Puebla to Bring Auto-Part Manufacturing to Ciudad Modelo

Puebla’s state government wants to bring auto part production to Ciudad Modelo to manage the ongoing semiconductor shortage, which is halting manufacturing across automotive plants across the world. However, final plans are on hold while the Federal Electricity Constitutional Reform is pending approval.

“It is very important for Mexico to attract this type of manufacturing now, and a resolution to the electricity reform is urgent so that it can be released and we can attract these types of companies,” said José Luis Espinosa, President, National Chamber of the Transformation Industry (CANACINTRA) Puebla.

The semiconductor shortage has increased automotive prices as the sector tries to recover, said Espinosa. Furthermore, in the US, vehicle prices have risen 16.7 percent as a result of various auto-part delivery delays caused by the shortage of transportation containers and the congestion of maritime ports in Asia. This crisis is worsening due to the current political climate. A similar rise in prices can be expected in Mexico if the situation is not addressed properly, Espinosa forecasts.

José María Salazar, President Automotive and Auto Parts, CANACINTRA, is also looking to bring auto-part manufacturing to Puebla to handle the current crises as he does not expect the semiconductor shortage to be resolved until 2023 at the earliest, without accounting for additional hardships that may arise. For example, the transition to 5G could further increase global demand for semiconductors for the manufacture of phones, laptops and other devices. Additionally, Russia’s ongoing conflict with Ukraine could further slow down microchip production as Russia is a main manufacturer of the nickel, palladium and aluminum needed to produce semiconductors.

“In the end this is a global issue, the [prices of] metals we are now seeing are at all-time highs… What we need is to make and assemble these parts here, then it will be worth it. The problem is that we need to ship all of these parts, the idea is to develop these suppliers and have them do it here,” said Salazar.

Already, international challenges in the mobility and logistics sector are driving forward a nearshoring trend across North America, as manufacturers reassess the total cost of having to ship internationally due to increasing delays that lead to manufacturing halts. Just last week, Volkswagen had to stop production of its Jetta and Taos models in its Puebla plant for two days due to a shortage of auto-parts, primarily semiconductors. This is the second production halt the plant has suffered this month.

The automotive sector is a main contributor to Puebla’s economy. Last Friday, the National Employment Services (SNE) Puebla announced the current opening of over 700 jobs in the automotive sector.