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Analysis

Anticipation and Preparation for the Cluster´s Newest OEM

Tue, 09/01/2015 - 12:52

During late 2014, the Ministry of Economic Development held the first seminar for Mexican and Korean Tier 1 and 2 companies. This was an opportunity to attract foreign investment, but also to integrate local suppliers into an OEM supply chain. The automotive cluster in Nuevo Leon was elated about KIA’s recent decision to enter the region; the existing companies actively helped to attract the OEM, even though they knew it implied more competition as well as opportunities. The industry in Nuevo Leon sought growth and some companies are seeking partnerships with KIA, while others will benefit from improved infrastructure and transport links, as well as an increased perception of prestige for this automotive hub. One of KIA’s main concerns, besides the availability of a skilled workforce, was the guarantee that Nuevo Leon would provide the infrastructure that was not already in place for electricity, water, and natural gas, among others. The next step for Nuevo Leon is to deliver on its infrastructure promises in order to ensure that KIA’s production will start in May 2016. To ensure everything is ready on time the Ministry of Economic Development has mapped each commitment with KIA and has delegated the responsibilities of infrastructure and site preparation to specialized teams.

After the entry of KIA there will be a whole new center of gravity in the cluster and a new focal point for regional development. Companies that already have a presence in Mexico might consider expanding into the state and foreign companies now find Nuevo Leon a more attractive investment destination. The federal government has asked the Ministry of Economic Development to emulate the model of the Bajio cluster, meaning that both the supply chain and logistics infrastructure must be strengthened to optimize the trickle-down effects for the economy and the country’s wealth. Unfortunately, Celina Villarreal, Secretary of Economic Development for Nuevo Leon predicts that some potential investors will be reluctant to locate directly next to KIA and would rather find a location that is better positioned to supply multiple OEMs, a gap that she expects Coahuila to fill. On a more positive note, Villarreal also expects to announce the arrival of approximately 13 Korean companies in the near future, while LG’s group of Korean suppliers, which has been operating in Nuevo Leon for more than 14 years, is also looking to supply KIA. “Nuevo Leon is completely ready for the next OEM,” Villarreal concludes.