POWER OF THE PEDAL

Mexico 2016 | INDUSTRY | FOCUS: NEW AUTOMOTIVE INVESTMENTS

The automotive sector has long been one of the most important components of Mexico's manufacturing industry, and large investments from international automobile companies are reinforcing that position for years to come.

The success of Mexico's automotive industry is no secret. Indeed, the country has been the seventh-largest automobile producer globally for a number of years, and is the largest light vehicle producer in Latin America, surpassing even Brazil. The industry accounts for 17% of Mexico's manufacturing output, 3% of overall GDP, and is one of the country's largest export industries, with 82% of production sent abroad. The sector has also been one of the most important destinations for international investment in Mexico. Within the past year, a number of the major players in the automotive sector have announced new investments in manufacturing facilities in Mexico. In total, Mexico is set to receive $10 billion in automotive investment between 2016 and 2020.

Ford is one of the pioneers of Mexico's automotive industry, as it first began manufacturing vehicles in Mexico in 1925. The company recently announced that it will be investing another $2.5 billion in Mexico to build two new plants and expand a third existing plant. The majority of the roughly $1.6 billion investment will go to the construction of a new assembly plant for compact vehicles in San Luis Potosí, Ford's third assembly plant in Mexico. The company will also invest $300 million in the expansion of its engine plant in Chihuahua and $200 million in a transmission plant in Irapuato.

In September 2015, Daimler and Renault Nissan began construction of a new joint-venture plant in Aguascalientes. The $1.36 billion plant will begin production of Infiniti vehicles in 2017 and of Mercedes-Benz vehicles in 2018.

In November 2015, General Motors celebrated its 80th anniversary in Mexico and announced that it would invest an additional $800 million in Mexico to upgrade and expand its plant in Ramos Arzipe, Coahuila, in order to enable the plant to manufacture the Chevrolet Cruze. This followed investments over the previous three years in two new plants in Toluca. General Motors is the second-largest automaker in Mexico and has a 30% share of the domestic market for auto sales.

In May 2016, Korean automaker KIA completed construction of its new plant in Pesquería, Nuevo León. The opening of the plant is the culmination of an investment of $1.5 billion in the country and will produce the compact KIA Forte for sale throughout the western hemisphere. Once at full capacity the plant should produce 300,000 vehicles per year.

BMW is currently building a $1.3 billion manufacturing plant in San Luis Potosí, the company's first such investment in Mexico. The company has said that the plant will be one of the top-five BMW plants in the world and will begin operations in 2019. In the meantime, BMW has already opened a training center to begin training Mexican engineers who will work in the plant when it opens.

Toyota is currently considering an investment of more than $1 billion for a new plant in Celaya, Guanajuato, to begin producing the Toyota Corolla for the Mexican market. Although the investment was announced in 2015, in early 2016 Toyota executives said that they were still considering whether and how to make the investment. The plant would be Toyota's second in Mexico.

Volkswagen, which already has an established presence in Puebla, announced that in 2017 it will invest an additional $1.1 billion in its facilities there to begin producing the Tiguan SUV. The plant will also continue to produce other models like the Beetle.

Honda opened its $470 million transmission plant in Celaya, in 2015. The company had also previously invested $800 million in a plant in the same city in 2014 to build the Honda Fit model.