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Mexico auto industry continues its expansion

Black BMW sports car representing the booming auto industry in Mexico.
09 Dec 2014

Mexico is continuing forward with its slow-but-steady growth pace, according to Finance Minister Luis Videgaray, and therefore the country doesn't need to alter its currency or inflation rates, Reuters reported. Essentially, this is good news for investors who want to build a maquiladora in Mexico. While countries like Brazil are artificially propping up their exchange rates, Mexico has chosen the safer and more stable route. Essentially, the country is committed to easing its way into an expanded economy. This means that unlike China, which grew so quickly that it is now more expensive to build products there as opposed to Mexico, the North American country will continue to be a profitable location for offshoring for many years into the future.

"Mexico should be the region's stand out performer over 2015-16."

Offshoring in Mexico is a simple procedure when it's done using the help of experts who will intervene on behalf of those who need assistance – such as through the use of Mexico shelter companies. These businesses help industries in the U.S. build factories in maquila-designated parts of Mexico. A maquila is a special property attribute that gives tax and governmental incentives to those who earn the right to build factories there. In exchange, essentially all of the items built in a maquiladora factory must be shipped outside of the country . This is easy to do, however, because of trade partnerships such as the North American Free Trade Agreement, which allows people from every North American country to ship goods through the borders to Canada, the U.S. or Mexico without any tariffs. This includes items shipped by boat to the East and West coasts. It also means that a company can have parts built in Mexico, shipped to the U.S. and assembled there, and then sent to every part of North America, including Canada, for no tariff. In other words, a business can source its products wherever it is cheapest to do so.

The third quarter has been good for Mexico
The Wall Street Journal reported that Mexico has seen modest growth of 2.2 percent for its gross domestic product in Q3. The auto industry was a major driver as the sector experienced sales gains of 4 percent, year over year. Oil and gas are also becoming cheaper, which makes manufacturing a power engine making Mexico a wealthier nation.

"Mexico should be the region's stand out performer over 2015-16," said Capital Economics emerging market economist Davis Reese.

He expected Mexico's growth to continue to be fueled by the expansion in the U.S. Both countries tend to follow each other in terms of growth and contraction, and development has been good in the U.S. because of the increasingly large supply of natural gas and oil, driving prices down and making it more lucrative to produce items for sale or export.

BMWs are being made in Mexico.

Automobile industry is growing
Companies as quality-focused as BMW and Audi are both expected to shift their Mexican factory production away from mass-market cars to luxury autos, according to Automotive News. This is to be expected because Mexican workers are becoming ever more advanced when it comes to manufacturing. Schools and government programs are combining to make Mexico a major player when it comes to the auto industry.