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News Article

Puebla’s Suppliers Face Challenging Path to Become Tier 1s

By Antonio Gozain | Mon, 12/20/2021 - 14:46

While Mexican Tier 2 suppliers in the Bajio are gradually becoming Tier 1s, OEMs in Puebla such as Volkswagen and Audi prefer to work with international giants, said the National Chamber of the Transformation Industry (CANACINTRA).

"The situation is that Tier 2s are financially very poor and do not have the capacity to sustain projects, so they must be continually supported for growth," said to El Economista José María Salazar, President Automotive and Auto Parts, CANACINTRA.

From the 40 Tier 2s in Puebla affiliated to CANACINTRA, only five have become Tier 1s in the last six years, a “very low” amount considering the business boom Puebla experienced after the opening of Audi’s plant, said Salazar. Those suppliers grew due to their connection with Nissan and Honda plants in Aguascalientes and Jalisco, respectively, which have shown openness to work with different suppliers.

To date, Audi Mexico’s plant in San Jose Chiapa, Puebla, has produced 750,000 units of SUV Q5, solidifying the Mexican factory as one of Audi’s central areas of manufacturing in the world, as reported by MBN. Meanwhile, Volkswagen de México employs over 15,000 people. In Puebla alone, the German automaker assembles over 440,000 cars per year. Volkswagen de México, according to Salazar, negotiates with only two suppliers instead of 10. These two suppliers then decide to work directly with Tier 1s or Tier 2s.

"Unfortunately, this is how the automotive industry works in the state. This has been the situation for years, in order for direct suppliers to be responsible for complying with quality certifications in production and to reduce negotiations," said Salazar.

To compete with international Tier 1s, local auto parts suppliers must reinvest to increase their production capacity and hire up to 30 percent more employees, said Salazar. Tier 2 suppliers aiming to become Tier 1s have to comply with ISO 9001-based TS 16949 certification, which refers to product quality, productivity, competitiveness and continuous improvement. Although complying with the International Automotive Task Force’s certification is absolutely necessary to supply OEMs, in the last few years it has also become necessary for Tier 2s.

In Puebla, CANACINTRA is working to find public financing programs to improve the conditions of the local supply chain, said Salazar. CANACINTRA in Puebla has 85 affiliated companies, from which 45 are Tier 1s and 40 Tier 2s. These companies employ over 18,000 people.

The data used in this article was sourced from:  
MBN, El Economista, CANACINTRA
Antonio Gozain Antonio Gozain Journalist and Industry Analyst