MANUFACTURING IN MEXICO: WHAT YOUR COMPANY NEEDS TO KNOW

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Manufacturing in Mexico is considered to be the main engine of the development of the country’s economy. As a result, the productive sector’s share in Mexico’s Gross Domestic Product (GDP) rose from 15 to 18% over the last decade.

The coronavirus pandemic has brought new challenges that demand a significant transformation of current manufacturing business models despite this growth. In some instances, these contemplate entirely changing how things were being done in the past.

Observers recognize that there will be five significant changes in manufacturing in Mexico due to the effects of the global pandemic on the sector.   Among the trends that are in the process of driving the transformation of manufacturing in the country are the following:

  • Modernization of remote work capabilities in Mexico.
  • Centralization of monitoring and diagnosis of operations and assets
  • Significant investments in the automation of manual processes.
  • Remote product services as a critical part of product innovation.
  • The resilience of the nearshore supply chain.

These changes imply that starting the digital transformation process will allow companies that are manufacturing in Mexico to be ready for any present and future situation. However, this should not necessarily involve significant investments in infrastructure or completely getting rid of current production models. Instead, this will result in implementing solutions that adapt to the evolving needs of manufacturers in Mexico in a flexible way.

Industry 4.0, by definition, is a model in which companies in Mexico will increasingly automate and control their operations. This is through the use of a robust technology strategy based on edge computing, analytics, Artificial Intelligence, and software-based automation. The main objective of this approach is to modernize the mode of production of manufacturers in Mexico and lead them to reach their maximum levels of productivity.

Main industrial parks for manufacturing in Mexico and their locations

The growth in the number of world-class industrial parks in Mexico has been constant in recent years. This steady progress has installed the necessary infrastructure to efficiently and orderly produce, store, and transport manufactured goods. The products made in Mexican industrial parks are marketed and sold predominantly through the thirteen international free trade agreements and other treaties Mexico has entered into. Quality industrial parks are essential to attract more foreign direct investment to the country. Currently, potential investors will find that Mexico is home to 875 Class A industrial parks. These installations occupy approximately 60,248 hectares.

Establishing manufacturing operations in an industrial park is considered necessary by businessmen interested in having a space that complies with the quality, sustainability, and safety guidelines that enable them to world engage in world-class manufacturing in Mexico. Among these quality guidelines are the protocols included in the Mexican Standard for Industrial Parks NMX-R-046-SCFI-2015. Additionally, industrial facilities may also have certifications such as the Green Industrial Park designation, Environmental Quality Park recognition, or Sustainable Industrial Park classification.

In an investigation of the conditions of industrial parks in Mexico, which was recently carried out by the Faculty of Commerce of the Universidad Nacional Autónoma de México (UNAM), researchers discovered that up to 48% of those companies have a positive perception regarding settling up manufacturing operations in Mexican industrial parks.

Due to the interest of international investors in establishing production facilities in Mexico and the wide range of advantages that characterize the regions where they settle, Many state governments have facilitated the installation of these industrial complexes. The most prominent states in terms of the number and quality of areas designated for industrial parks and manufacturing activities in Mexico are:

Nuevo Leon:

The state of Nuevo Leon is home to 176 industrial parks. They are located mainly in the metropolitan area of the city of Monterrey. According to the Ministry of Economy and Labor of Nuevo León, in 2020, Monterrey accounted for 6.5% of direct foreign investment in Mexico. This activity resulted in capital inflows valued at  US 1.71 billion.

The State of Mexico:

The Metropolitan Zone of the Central Valley of Mexico is the urban area with the most industrial facilities to conduct productive manufacturing activities. One hundred and thirty-five industrial developments are located here. These include parks for manufacturing and logistics developments. Of these installations, seventy-nine are classified as Class A industrial parks. Mexico City is home to more than 1,900 companies. These establishments are dedicated to producing items such as auto parts, transportation equipment, components for various industries,  and food and beverage products. This is according to figures from Mexico City’s Secretariat of Economic Development, also known by its Mexican acronym SEDECO.

Queretaro:

In this state, sixty-five industrial parks operate with national and foreign companies. They house approximately 1,600 companies that are manufacturing in Mexico. Collectively, they generate 40% of the state’s Gross Domestic Product, GDP.

Guanajuato:

The state of Guanajuato is home to sixty industrial parks comprising a total area of 5,655.69 hectares. Guanajuato is an international powerhouse in the production of automobiles, auto parts, and transportation equipment.

