Rafael McCadden
Industrial and Logistics Director Mexico City
Colliers International
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Critical Site Selection Factors for The Auto Industry

By Alejandro Enríquez | Fri, 05/22/2020 - 09:00

Q: How is Colliers International (Colliers) supporting the growth of the local automotive sector?

A: Colliers is not only a real estate broker; we are partners to our clients. Deciding where to set up a new plant represents a monumental investment and an extremely important decision that will have a long-term impact on every aspect of the company. As a result, we strive to provide much more than a plot of land. We provide comprehensive consultancy services to help clients choose their manufacturing site by analyzing the local workforce, former strikes, availability of universities and technical schools, roads and railroads, types of soil and even potential natural disasters. Honda’s plant in Celaya, for example, flooded in mid-2018 after intense rains caused a local river overflow, which costed the carmaker millions in damaged property and interrupted operations. This was caused by inadequate site selection planning that could have been avoided by selecting a better location for the plant.

Q: What characteristics do automotive companies prioritize when choosing a site and how does Colliers help them?

A: There are many different factors influencing the site selection process and these have evolved over the past few years. Many years ago, the marketing or financial director made these decisions. Now, the decision is primarily made by the supply chain team, an area that has gained importance as companies increasingly consider supply chain, accessibility to their plants and the distance to ports, railways and airports to facilitate the distribution process, especially for exports.

Mexico has clearly outlined the strongest regions for automotive production: the Bajio and the northeast of the country, both of which have a high concentration of Tier 1, 2 and 3 suppliers. The closer these companies are to each other and to the OEMs, the more efficient and competitive the sector is. However, suppliers have different preferences when choosing a site. Tier 1s need t to be close to the OEM but Tier 2 and 3 companies can locate far away from them since they directly compete with Tier 1s and OEMs for qualified employees. Our counseling services include solutions so our clients can have access to a qualified long-term workforce and learn how to retain it.

Q: What role does Colliers International play in FDI attraction?

A: We work closely with our offices in Detroit and in Germany and other ones across the globe that are strong in the automotive sector. Colliers has several specialized groups to attend the needs of every sector. We have one for automotive and one for the supply chain, which have helped companies establish their operations in Mexico. A few years ago, when Mexico won a bid against China to manufacture the Chrysler Journey, Chrysler approached us to assist their suppliers to establish close to their Toluca complex. Chrysler requested an industrial park for Tier 1s to ensure its supply chain was located within a 5km radius.

Q: What are Colliers’ growth expectations for the Mexican automotive industry?

A: The automotive sector is undergoing a commercial transformation. While USMCA negotiations left new projects on standby during 2019, companies began adapting existing plants. Ford’s plant in Cuautitlan for example, is retooling to start manufacturing electric vehicles. The transition from combustion to electric cars will be very slow and we expect it will take at least 20 years for these vehicles to become the new standard. However, Mexico is already incorporating these technologies in its manufacturing process. Investment will keep coming and the country will increasingly invest in the production of electric, autonomous and hybrid vehicles. Mexico’s future in the automotive industry is in these markets. Colliers is currently assisting a company that will soon assemble electric utility vehicles in Mexico.

Q: Considering Mexico’s socioeconomic environment, what are automotive companies looking for in terms of infrastructure?

A: We perform highly detailed analysis to eliminate any potential risk a company might face when choosing a new location. In terms of infrastructure, automotive companies are always on the lookout for class A industrial parks, with excellent roads and all services included. A common challenge for industrial parks is power supply. We have had to relocate projects where providing power to a destination was more expensive that the land itself.

 

Colliers International is a real estate services company with operations in 68 countries. The company manages 2 billion ft2 and has over 17,000 employees across the globe

Alejandro Enríquez Alejandro Enríquez Journalist and Industry Analyst