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Analysis

Power Couple with Solid Prospects

Sat, 09/01/2018 - 09:44

According to data from the Ministry of Economy, between 1999 and 2017, FDI in Mexico’s automotive industry amounted to US$60.7 billion. Germany alone accounted for 14.6 percent of the total FDI that the Mexican automotive industry received in this period (US$8.8 billion) and 13.7 percent of the 1,345 total companies with investments in this sector. Germany ranks third among the top investors in the Mexican automotive industry after Japan and the US.
According to Frank Hezel, Business Vice President of BASF’s Coatings Division in Mexico and Central America, the presence of over 2,000 German companies including outside the auto industry operating in Mexico and generating over 150,000 jobs is a testament to Germany’s belief in Mexico’s potential as an investment destination. The future seems promising for German players in the country as BMW and Mercedes-Benz are projected to start assembling premium cars in San Luis Potosi and Aguascalientes, respectively.
Radek Jelinek, President and Director General of Mercedes-Benz México, says the company’s decision to start production of the A-Class sedan in 2H18 at the COMPAS plant in Aguascalientes is a progression of its experience here. “It is based on strong foundations and shows our commitment after 25 years of presence in Mexico,” he says. At the same time, Steffen Reiche, President of Volkswagen de México, says the start of operations of Volkswagen Group’s Audi plant in Puebla in September 2017 represents new opportunities for automotive suppliers, logistics operators and service offerors.
“Mexico has proven to be a top-level manufacturer in quality of workmanship and human resources and has demonstrated its ability to produce auto parts,” says Leandro Radomile, Managing Director of MAN Truck & Bus México. “There is a strong integration between Germany and Mexico and the country is a key part of MAN’s global strategy.” Radomile enumerates Mexico’s increasing adoption of technologies necessary for the automotive industry as a key opportunity for both countries to grow their trade relationship.
“Mexico will continue to collaborate with Germany because the commercial relationship works for both countries,” adds Jan Hegner, CEO of Daimler Buses México. OEM presence along with Mexico’s free-trade network and strategic geographical position are the main advantages that Mexico offers to automotive companies, according to Hegner. The continuous arrival of investments from Germany and reinvestments that OEMs and Tier 1 companies make in Mexico trickle down the supply chain and open new opportunities in the industry. “The Mexican automotive industry has grown at double-digit rates and this trend is linked to hard work, great quality, great ideas and support from the public sector,” says Martín Toscano, Managing Director of German supplier of specialty chemicals Evonik.
But Mexico is capable of much more than just manufacturing components, which is why several German automotive players are bringing their R&D operations to Mexico and opening design and engineering centers. Continental opened a new R&D center in Queretaro in May 2018 where the company plans to develop technology for chassis and safety systems that use artificial intelligence and that eventually will be implemented in self-driving vehicles. “These innovations are active accident-prevention systems,” says Jorge Vázquez, R&D Center Director of Continental Automotive. Other German automotive players with design and engineering operations in Mexico include Volkswagen, which designs and develops special vehicles and electronic auxiliary systems in Puebla, and Robert Bosch, which projects the construction of a new R&D center in Guadalajara where software and shared-services solutions will be developed.
Daniel Romero, Americas Automotive Division Manager at Schunk Carbon Technology, sees a clear road ahead for German automotive players in the country. “More business opportunities are coming to Mexico and companies that have created a positive image in Mexico will be able to expand their product lineup and diversify into new market niches thanks to these investments,” he says.