R&D: The Next Step in Mexico’s Automotive Journey

Mexico is transitioning from a manufacturing hub into an engineering and service provider powerhouse, and increasing R&D is crucial to this transition. With rapid shifts in the global economy and the rapid transformation of the supply chain, companies would benefit from focusing on R&D to remain competitive. A company that is strengthening its bet in R&D is Italian tire manufacturer Pirelli, which has made large investments in developing innovation in Mexico. 

Pirelli started operations over 151 years ago and now has one of the largest and more important R&D centers in Mexico. The company created a solid foundation for its operation in the country thanks to its major manufacturing plant and R&D center in Guanajuato. “Pirelli inaugurated its first plant in Mexico in 2010. In 2019, the company developed a specific cultural program for the Mexican context,” says Gonzálo Rodríguez, CTO Mexico, Pirelli Mexico.

This specific program helped the country establish itself as one of the critical areas in Pirelli’s global strategy, says Rodríguez. Thanks to its good results and the increase in demand, Pirelli has doubled its operational capacity. Beyond increasing the scale of its operations, Pirelli invested in the country’s potential as an innovation and technology hub for the market's new demands.

Mexico must increase its investment in R&D and education to improve its position in the global automotive industry, which demands expertise across different domains and brands. To successfully develop R&D, the government, private sector and academia must collaborate and delineate joint objectives that promote job creation, talent development and sustainability. Investing in talent is crucial as a well-trained workforce can drive innovation, ensure quality and provide a competitive advantage, key components for creating steady and sustainable growth.

Countries with a large pool of talented individuals are also more likely to attract foreign investment and collaborations, as well as retain their homegrown talent and gain a competitive advantage in the global marketplace. Moreover, investing in local talent also contributes to the economic growth of a country. Talented individuals often earn higher salaries, which in turn translates to greater consumer spending and economic activity.

Alongside the recent influx of manufacturing operations, Mexico is witnessing a surge in new engineering and R&D centers, such as Pirelli’s. The tire manufacturing giant has made great efforts to expand its product portfolio in accordance with market demand. “Several decades ago, only a few details were required for tires. Their design, however, has become more sophisticated and we have focused on a high value strategy based on specialty developments,” says Rodríguez.

R&D investments prove to increase companies’ added value, allowing them to fully integrate digitized services that provide significant savings over the medium and long term. For example, Pirelli Mexico is developing a virtual line for the first stages of new wheel models, which seek to meet the automotive sector’s future demands. This program creates fully digital prototypes and performance tests that allow for greater flexibility when designing new models due to significant cost savings in physical prototypes, says Rodríguez. 

Consumers now demand more from their vehicles, as the concept of mobility is changing to embrace safe, green and personalized services. To achieve this transformation, the entire automotive supply chain must collaborate to deploy innovative solutions. This market transition is not only affecting OEMs but the entire automotive industry, which requires more talent to fully adapt to these changes.

While the global automotive industry is experiencing a shortage of design engineers as workforces in developed countries age out of the market, over 100,000 engineers graduate annually in Mexico. These engineers are eager to pursue careers in the country’s main manufacturing industries, says Manuel Montoya, Director, Cluster Automotriz de Nuevo León. Other developed countries are not seeing their workforce grow, resulting in increased labor costs and decrease of availability, adds Montoya. These countries have grappled with population declines for years, and the situation is unlikely to improve without a well-planned and targeted immigration policy. These talent gaps give Mexico a unique opportunity to take on the excess demand that companies are seeking. 

Mexico has seen an investment boom in R&D, as the automotive industry sees in Mexico a great opportunity because the country offers the right balance between highly trained and experienced labor, a mid-size local market that continues to grow, a talented engineering pool and a privileged location.