Globalization Leads Turkish Leader to MexicoFri, 09/01/2017 - 14:53
Mexico’s political stability has helped attract OEMs to the country, resulting in a thriving domestic supply chain. Since Lázaro Cárdenas’ government in 1934, Mexico has enjoyed stable power transitions that continue to this day. Other countries are less fortunate and in many of them companies cannot enjoy the advantages of healthy domestic production. Turkey is among the countries impacted by geopolitical conflicts, which have hindered the development of its Tier 1 suppliers. The arrival of globalization turned the tables, letting Turkish companies like Teklas find their export niche and eventually expand to other regions.
Thanks to its growth in exports, the fluid circulation systems and windscreen-wiper manufacturer was able to invest in other countries in a short amount of time. Its first foreign investment was in Bulgaria in 2006 and by 2011 the company had already ventured into China as well. It came to Mexico in 2016. The company is currently in the development phase of its production site in Mexico and once it is ready, the goal is to expand within the NAFTA market.
“Our plans in North and South America are rooted in globalization,” says Arcan Ergur, Plant Manager of Teklas Automotive Mexico and the person in charge of developing the company’s position in the Americas. OEMs are looking for suppliers that can keep up with their global footprint to save costs and maintain the same level of quality across their entire production network. “Vehicle and auto part designs are becoming more global, which means we have to be present in more countries to strengthen the production chain.”
Once Teklas had decided to establish operations in Mexico, the company performed an analysis that concluded Aguascalientes was the best option to invest in. Safety and the government’s involvement in industrial development were two defining factors for Teklas’ new investment, Ergur says. The company outsourced the plant’s construction project to a Mexican company in July 2016 and the complete infrastructure was expected to be ready by mid-2017. Ergur is also building its supplier base, leaning on Teklas’ existing network in Europe. “At this early stage, even companies located in Mexico that are already our suppliers cannot compete with their European counterparts in terms of price,” he says. The company is still exploring local opportunities and negotiating with Tier 2 suppliers that could be validated by Teklas’ OEM clients in the near future. “So far, we are right on schedule with our Mexican operations.”
Teklas already works with most OEMs in the European market and it has established global contracts with companies like Volkswagen, BMW, Volvo and GM. “We have a 30-percent market share in Europe and although we are just starting production in Mexico for the North and South American markets, we see great potential, an even bigger opportunity than in China,” says Ergur.
The company will follow two strategies in the Americas. It will begin its production operations in the second half of 2017 to supply Volkswagen and Audi, BMW and Volvo by 2019, and subsequently GM, Daimler and Tesla can be added to its client portfolio for the Mexico plant. The company will also manage imports from Bulgaria to cater to GM in the US and Mexico, FCA and the Volkswagen Group. As its Mexican production facility is completed, Ergur’s plan is to transfer all components that are sourced from Bulgaria to be manufactured in Mexico.
Teklas’ current production in Mexico will be oriented toward fluid circulation systems. This is the company’s main product line and Ergur sees cooling and heating-line components for internal combustion, hybrid and electric engines as the priority. Once the plant ramps up its operations, Teklas will introduce air-intake systems to Mexico, mainly for turbocharging applications. “Gasoline and diesel prices have become a concern for many manufacturers, making turbocharger components a critical component to improve the vehicle’s performance,” says Ergur. According to Markets and Markets, this segment is expected to grow at a compound annual growth rate of almost 8 percent globally, reaching a market size of over US$18.5 billion by 2021. This shows a clear opportunity for Teklas, coupled with the 20-percent increase in gasoline prices in Mexico at the beginning of 2017. “Electric vehicles are also a priority in the industry and we are focusing on innovating in our portfolio to cater for models between 2019 and 2025,” says Ergur.