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Collaboration Key to Building Strong Automotive Supply Chain: INA

Armando Cortés - INA
Director General


Fernando Mares By Fernando Mares | Journalist & Industry Analyst - Wed, 08/23/2023 - 16:30

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Q: What will be your main strategies or initiatives as new director general of INA? 
A: The most important thing is to consolidate existing initiatives, which are mainly oriented at supporting all associates in complying with USMCA’s regulations regarding regional content, one of the most relevant topics for our members. Additionally, we should continue to promote strategic alliances, like that with the Pan American Development Foundation (PADF) to implement the new labor reforms in Mexico. This will provide a significant competitive advantage for our associates within the framework of USMCA.

A second strategy involves new initiatives related to emerging technological trends, such as electromobility. This includes focusing on training to ensure all our associates’ employees have access to the necessary knowledge and skills in the field of electromobility and other technological advancements. 

Q: How will your experience in ProMéxico drive your strategies for INA?  
A: During my time at ProMéxico, the country experienced massive investments in the automotive industry, including the manufacturing plants of BMW and Audi, as well as the co-investment between Mercedes-Benz and Nissan in Aguascalientes. This brought a new profile to the automotive industry in Mexico, transitioning from traditional vehicle manufacturing to producing premium vehicles.  

This investment wave did not only attract manufacturing of premium vehicles; it also involved attracting a new supply chain to the country, with higher quality standards to meet the requirements of these new manufacturing plants. I believe that all the experience and lessons learned from ProMéxico will be of great use in this new stage at INA and, above all, they will drive a fundamental aspect for our success: collaboration.

When I speak about collaboration, I mean between key stakeholders, which are the private sector, the government and the academic sector. No successful initiative can overlook the involvement of these three relevant parties and we will actively incorporate them into INA along with our allied associations, ANPACT and AMIA. 

Q: What are Mexico’s main areas of opportunity to continue being an attractive investment destination?   
A: Everyone in the sector is aware of Mexico’s competitive advantages, including its extensive network of free trade agreements and a skilled and young workforce, which is a significant asset for any manufacturing project. Beyond that, Mexico has a great capacity for specialized manufacturing, making these three elements the pillars of Mexico's potential for success. 
However, there are several areas of opportunity that we need to address. Logistics, port and customs procedures, security and the availability of green or renewable energy are some of the significant areas of opportunity in the country. This is not a bad sign; on the contrary, it shows that the country is growing. 

Q: What is required to ensure the southeastern region benefits from nearshoring, specifically in the automotive sector? 
A:  Traditionally, development has been concentrated in the northern regions, where approximately 52% of auto parts companies are located, followed by 30% in the Bajio region and 15% in the central region. These three areas account for 97% of auto parts production in Mexico. 

A great deal needs to be done to promote and incorporate other regions into the auto parts industry and we believe that new technological trends are the way to do that. Remote working models have enabled people to work from many different regions. The southeast has a great deal to offer and, as an association, we will support any initiatives linked to the development of these regions.

Q: What is INA’s perspective on the increasing number of Chinese manufacturers coming to Mexico?  
A: We welcome the arrival of any company to the country, as long as they comply with the established regulations, both at the governmental and technical levels. 

As an open economy, Mexico receives investment from companies all over the world. They all converge in their commitment to meet the highest standards required by the automotive industry in Mexico to serve the North American market. The automotive industry is particularly stringent in terms of regulations and, in this sense, there are no distinctions based on the origin of the company. We have indeed observed a growing trend of interest from Chinese companies, which exactly demonstrates what nearshoring is.  

The strategy we have observed from companies like BYD or Changan considers the establishment of a dealership network. At this stage, they are basically importers. However, as they grow, they look for opportunities to manufacture in Mexico. This also enhances competitiveness and benefits the final client.

We do not have any Chinese associates, yet. However, there is an increasing presence of relevant Chinese companies in states like Nuevo Leon, such as the Hofusan industrial park, which marks a significant step in terms of Chinese-origin investments in the country. 

China was usually perceived as a market primarily focused on low-value-added processes but the global landscape has evolved significantly. Many countries, including China, have been shifting toward higher value-added processes and they now see Mexico as a viable option to establish manufacturing plants. The changing dynamics in the industry and the increasing interest from different countries, including China, demonstrate that Mexico's position in the global automotive market continues to grow and evolve.

Q: How is INA working with universities and the government to strengthen the sector? 
A: Apart from electromobility and nearshoring, one big trend involves the changes in the labor landscape. Over the past few years, almost all major automakers have established engineering centers in Mexico, staffed with Mexican engineers. This growing trend reflects the increasing need for higher value-added activities in Mexico's automotive industry. 

One crucial factor contributing to this trend is the availability of skilled engineers in Mexico, which is one of the top producers of engineering graduates globally, even surpassing countries like Germany. Additionally, USMCA demands 40% of components produced to be made by workers earning at least US$16/h. This means that Mexico will have better-paid jobs. To put things into perspective, a monthly wage of US$16/h translates to around US$2,600 per month. This means that under these new regulations, many young Mexicans will have the opportunity to earn an attractive income higher than the average salary in Mexico.

One of our main focus is on training and education. We are initiating a project aimed at strengthening technical education at the high school level, specifically in topics related to electromobility and sustainability. The approach involves asking associates about the skills and capabilities they seek in the context of the emerging trend of electromobility at their manufacturing plants. This feedback will help design a customized curriculum tailored to their needs.

Q: What are the main changes the association expects in the industry for the coming five years? 
A: Challenges are tied to global trends and one of the main global trends is sustainability. OEMs not only aim to be sustainable but also require their suppliers to follow suit, adhering to the concept of "net zero," which involves achieving decarbonization across the entire chain. This will be a crucial focus in the coming years in Mexico.

In response to this trend, we recently signed a collaboration agreement with ANPACT, aimed at reducing the carbon footprint of the automotive industry value chain. While our primary focus has been on the supply chain of light vehicles, INA is fortunate to have strong ties with academia and suppliers in the heavy-duty vehicle sector. These units have made significant progress in technology and emissions reduction and this agreement aims to stay ahead of these trends.

If you attend a heavy-duty vehicles expo in Germany, discussions primarily revolve around hydrogen, not EVs. There are challenges related to the availability of hydrogen, however. One crucial point to consider is that the automotive industry must adapt to the most advanced technologies. It could be electrification today but tomorrow it might be hydrogen. As an association, we need to be aware of this and create platforms within companies that help them adapt to these new technological trends, without committing solely to one.

The key is to have the ability and resilience to adapt to market trends, as technology can change rapidly. Fortunately, I believe the automotive industry is prepared for such changes. 

Overall, collaboration is the most crucial element for Mexico and the auto parts industry. We must work together with academia, the government, the private sector, OEMs and the heavy-duty vehicle industry to position Mexico as the most competitive place in the world for manufacturing auto parts and components related to new technologies. We are not just talking about traditional components; we are talking about sensors, active safety systems, infotainment systems and drivetrain monitoring systems, transitioning from metal-mechanical components to electronic components.

The National Auto Parts Industry (INA) is an organization that supports the growth and sustainable development of auto parts and aftermarket manufacturers established in Mexico through the international promotion of Mexican automotive production.

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