Quality, Logistics Keep Mexico Attractive in Pandemic: IHS MarkitBy MBN Staff | Tue, 12/22/2020 - 13:47
IHS Markit’s Guido Vildozo, has said that the workmanship quality and logistics costs that Mexico’s automotive market offers means it remains a highly attractive market despite the COVID-19 pandemic.
In an interview with Milenio, automotive industry expert Vildozo explained that the country’s market is still competitive on the international stage, despite the incremental increases in production costs that the virus has caused.
“Manufacturing costs are much higher because COVID-19 has added an extra element to all of this. It is a moment where you have to decide if you pay a 2.5 percent of tariff instead of making an investment. There is nowhere to get $400 million to build an engine or transmission plant," Vildozo told Milenio.
While IED into Mexico has fallen off slightly, the period between 2012 and 2017 saw high investment that the industry is still reaping the benefits.
Among the more recent notable investments into the industry have been Volkswagen’s US$240 million for its Guanajuato plant announced in December, following the company’s US$40 million investment in its Puebla plant to build the compact SUV Taos model, announced in October. This is on top of industry’s performance in El Bajío, where investment has boomed, expanding possibilities for OEMs, and Tier 1 and Tier 2 companies.
San Luis Potosi city is one of the El Bajío conurbations that has profited from automotive growth in Mexico. Javier Gómez, Eaton Plant Manager in the city, told MBN in a recent interview that both San Luis Potosi state and the city offer several logistics benefits.
“The state offers several advantages for a broad range of companies, such as short distances to industrial parks and affordable services; from a logistics perspective, public transportation provides easy routes for plant workers to get to their workplaces in a matter of minutes. We are four hours away from Mexico City, two hours from Queretaro City, and seven hours from the northern border. There are opportunity areas, of course, but compared with other states, the city provides great benefits overall.,” he said.
The industry now has clear signs of recovery after production plummeted when the COVID-19 pandemic arrived. As MBN previously reported, November’s production and exports showed a two-month sustained year-on-year increase, though sales remain in the red.