San Luis Potosi:

San Luis Potosi has twenty industrial parks located in the metropolitan area of the state capital. International automotive industry leaders are among the companies settled in these facilities, including BMW and General Motors. It also houses Logistik Industrial Park, established in 2003 on 1,500 thousand hectares. This development is one of the largest industrial parks in the country and is the first integrated logistics platform providing both cargo handling and industrial real estate services.

Baja California:

Baja California is one of the industrial epicenters of the Mexican Republic. One of the primary benefits of industrial parks in the state is its proximity to the US state of California. Manufacturing hubs are located in the border cities of Tijuana and Mexicali. According to Tijuana’s Metropolitan Institute of Planning (IMPLAN), ninety-two industrial parks are registered in the state of Baja, California. Of this number, forty-two have been established in the industrial capital of Tijuana. Tijuana, Mexicali, and the rest of Baja California are homes to companies in the medical device, automotive, aerospace, and electronics manufacturing industries.

Some of the Class A industrial parks in Mexico

The following information provides a sampling of some of the Class A industrial parks in each region of Mexico:

  • Arco 57 Industrial Park in San Francisco Soyaniquilpan, State of Mexico. The total area of the park is 717 hectares. Companies that have a presence in this park are establishments involved in light manufacturing.
  • Centinela Industrial Park in Mexicali, Baja, California, encompasses a total area of 706 hectares. A diverse industrial base is on site.
  • API Altamira Industrial Park, Tamaulipas, has a total area of 4,000 hectares. It is a mixed industry development.
  • Chetumal Industrial Park in Othón P. Blanco, Quintana Roo, total area 4,000 ha., type of industry: mixed.
  • Tesistán III Industrial Park in Acatlán de Juárez, Jalisco is comprised of a total area 1,800 hectares. Tenants are from a mix of industries.

The construction or installation of industrial parks to advance the manufacturing sector in Mexico is a trend that will continue to grow.

Due to the advantages of manufacturing in Mexico, the tendency to install these industrial complexes will continue to grow. In the efforts to further develop the sector, the Mexican Association of Industrial Parks, AMPI, is one of its promoters. They advise foreign direct investors that these industrial facilities provide companies with infrastructure, security, and sustainability and facilitate the implementation of quality standards and environmental regulations.

The Mexican Standard for Industrial Parks NMX-R-046-SCFI-2015 indicates that an industrial park must have the following criteria:

  • It has property title, permits, and design for the operation of manufacturing plants or distribution centers. It is located near the main trade routes and urban areas to facilitate access to markets, suppliers, labor and education, housing, and health services.
  • It offers infrastructure and equipment for industry. This is in addition to essential services such as water, electricity, and telecommunications, including natural gas, railway spurs, water treatment plants, etc.
  • It operates under internal regulations and has an administration that coordinates security, the proper functioning of the infrastructure, the promotion of real estate, and the general management of procedures and permits before the regulatory authorities.

By meeting this Mexican Standard, industrial parks offer certainty to customers who settle as tenants. This increases the value of their assets and makes them more attractive to their customers.

 

Mexico’s major industries

Aerospace Industry

Mexico enjoyed an annual growth rate of 15% in the aerospace industry between 2010 and 2020. Regarding economic activity in this sector, 79% of aerospace companies in Mexico are dedicated to manufacturing, 11% are involved in MRO activities, and the final 10% of companies engaged in the Mexican aerospace industry are engaged in research and development.

According to the Mexican Federation of the Aerospace Industry (FEMIA), in 2019, the Mexican aerospace industry exported 9.5 billion dollars. Furthermore, the sector’s growth has been an impressive 14.4% per year in the last 15 years.

Mexico, by volume of aerospace exports, ranks 12th worldwide. However, in the coming years, it is expected that the country will improve on that position by entering the top 10.

The United States is the destination of 80.7% of Mexican aerospace exports, while Canada receives 4.7%, France 3.5%, Germany 3.2%, and 7.9% is shipped to several other countries. Companies that consume aerospace parts and components include Airbus, Bombardier, Aerospace, General Electric, and Honeywell. In addition to purchasing parts, each of these companies has a manufacturing presence in the country.

