MEXICO’S REGIONAL AUTOMOTIVE REPORT 2016 REPORT AUTOMOTIVE MEXICO’S REGIONAL Mexico’s Regional Automotive Report 2016 Clusters - Original Equipment Manufacturers - Tier 1s - Tier 2s Sub-Tier Suppliers - Affiliated Services - Government Officials 1 Number 1 Supplier of the United States. 1/3 of the total value of U.S. imports of autoparts comes from Mexico IN 2015, 91 MILLION VEHICLES WERE MEXICO IS THE 7TH LARGEST PRODUCED WORLDWIDE VEHICLE PRODUCER IN THE WORLD (3,58 MILLION UNITS) 21 of the top leading auto- makers are located in 14 states of Mexico 81,927Occupied workers in the assembly industry More than 300 nd (156,893 vehicles) Tier 1 suppliers Exporter of established heavy vehicles 300 in Mexico 2(Jan-Nov 2015) *Sources: OICA , INEGI, AMIA, ProMexico, Global Trade Atlas, Mexico Ministry of Economics Dear Reader, Today, the automotive industry is one of the most vibrant sectors in Mexico and a major economic stimulant. It is an important source of direct employment and a key contributor to a large number of small-and-medium sized local companies that support the industry. This is not merely a local success story, but also a story of healthy competition, synergy, and collaboration between the various foreign and local participants for the greater good of the sector, and the country as a whole. Many strategic advantages have attracted OEMs and Tier 1s alike to build facilities in Mexico, including the establishment of Automotive Clusters, a very attractive, skilled and cost-effective workforce, the logistical advantages of Mexico’s geostrategic location, and most importantly, its vast network of bilateral and multilateral trade agreements. Major multinational OEMs have realized that Mexico is one of the most attractive countries in which to conduct operations, easily reaching the most important automotive market in the world, the United States, as well as many others. The business environment of Mexico is exemplary, and its overwhelming potential is teeming with opportunities for foreign investors, especially as the internal market has shown some of the most impressive growth in years, with no sign of slowing down. Following the success of its various reports on Mexico, Global Business Reports (GBR) has collaborated with INA and CLAUT to produce in-depth regional research within the automotive industry to evaluate the opportunities and challenges that the sector faces as it pushes ever forward. Mexico’s Regional Automotive Report explores the particular dynamics of the Northeast, Central/Southern Mexico and Bajío regions by not only looking at the OEMs and Tier 1s, but also the Tier 2s, government organizations as well as research and design institutions. Additionally, GBR spends a significant amount of time understanding the supporting industries, including engineering, equipment and service providers, legal, logistics and finance firms. Analyzed together, all of these parties tell the complete story of the automotive sector in Mexico and how it is achieving an unparalleled rate of growth. We want to thank all of those who have generously donated their time and insights to GBR’s research. We hope that you find this publication to be an interesting and informative platform as a means of drawing more attention to Mexico as an automotive investment destination. Meredith Veit Project Director Global Business Reports Exclusive Interviews Directory Leading industry, GBR, Cluster Industrial, government and academic ProMéxico, INA and figures from Mexico's CLAUGTO provide a automotive sector contact directory of major discuss market trends, players that together make technologies, opportunities up Mexico's automotive as well as collaborative community. efforts in the cluster. Editorial Analysis Global Business Reports' journalists provide unique insights into all aspects of the automotive value chain by working on the ground and meeting face to face with industry leaders. Introduction to Mexico 32. Interview with FALCCOS 57. Interview with CLAUT Querétaro, 33. Interview with MPG Casting Technologies TREMEC 9. Mexico at a Glance 34. Interview with General Motors (GM) 58. A Rise in Demand 10.The Rise of Clusters: A means of Strengthening 35. Interview with C&S Mecatronics Technologies, 59. Interview with Automotive Cluster Of San Luis the Local Industry S.A. de C.V Potosí 11.Interview with ProMéxico 60. Ford Puts Emphasis on Customer Wellness and Interview with Industria Nacional De the Environment Autopartes, A.C. (INA) 62. Guanajuato and Its Integrated Effort For Progress 13.Globalization: The Catalyst Central / South 63. Interview with Cluster Automotriz De 14.Interview with Asociación Mexicana De La Guanajuato AC (CLAUGTO) Industria Automotriz (AMIA) 39. Historically Opportune Automotive Destination 64. Growing