Nuevo Leon Spotlight

Mon, 09/01/2014 - 12:34

Nuevo Leon is one of Mexico’s vital industrial and economic centers, contributing 7.5% of national GDP. While Nuevo Leon is still waiting on an OEM to elevate its importance for the automotive sector, its auto parts industry contributes to 3% of the country’s automotive industrial production. Of the more than 190 auto parts companies in the state, only 50 are of foreign origin, showing the strength of its local suppliers. Due to its proximity to the US, the automotive industry in Nuevo Leon serves mostly the US market. The auto parts industry in Nuevo Leon is the third largest nationally and employs over 60,000 people. Investment in the automotive sector in Nuevo Leon reached US$870 million in 2013. Nuevo Leon ranks first nationally in the production of cylinder heads, motors, batteries, laminated and tempered glass, and harnesses. It ranks second in the production of trucks and buses, electrical and electronic equipment, and plastic parts for the automotive industry. It also produces bodies, transmissions, brakes, seats, metal stamp, tires, and steering and suspension systems.

In May 2014, cheers must have resounded in the halls of Monterrey’s government buildings when Korean OEM Kia Motors confirmed its interest in building a plant in the town of Pesqueria. Production would be divided into two model platforms with a combined capacity of 300,000 vehicles a year. It would help satisfy demand in the US where Kia and its affiliate Hyundai have been facing constraints in their ability to supply the market, even though its plants in Georgia and Alabama are operating at or even above their official capacity. According to the announcement, the construction of the plant would begin with the intention of manufacturing the Soul, the Forte, and the Picanto models starting in 2016. Kia’s announcement brings hope to Nuevo Leon since it will prove that its abilities go beyond auto parts manufacturing and extend to assembly too. Prior to Kia’s news, Nuevo Leon’s automotive and auto parts industry was predicting growth by 5% during 2014. The role of Nuevo Leon’s auto industry has been to support the national sector through the integration of a strong local supply chain. ProMéxico promotes the development of supply chains in the manufacturing industry in order to link local suppliers with transnational companies and importers. To date, this campaign has been successful in Nuevo Leon. The state is a national leader in attracting foreign direct investment, having brought in US$3.5 billion in investment in the first half of 2014. One industry that will directly benefit from increased automotive industry activity is the steel industry. Nuevo Leon used to have to import 100% of its steel but a recent US$1.1 billion investment in a cold rolling mill by Tenigal, a partnership between Ternium and Nippon Steel Corporation, will represent a breakthrough. This investment is the largest investment in Nuevo Leon in the last decade and will have a capacity of 1.5 million tonnes of cold plates and 400,000 tonnes of coated sheets. These are thought to meet the needs of the automotive industry in the state and the country. The steel coming from the plant will be used in the production of automotive parts ranging from chassis, wheels, fenders, coils, wheels, roofs, trunks, engine structures, doors, and outside protections. This shift from imported steel to locally produced steel will act as a beacon for further automotive investment and will have a direct impact on the reduction of costs for local manufacturers. Nevertheless, Nuevo Leon still needs to improve on some key areas, such as training and human capital, particularly given the technical level of manpower that OEMs like Kia require. Therefore, the government is pushing for the creation of vocational high schools, or vocational courses within existing schools, that will graduate specialized technicians. Such an effort should link up well with growing interest to establish R&D centers in the state. Metalsa, Katcon and Sisamex have all opened R&D facilities in Nuevo Leon already, while Italian automaker Fiat is considering following suit. Besides education, security has also threatened to hold Nuevo Leon back slightly. But as crime seems to be dropping, the state’s business community has remained loyal, with foreign companies continuing to invest.