Luis Lizcano, president of FEMIA,  recently indicated that, in the next 20 years, it is estimated that global assemblers will build 44,000 new aircraft. This number is double the fleet that now operates in the world. “This guarantees the growth of the aerospace manufacturing in Mexico, which should represent exports valued at approximately US $19 billion in the next ten years. Aerospace production in Mexico is concentrated in civil and commercial aviation. Therefore, most exports are engines, fuselages, landing gear, connection systems, doors, and other components”.

The generation of employment in the aerospace industry also requires an educational sector that supports this growth. In this sense, in the last seven school cycles, 4,523 people graduated from specific careers in the aerospace sector. Of this total, 82%  of students received Bachelor’s degrees, and the remaining 18% received technical training and certification.

Automotive Industry

In 2021, Mexico produced a total of 2,979,276 vehicles. However, the semiconductor crisis and logistical difficulties caused production stoppages throughout the year that represented the manufacture of hundreds of thousands of units less than projected. This represented a drop in production of -2% compared to 2020. In December, companies in Mexico added only 212,272 vehicles to the total for the year. This figure was 16.51% less than in December 2020.

The automotive manufacturers in Mexico with the highest production in 2021 were:

  • Nissan: 536,323
  • GM: 518,175
  • Volkswagen: 294,408
  • Toyota: 222,346

Mexico accumulated a total of 2,706,980 light vehicles exported between January and December 2021. This number was  0.9% more than in 2020. In this area, the export of trucks produced in the country increased considerably (12.5% compared to 2020), with the introduction of models like the Ford Mustang Mach-E, the all-electric mass-produced vehicle in Mexico, and the production ramp-up of the Toyota Tacoma in Guanajuato. As a result, vehicle exports in December 2021 were 227,465 vehicles. However, this was 17.3% less than the same month in 2020.

In 2021, the growth in the manufacture of Chinese automotive brands in our country stood out. Production was 307.56% more than in 2020. This represented a total of 26,593 units produced during the year 2021. MG Motor had the largest number of units with 16,358. In this regard, the Chinese brands (with sales of less than 25 thousand units) that managed to grow their sales the most compared to 2020 were:

  • MG Motor: 2,203.9% (16,358 sales).
  • JAC: 92.1 % ( 8,203 sales).
  • Mitsubishi : 71.1% (17,872 sales ).
  • Subaru : 46.7% (2,119 sales ).
  • SEAT : 39.3% (20,942 sales ).

Electronics Industry

The electronics manufacturing industry in Mexico includes such famous brands as LG, Sony, Samsung, and Vizio. The sector is favored by access to a cost-effective and plentiful labor pool, direct proximity to vibrant commercial markets in the United States, and a network of 13 free trade agreements governing exchange with more than 50 countries. As a result, electronics manufacturing in Mexico has grown at a steady pace over the last several decades. The electronics assembly sector in Mexico boasts several leading technology exports. The country is the most prolific exporter of flat-screen TVs and now stands as the second-largest exporter of electronic products to the United States. It is the world’s eighth-largest manufacturer of electronics products globally.

As technology invention continues and the significance of electronics becomes more deeply ingrained in the economic expansion linked to the digital age, Mexico’s electronics manufacturing shows signs of nothing but continued growth. Electronics companies that are active in Mexico will continue to provide advanced industry-related services that include both fabrication and assembly. The country’s manufacturing services produce both high volume-low mix items and those that are low volume-low mix.

Medical Device Industry

According to figures from the Mexican Association of Innovative Industries of Medical Devices (AMID), in the field of medical devices, Mexico occupies the position of the eighth exporter worldwide. In addition, the country is ranked number one in Latin America, with an annual average growth rate of greater than 7 percent over the last several years.

The value of the production of medical devices in the country is more than US $15 billion. Medical device manufacturing in Mexico has generated more than 130,000 jobs and represents 0.3% of the total national GDP and 1.5 of the country’s manufacturing GDP.

It can be observed that, before 2020, the sector had grown steadily. However, the appearance of COVID-19 increased the production and demand for many classes of medical devices and supplies. This was due to the need to provide materials and equipment to diagnose and treat the coronavirus pandemic. In particular, products related to protective equipment, reactive tests, and products associated with respiratory therapy, including invasive and non-invasive ventilation apparatus, were in high demand.

Manufacturing in Mexico has a long history. Today the nation is one of the foremost producers of a broad class of products in the world. Companies that seek to manufacture in the country can establish a presence in several regions. These areas have modern, Class A industrial parks that accommodate a wide range of productive activities. Should your company want to establish itself in Mexico, call the professionals at Prince Manufacturing.