Pains: Human Capital Adequacy and 15.Interview with CANACINTRA 40. Interview with CLAUT Estado de Mexico Increased Competiton 41. BMW Moves Toward More Sustainable 65. Interview with Plus Integral Consultores Production 66. Leveling the Playing Field 42. The Rise of Design Centers for Innovative and The Northeast Integrative Solutions 44. Interview with Daimler Buses Mexico 19.From a Foundry Foundation Arises an Industrial 45. Interview with Faurecia Future Outlook Stronghold 46. Interview with Hitachi Automotive Systems 20. Interview with The Automotive Cluster Of México, S.A. de C.V. 70. Conclusion Nuevo León (CLAUT) 47. Interview with RASSINI S.A. de C.V. 21.Bustling with Change: Nuevo León’s New 48. Innovative Solutions for the Environment Additions 49. Interview with Enviromental Resources 24.Interview with Secretary of Management Economic Development, Nuevo León 50. Interview with SAG-MECASA S.A. de C.V Mexico Automotive 2016 & Undersecretary for Investment & Industry, 51. Interview with Deloitte Mexico Industry Explorations Nuevo León Global Business Reports 25.Interview KIA Motors Mexico 26.Local R&D Investment and the Use of Partnerships as a Means to Progress The Bajío 28.Interview with METALSA A Global Business Reports Publication 29.Interview with Consultores CPM 55. The Bajío: Location, Location, Location For updated industry news from our 30.Interview with EVCO Plastics de Mexico 56. Querétaro on-the-ground teams around the world, 31.Interview with Np Steel S.a. De C.V. please visit our website at gbreports.com, Mexico Division (NPS) subscribe to our newsletter by signing up to our VIP list through our website, or follow us on Twitter: @GBReports Industry Explorations MEXICO AUTOMOTIVE 2016 Global Business Reports ACKOWLEDGEMENTS EDITORIAL AND MANAGEMENT TEAM Project Director: Meredith Veit ([email protected]) Writer: Jose Pablo Buerba ([email protected]) Researcher: Aleesa Schlup Executive Editor: Mungo Smith ([email protected]) General Manager: Katya Koryakovtseva ([email protected]) Graphic Designer: Inanc Duman ([email protected]) For updated industry news from our on-the-ground teams around the world, please visit our website at gbreports.com, subscribe to our newsletter by signing up to our VIP list through our website, or follow us on Twitter: @GBReports. To order additional copies of this book please write us at [email protected]. Image: Courtesy of Volkswagen GBR • Industry Explorations • MEXICO AUTOMOTIVE 2016 Introduction to Mexico "One of the main advantages that OEMs identify in Mexico overall is the country’s trade policy. In 1994, Mexico produced approximately 1.1 million units per year, and in 2014, we were producing about 3.2 million units per year. In that 20 years span, we were able to increase production by 2 million units—a success that can be mainly attributed to the country’s adopted trade agreements." Armando Cortés Galicia Automotive Sector Executive Director, ProMéxico Location of Light and Heavy Vehicle Manufacturing Plants in Mexico SONORA HERMOSILLO COAHUILA 2019 2020 RAMOS ARIZPE RAMOS ARIZPE BAJA CALIFORNIA SALTILLO SAN LUIS POTOSÍ TIJUANA CHIHUAHUA NUEVO LEÓN UNITED STATES Golfo de California Gulf of Mexico 8 MEXICO CITY PASIFIC OCEAN JALISCO GUANAJUATO CELAYA SILAO GUANOJUATO GUANOJUATO MORELOS EL SALTO 2019 AGUASCALIENTES ESTADO DE MÉXICO TOLUCA TOLUCA CUAUTITLÁN SAN JOSE CHIAPA PUEBLA TOLUCA 2018 2017 Population: 127.0 million (2015 est.) Land Area: 1,964,375 sq km Official Language: Spanish Capital: Mexico City Chief of State & Head of Government: President President Enrique PENA NIETO (since 1 December 2012) GDP (PPP): $1.44 trillion (2015 est.) Growth Rate: 2.5% (2015 est.) MEXICO AT A GLANCE GDP per Capita: $17,500 (2015 est.) Source: CIA World Factbook GDP Composition by Sector: 3.5% agriculture, 34.1% industry, 62.4% services (2015 est.) Exports: $430.9 billion (2015 est.): manufactured goods, oil and oil products, silver, fruits, vegetables, coffee, cotton Imports: $434.8 billion (2015 est.): metalworking machines, steel mill products, agricultural machinery, electrical equipment, automobile parts for assembly and repair, aircraft, aircraft parts Global Business Reports EDITORIAL Mexico at a Glance Albeit a country of vibrancy and tradition, Mexico remains salient as As the global economy was afflicted by the 2008 financial crisis, a clear and progressive automotive production destination. Mexico’s companies—the world-over—were forced to reanalyze their opera- economy, despite experiencing only modicum growth over recent tive strategies that had been based mainly on cost-optimization. “The years, is still the second largest in Latin America behind Brazil, and shift back to Mexico as a manufacturing destination became very its manufacturing activity