Want to be the next German company to succeed in Mexico? Here is how!

September 18, 2019

In today’s challenging economic climate — with the threat of recession hitting Germany, new global trade agreements bringing change to established manufacturing chains and the threat of Brexit impacting the entire European Union — many manufacturers are seeking new solutions. German manufacturers in particular are feeling the need to diversify to stay ahead of economic threats. After all, German manufacturing has been particularly hard hit by economic conditions. According to the August 2019  IFO Institute report, “The last time that industrial companies demonstrated such pessimism was in the crisis year of 2009. Not a single ray of light was to be seen in any of Germany’s key industries.”

However, there are rays of light to be found today. For starters, diversifying low-cost manufacturing to better serve customers across the broad global marketplace can help support German-based companies focused on exports.

More than 2,000 German companies have already found success manufacturing in Mexico. The two countries have reaffirmed their alliance to one another as recently as May 2019, when German Minister of Foreign Affairs, Heiko Mass and Mexico’s Secretary of Foreign Affairs, Marcelo Ebrard, signed a joint declaration to launch the next stage in the “Alliance for the Future” that unites the two countries. 

Those companies wondering whether a presence Mexico could strengthen their export business, or simply looking to strengthen their Mexico-based operations, will find insight to support their next move at Tetakawi’s executive workshop on 18 November in Frankfurt. The workshop is aimed at helping German manufacturers understand how to control costs when operating in Mexico.

Global changes push German manufacturers to adapt

The ongoing U.S.-China trade war has hit U.S. consumers, Chinese manufacturers and, perhaps more surprisingly, the German economy. Chancellor Angela Merkel recently commented that the international uncertainty caused by the U.S.-China trade conflict is “of course having an impact on an export nation like Germany.”

In response to the tariffs, many companies are looking to shift manufacturing out of China, finding sources for low-cost manufacturing. Mexico, however, offers more than just low costs. Many manufacturers benefit from the combination of cost savings, close proximity to U.S. consumers, and skilled labor that comes from a long history of complex manufacturing.

That is what attracted BMTS Technology, the Stuttgart-based manufacturer of turbocharged exhaust systems, to in Ramos Arizpe, Coahuila. According to the company, which also has branches across China and one in the United States, “Ideal framework conditions, qualified workforce and proximity to many customers make the country very attractive for players in the industry.” When the Mexico facility opened on 5 September, 2019, it created 500 new manufacturing jobs. The company has set a target to produce 2 million exhaust gas turbochargers each year.

German companies see Mexico as launch pad for meeting global demand

Other German companies have simply found that diversifying their manufacturing footprint with facilities in Mexico provides a strengthened platform from which to meet global demand. For example, when BMW opened its first plant in Mexico, board member Oliver Zipse reported that the decision was made based on Mexico’s “key geographical position.” The $1 billion plant opened in San Luis Potosi in June 2019 to produce 175,000 3-series sedans each year to meet global demand.

Hamburg, Germany-based Nordex Group, a manufacturer of rotor blades for wind turbines, also based its recent expansion into Mexico on the country’s ideal location for meeting global demand. Said CEO José Luis Blanco in an announcement, "With the plant in Matamoros, we are responding to the sharp rise in global demand for our products. In addition to the existing rotor blade production facilities in different regions, we can now also manufacture our rotor blades in the vicinity of the North and Latin American growth markets."

When production began in June 2019 for some of the largest turbine blades the company has ever produced, it created 300 new jobs, with plans for an additional 500 jobs as production ramps up in the next few years. The $63.1 million plant plans to produce about 1,000 wind turbine blades annually, approximately a third of the company’s total production.

Daimler Trucks North America also is ramping up its production goals, in its case for the Cascadia tractor trucks it manufactures in Saltillo. And they aren’t alone. Mexico News Daily recently reported that heavy vehicle production rose 42% in the first five months of 2019 to a record 85,965 units. The National Association of Bus, Truck and Tractor Manufacturers said that rising demand came largely from the United States and interest in more environmentally friendly vehicles, and German manufacturers are poised to respond to that demand.

Get the data before making a decision

Like any challenge, today’s shifting global economy will reward innovators who are willing to respond to changing demands in new ways. But that doesn’t mean jumping blindly into a new investment. The key to long-term success in Mexico is understanding the costs and controlling them to your benefit.

Tetakawi’s upcoming workshop aims to support companies in that understanding. If you’re ready to learn more about the costs of setting up a manufacturing presence in Mexico, register today for the executive workshop, 18 November from 8:00 am to 12:00 pm at Klassikstadt in Frankfurt. This workshop, hosted in partnership with AHK Mexiko (CAMEXA), will give you the information, insights and data you need to make stronger decisions around expanding or boosting the success of your existing operation in Mexico.

 

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