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Analysis

Disposition Does not Equal Action

Sat, 09/01/2018 - 11:05

That Mexico is the seventh-largest light-vehicle manufacturer in the world underlines the country’s attractiveness as an investment destination for production operations. Globally, the automotive industry is at the forefront of innovation, not only in manufacturing processes but in the technology that is increasingly present in a vehicle. Electrification and autonomy have become hot topics for every industry participant. Yet, Mexico has not evolved past its collaboration as a low-cost manufacturing site, which in the end could be detrimental to its position as a key automotive hub and an attractive investment destination.
According to a survey conducted by Mexico Automotive Review (MAR) 2018, 64.2 percent of the companies questioned agree that Mexico is ready to become an engineering and design hub, while only 16.4 percent believe the country is still not up to the challenge. This shows promise when considering that new projects oriented to R&D and engineering activities keep arriving, one of the latest being Continental Automotive’s new R&D center in Queretaro with an investment of US$58.3 million. However, when digging deeper into why this is not a common practice among investors, the main factor that comes up is the lack of specialized academic programs that offer graduates the right knowledge and skills to participate more actively in the industry.
“Right now, there is no education program that can offer graduates the necessary expertise on mobility technology or embedded systems,” says Jorge Vázquez, R&D Center Director of Continental Automotive. To bolster its appeal to potential investors, the country’s strategy was to develop manufacturing expertise, mostly at a technical level to satisfy the most pressing demands of a growing industry. This was a necessary measure considering that even with these programs implemented, the country still faces a lack of available talent to cover company requirements. “In the center of the country, people are highly specialized but there is little availability, which means we must train our new hires as fast as possible,” says Alejandro Veraza, Managing Country Director of TI Automotive. “In the north of the country, we face a problem of constant migration. People who wanted to move to the US but stayed close to the border are now returning to their states of origin because work opportunities are blooming.”
Overall, investors have faith in the capabilities of Mexican talent, evidenced by the fact that only 15.2 percent of the companies surveyed by MAR 2018 see a lack or deficiency of human talent as an obstacle for Mexico’s evolution beyond a manufacturing site. In contrast, 35.1 percent of the companies see lack of R&D and technology development capabilities as a hindering factor for the country’s development. “Universities should be a priority in the process of incentivizing R&D and design operations,” says Miguel Avalos, Director General of Air Design. “At the moment, the knowledge that these institutions are generating is sorely lacking compared to other design hubs.”
Companies are doing their part and many have already established training programs to help new hires elevate their capabilities to what the global industry needs. Foreign players, in particular, have been very open in sharing best practices with local talent and helping local engineers develop their skills through international training programs. However, this cannot be a one-sided effort.
“Education must be at the top of the list for the new administration,” says Miguel Márquez Márquez, Governor of the State of Guanajuato. “The government must continue supporting academic institutions and incentivizing the establishment of dual-education programs.” The government must make advanced education a priority for the industry to advance at a faster pace. Some state governments have already understood this and they are working together with their respective clusters to find ways to import experience from abroad and build a stronger collaboration between the state and the industry. However, at a federal level there is still considerable room for improvement.
President Enrique Peña Nieto’s administration set the goal of increasing R&D expenditure to 1 percent of national GDP and according to Rogelio Garza, Deputy Minister of Industry and Commerce, Mexico’s expenditure stands at 0.9 percent of GDP. “It is far easier to retain foreign projects when the company has its design operations in Mexico rather than just component production,” he says. Among President-elect Andrés Manuel López Obrador’s goals is to boost innovation and technology development in the country, which gives hope to companies wanting to develop their local operations.