers make manufacturing there feasible and beneficial.

Industry #3: Medical Device Manufacturing

Medical Device Manufacturing Facility in Mexico

Mexico has become home to some of the medical device manufacturing industry's most important players, producing everything from pipettes and needles to pacemakers and respirators. Medical device manufacturing in Mexico is a vital component of the country's industry and is one of its fastest-growing sectors. In 2018, Mexico exported more than USD $9 billion in medical equipment and supplies, with projections from INEGI (the Instituto Nacional de Estadística y Geografía) placing that closer to $15 billion by the end of 2020.

A significant factor in the success of the medical device manufacturing industry in Mexico is due to location. Manufacturers in Mexico have close proximity to some of the largest medical markets in the United States. Nearby San Diego is home to over 600 life science companies. Tijuana is a mere half-hour drive to the booming Baja California region, where the medical device manufacturing industry is one of the leading local employers. The States of Chihuahua, Coahuila, Nuevo León, Jalisco, Sonora, and Tamaulipas closely follow, with many medical device manufacturers operating in their regions.

Shelter services can get you up and running in any industry

 

Companies looking to enter one of these three significant industries often choose to do so using a shelter services provider. As one of the most straightforward entry strategies to begin manufacturing in Mexico, the shelter services model makes it far simpler to get up and running, regardless of industry.

Quick start-up, lower costs, easily-managed labor, more flexibility, and access to in-depth industry information are some of the top benefits. Beyond these advantages, shelter service providers are experts in other local affairs and can help companies stay competitive in the popular automotive, aerospace, or medical device markets.

Learn more about the benefits of using shelter services here.

Get more information about top industries manufacturing in Mexico

Automotive manufacturing, aerospace manufacturing, and medical device manufacturing are booming sectors that have tapped into the many benefits of manufacturing in Mexico. To learn more about these industries and how using a shelter services provider can help get your company started, contact a Tetakawi expert.

 

 

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