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Mexico Grows Rapidly as a Major Automotive Maker and Exporter, Business and Industry Trends Analysis

Over the past several years, Mexico has grown to become a major producer and exporter of cars, trucks and other vehicles.  Mexico’s economic growth is expected to continue over the mid-term, fueled by its relatively young population (between 2000 and 2030, Boston Consulting Group expects the labor force there to grow by 18%, while China’s will fall by 3%).  
Mexico is home to a variety of advanced manufacturing industries.  Automotive production, for example, has catapulted Mexico to be the world’s 4th-largest exporter of cars behind Germany, South Korea and Japan.  About 80% of Mexican-built vehicles are exported, and the majority go to the U.S.  American manufacturing gets some benefit, since some of the parts found in Mexican imports were manufactured in the U.S.
Automotive manufacturers have invested heavily in plants in Mexico, including Nissan, Honda, Volkswagen and Mazda.  Although automobile-related manufacturing is spread across much of central and northern Mexico, the greatest concentration is in the Bajio region, incorporating the Mexican states of Guanajuato, Queretaro, Aguascalientes and Jalisco.  In this industrial heartland of the nation, which some observers refer to as “Mexico’s Detroit,” Mexican plants compete very effectively with their peers in the world’s other auto centers.
The State of Queretaro is home to auto plants that employ more than 50,000 auto workers in roughly 80 factories.  Excellent transportation networks nearby make it easy to ship finished products to other countries. 
Visitors to the Leon airport, in the State of Guanajuato in the heart of the auto manufacturing district, are immediately struck by the enormous impact of the car and pickup manufacturing sector.  Massive, modern plants line the highways, including one of GM’s most important pickup truck plants close to the airport.  Nearby, there are large numbers of modern hotels, attractive housing districts and good highways.
Mexico is a powerhouse of high-value manufacturing and a major export machine.  Its close proximity to the American market, growing middle class, highly desirable workforce, reasonable costs and government support will continue to boost major manufacturing investments there.  Mexico’s strategy of entering into free trade agreements around the world will boost this trend even further.  
Mexico’s manufacturing wages were relatively low, at about $5.30 (in U.S. dollar terms) per hour as of March 2023 according to IVEMSA.  The Trump Administration negotiated a change in manufacturing and trade regulations (formerly known as NAFTA) which took effect in July 2020.  The new U.S.-Mexico-Canada Agreement (USMCA) requires 75% of a vehicle’s parts to be made in one of these three countries (up from the previous 62.5%) in order to be free from tariffs.  The agreement also requires that at least 40% of vehicle parts be made by workers earning at least $16 per hour.  USMCA also keeps tariffs on most agricultural products at zero, while opening the Canadian market to U.S. dairy, poultry and eggs.  In addition, the agreement includes provisions for digital trade and commerce, (which were absent in NAFTA) and provides $600 million to address environmental problems.

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