Mexico Auto Sector Braces for Second Nearshoring Wave After 2027

Mexico’s automotive industry is positioning itself for a second wave of nearshoring projects beginning in 2027, once the review of the USMCA is completed and greater clarity emerges around tariffs and trade rules. At the same time, global supply chains are entering a more restrictive and compliance-driven phase in 2026, shaped by geopolitical tensions, tighter controls on China and rising operational demands. Together, these dynamics place Mexico at a strategic crossroads: strong investment potential, but under increasing scrutiny.

Gabriel Padilla, general director, National Auto Parts Industry (INA), said the automotive sector could capture close to 40% of nearshoring projects in this second phase, compared with nearly 37% during the first wave of investment relocation. He said the next cycle would be driven less by labor costs and more by technology adoption, trade compliance and deeper regional integration.

“We believe that the push for technology must be the new driver once we come out of the tariff negotiations and the USMCA review. What we are projecting is that, starting in 2027, Mexico could have the opportunity to receive a second wave, what we call Nearshoring 2.0,” Padilla said.

Padilla noted that planning for 2026 will continue under a complex and uncertain environment. While no automotive investments have been canceled, several projects remain on hold as companies wait for greater visibility on tariff negotiations and the outcome of the treaty review. He added that consultations launched by the Mexican government ahead of the mid-2026 review are a positive step, but emphasized the need for sustained coordination with industry.

“These consultations should not overshadow the technical work that must be done jointly to make the review successful. If we do this in close collaboration—primarily between the Ministry of Economy and industry—we can achieve it,” Padilla said.

He also stressed the central role of the automotive sector in the agreement. “The automotive industry will continue to be the backbone of the treaty,” he said, noting that US law requires Washington to present its initial negotiating position to Congress in early 2026. According to Padilla, this timeline gives Mexico and industry an opportunity to prepare technical support ahead of the formal review scheduled for July.

Within this context, INA has highlighted the need to strengthen domestic capabilities in mold and die manufacturing, which Padilla described as essential for every automotive component. Expanding this capacity would increase regional value content and reduce reliance on imported tooling.

Between 2006 and 2024, Mexico received US$99.7 billion in foreign direct investment in the automotive sector, according to data from the Ministry of Economy. Chihuahua, Guanajuato, and Nuevo Leon accounted for the largest shares of that investment. Auto parts manufacturing represented 53% of cumulative inflows, followed by light vehicles at 44% and heavy vehicles at 3%.

These domestic trends align with broader shifts in global manufacturing. Since the pandemic, supply chains have been reshaped by geopolitical disruptions, including the war in Ukraine and rising trade tensions between the United States and China. According to United Nations data, China accounted for 29% of global manufacturing output in 2023, 12% points more than the United States. A 2024 report by the Information Technology and Innovation Foundation said China now leads production in seven of 10 advanced industries, while the United States leads in three.

China also dominates the supply of critical minerals. The International Energy Agency reported in 2023 that China controls about 70% of global rare earth production and more than 90% of refining capacity, materials essential for electronics, semiconductors, electric vehicles and renewable energy systems. This concentration has intensified US efforts to reduce dependence on Chinese supply chains and encourage relocation toward allied and regional partners.

For Mexico, this environment presents both opportunity and pressure. The country has remained one of the United States’ top trading partners, according to US Census Bureau data, but higher trade volumes bring stricter requirements in documentation, traceability and logistics. Industrial real estate firms CBRE and Newmark have warned that occupancy rates in key Mexican industrial corridors exceed 95%, increasing costs and operational complexity.

Energy, water and talent constraints also remain structural challenges. The International Energy Agency and Mexico’s National Energy Control Center have warned that industrial expansion will place additional strain on regional power grids, while water availability is becoming a decisive factor in investment decisions. The World Economic Forum and Gartner have identified shortages of technical and logistics talent as a growing risk for regionalized supply chains.