Over the past 15 years the government has been very disciplined in how they managed monetary policy, and that has given Mexico stability.
According to the Mexican Automobile Industry Association (AMIA), in 2009 automobile production dropped to 1.51 million units, a level not seen in almost a decade. In 2010, however, the industry recovered to 2.26 million units – an all-time high. The trend is continuing in 2011 with increases in production (13%), exports (16%) and domestic consumption (11%) in the first four months of the year.
GDP GROWTH OF 4 TO 5 PERCENT
“Over the past 15 years the government has been very disciplined in how they managed monetary policy, and that has given Mexico stability,” says Alex Meza, Head of WWL Mexico. “In the past a global recession like this would have killed the economy. This time Mexico was still hurt but certainly more protected, so right now GDP is growing at 4 to 5 percent.” Though the 5.5 percent GDP growth in 2010 has slowed somewhat in 2011, economists are predicting that Mexico will be the world’s eighth-largest economy by 2050. To support its growth, Mexico will soon complete a US$150 billion national infrastructure project for new highways, airports, railroad lines and coastal ports.
REDISCOVERED BY MANUFACTURERS
“There are a few reasons why the industry went from a bad year to a historic year,” says Meza. “In essence, what happened after 2009 is that the auto industry reviewed and consolidated their production resources, and Mexico was seen as providing real value. They shifted production volumes to Mexico that had not typically been here.” Ford, for example, opened a new factory in Mexico in 2010, and Mazda, Honda, Toyota and Hyundai are considering building new plants for 2013-14. “The skill of the worker pool in Mexico is very good for the auto industry, as is the quality of product,” he explains. “Mexico still can’t compete with China or India when it comes to lower wages, but when you factor in logistics costs and proximity to markets Mexico becomes a very attractive alternative.”
EXPORT AND DOMESTIC GROWTH
Due to lower labour costs compared to the US, and its supply chain competitiveness, Mexico’s share of North American auto production is expected to rise to 19 percent over the next decade, according to DesRosiers Automotive Consulting, Inc., in contrast to a 12 percent share from 2000 to 2009. Of Mexico’s auto production about 80 percent is exported, primarily to the US and Canada but also to the growing Latin America market. Domestic consumption in Mexico has also recovered as the economy has improved. In 2010, light vehicles sales in the country increased 8.7 percent year-on-year, to a total of 820,406 units. Mexico’s population, with half of the people under 26, also provides an advantage with its abundance of young skilled workers and the potential for increased consumption.
WWL IN MEXICO
WWL handles more units in Mexico’s auto industry than any other supplier in the country. Providing ocean transportation, inland distribution, technical services and supply chain management, the company managed 514,000 units in 2009 and 732,000 in 2010, and expects to manage close to 850,000 in 2011. “We are always looking for ways to improve service for our customers in this growing market,” says Alex Meza, Head of WWL Mexico.