Mexican auto parts industry: adapting to the electrification era

Automotive manufacturing in Mexico has grown in the past decades due to the installation of assembler plants for different OEMs (Original Equipment Manufacturers) that more recently took advantage of the prepared workforce and established supply chains to reduce operation costs and export products to the United States market in a nearshoring vs. offshoring dynamic.

Asian manufacturers, as American and European brands did before, have been relocating activities in different areas of Mexico to improve their chances to compete in new markets.

As Ford and General Motors did in the first decades of the XX century, European factories such as Volkswagen arrived in the country in the 1960s. Nissan started operations in Aguascalientes in the 1970s, and recently, Chinese manufacturers such as JAC (Jiangsu Automotive Company) or BAIC (Beijing Automotive Industry Holding Company) have established in Hidalgo and Veracruz, following KIA in Nuevo Leon.

Tier 1 supply chain is the main reason for the automotive industry's growth

The presence of different assemblers is boosted by the access to providers of Tier 1, Tier 2, and Tier 3 components, which have created other automotive hubs in the country, especially in Bajio’s area.

From there, these providers send pieces to other regions such as Aguascalientes, San Luis Potosi, Nuevo Leon, or Puebla, where there are factories of various groups: Nissan, FCA (Fiat Chrysler Automobile), General Motors, Volkswagen, or Ford are just some examples.

The challenge: support the activities in a new landscape

Automotive manufacturers are facing a new challenge: after decades of working with traditional and non-renewable energies, the world is advancing daily to a new era in which electrification is vital to protecting the planet.

The industry is changing its schemes to adapt to electrification; fortunately, for Mexico, the opportunities are still in the landscape, so it’s easier for assemblers to adjust their activities to the supply chains they already work with.

The arrival of the Tesla factory in Nuevo Leon is an example of this dynamic because the American electric vehicles manufacturer looked for a place to access to different providers with technical capacity and low prices, allowing it to establish a new installation near the US market.  

Electrification will drive the automotive industry dynamics from now on, and having the chance to receive components from established providers can be a crucial aspect for OEMs to decide where to develop their activities. It can take Mexico to scale up in an industry where the country has become a noticeable competitor in the number of manufactured vehicles yearly.

Lithium: the key to supporting the future

Electromobility had historically been relegated to a second term because of the technical factors related to the autonomy of each vehicle and the instability of different materials used in the development of electric cars.

Batteries are an excellent example of this: the technological advances made lithium a crucial element for the manufacture of batteries that allow the market’s growth. Mexico has essential reserves of this material.

The growth of the automotive industry in Mexico and the existence of important hubs is now a door for entering a new stage in the global economic dynamics, with operation schemes that allow the country to maintain its relevance.

In a nearshoring vs. offshoring landscape, Frontier Industrial offers industrial buildings for lease and land for sale in Mexico’s central industrial regions, allowing Mexican and foreign enterprises to establish their operations in a country that provides access to the United States market. Contact us to get more information and see availability.