Apart from hosting the world’s largest automotive assemblers—and their paint system partners—Mexico’s national trade association, Asociacion Mexicana de la Industria Automatriz (AMIA), estimates that there are 1,100 automotive parts companies in Mexico now. “There are certainly new plants coming into Mexico, and that is driving demand,” said Mike Millar, a spokesman for PPG’s OEM coatings unit, in Pittsburg, Pa.
Following the spike in oil prices and the devalued U.S. dollar, Mexico has demonstrated that it can squarely compete with China in automotive manufacturing, given its advantages of proximity to the U.S. market, relatively low labor costs, minimal language barriers and the free trade regime established by the North American Free Trade Agreement. Last year, Mexico’s automotive industry racked up $87 billion in revenue on 2.3 million units. August automotive manufacturing statistics in Mexico broke a record, with total production up 7.7 percent, buoyed by a domestic sales increase of 13.1 percent, according to statistics from the AMIA.
Last year, Mexico was already ranked as the ninth largest motor vehicles manufacturer in the world by the International Organisation of Motor Vehicle Manufacturers, in Paris. Now, consultant A.T. Kearny predicts that Mexico could move into the top five global manufacturers in as many years.
New OEM automotive investments now are falling on Mexico like rain. In August, Honda announced plans to invest $800 million in a new plant in El Salto, Jalisco state, that will open in 2013. Similarly, Mazda announced plans in August for a $500 million investment in Guanajuato state. Previously, Nissan announced a $1 billion-plus investment in its Aguascalientes state plants for new lines opening in 2014. And Volkswagen has spent some $400 million refurbishing its “Bug” plant, from which the new version of the classic is expected to roll out this fall.
Within the parts industry, Methode Electronics, of Chicago, Ill., in September acquired the Monterrey plant of Nylon specialist Nypro, which included three full paint lines with a Class 100,000 clean paint room. An ISO Class 5 cleanroom has no more than 100,000 particles per square meter of air. While the purchase price was not identified, Methode indicated that following a $7.5 million integration process, it anticipates annual sales of up to $25 million from the facility.
Methode also operates facilities in Mexico at Apodaca and Santa Catarina, in Nuevo Leon state. Nypro maintains still has two other operations in Mexico, in Juarez and in Guadalajara, where it also operates a Class 100,000 clean painting room with two fully-automated booths. Similarly, TRW recently announced plans for a new plant in Queretaro state.
Manufacturers in Mexico have a distinct advantage over China in terms of just-in-time deliveries, since a truck or double-stack train from Mexico can almost deliver anywhere in North America within a week’s time. A ship from China, however, can take three weeks for crossing time, and delays in harbor from handlers or U.S. Customs can be unpredictable at times. As a result, southbound paint materials from the United States often are used in Mexican paint operations.