Mexico fortifies role as N.A. assembly hub with plum Audi plant
Low wages, favorable trade accords, generous tax and government incentives and a robust supply base have encouraged automakers to aggressively invest in Mexico.
Score another big win for Mexico.
With Volkswagen AG's decision today to build an Audi assembly plant there, the country has cemented its role as a major North American hub for light vehicle production.
Audi is joining Mazda Motor Corp., Honda Motor Co., Ford Motor Co. and Nissan Motor Co. with plans for new or expanded vehicle assembly operations in Mexico.
But Audi will become just the third luxury brand to build light vehicles on a major scale in Mexico.
The Cadillac SRX crossover, Escalade EXT luxury pickup and Lincoln MKZ sedan are the only luxury models assembled in Mexico.
Light vehicle production in Mexico rose 13 percent last year to a record 2.6 million units and the country's share of North American output hit a record 19.5 percent in 2011, according to the Automotive News Data Center.
Low wages, favorable trade accords, generous tax and government incentives and a robust supply base have encouraged automakers to aggressively invest in the country.
Audi Chairman Rupert Stadler said good infrastructure, a competitive cost structure and existing free-trade agreements played a significant role in the decision to select Mexico over other North American sites.
"This trailblazing move will help us safeguard our position on the world market," Stadler said in a statement.
Mexico exported a record 2.14 million cars in 2011, a 15.3 percent increase from a year earlier, the Mexican government said in March.
By 2017, the country is expected to become the world's third-largest automobile exporter and the seventh-largest producer of cars, the Mexican government said.
As recently as 2004, Mexico accounted for less than 10 percent of the vehicles produced in North America.
"The productivity and quality of product coming out of plants in Mexico is certainly equal to that of product coming from the United States and Canada," said Tony Faria, co-director of the Office of Automotive & Vehicle Research, a consulting and research unit at the University of Windsor in Ontario.
In 2011, Mexico was second to China in attracting investment for vehicle assembly operations worldwide, according to a study by the office.
While China grabbed more than half of the total investments in automotive assembly operations in 2011, Mexico far outpaced the United States in North America.
Of the $24.4 billion earmarked for new auto assembly worldwide in 2011, China received $13.8 billion or 56.6 percent, making it the top country of 28 studied, according to the office.
Mexico attracted $3.3 billion in auto assembly investment in 2011 -- triple the outlays earmarked for the United States. Canada received no investment for auto assembly in 2011.
China and Mexico were followed by Brazil, India, the United States and Indonesia on the list.
Mexico passed Canada in light vehicle output in 2008.
During 2011, three Japanese manufacturers selected Mexico for light vehicle factories. In June, Mazda announced plans to invest $500 million in a plant in Salamanca to produce the Mazda2 and Mazda3.
Honda said in August it will construct an $800 million plant in Celaya to build the subcompact Fit, and in December, Nissan unveiled plans to build a $2 billion assembly plant in Aguascalientes.
Last month, Ford said it will invest $1.3 billion in its stamping and assembly plant in Hermosillo, creating 1,000 jobs.
The United States secured three major investments from automakers since the start of 2011.
In June, Kia announced an investment of $100 million to expand capacity at its plant in West Point, Ga. Honda said in November it would invest $84 million to expand capacity at its plant in Lincoln, Ala., and in January, BMW unveiled plans to invest $900 million to increase output at its factory in Spartanburg, S.C.
China, the world's largest light-vehicle market, has held the top spot on the Office of Automotive & Vehicle Research's list of countries receiving the largest auto assembly investment for the past four years, claiming about $38.7 billion of the nearly $82.7 billion invested around the world, Faria said.
"If we look at all the automotive investment made over the last five years, the bulk of it is overwhelmingly going to the Asia-Pacific region, in particular China," Faria said. "Since 2007, there has been more automotive plant expansion and new plant development in the Asia-Pacific region than in the rest of the world combined."
Total worldwide production of vehicles in 2011 was about 75.9 million units, with 48.7 percent assembled in the Asia Pacific region and 17.8 percent in North America, according to the Office of Automotive & Vehicle Research.
The study, conducted since 1995, uses information from automakers, major automotive publishers and research organizations and industry Web sites and publications.
Bloomberg contributed to this report
You can reach Ellen Mitchell at firstname.lastname@example.org.