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Trip Report: Automotive Logistics Mexico

By Salvador Murguia  February 10, 2016

The second annual Automotive Logistics – Mexico Conference was held at the Hotel Marquis in Mexico City January 27 and 28 and brought together the highest level executives in the industry to discuss trends, main challenges and future investments in public and private sectors to boost growth, as they pertain to the Mexican market, but also more broadly. Here are a few key trends and takeaways from the event.

Rapid Growth in the Automotive Industry

In 2015 Mexico produced 3.4 million of vehicles, marking a milestone in the industry. From 2015 to 2020 it is expected to see a 56 percent in car production in Mexico (81 percent for export and 19 percent for domestic market). Also carmakers providers as parts manufacturers and logistics service suppliers projected strong growth in the next five years. Mexico is the largest supplier of a parts in the US and is currently the seventh largest vehicle producer and the fourth largest exporter worldwide.

Large Investment and Public-Private Partnerships

Representatives of the leading car brands in the world such as Audi, Volkswagen, Ford, GM, among others agreed that Mexico has several features that support the potential of country:

  • Strategic Location: good geographic position due to its proximity to US
  • Trade Agreements: It has 12 trade agreements involving 44 countries

Against this background, the big players in this market said they will continue their investments in large plants located mainly in the north and south.

The Secretary of Economy for the Government of Mexico, Ildefonso Guajardo Villarreal, presented a keynote address at the event.

The Secretary of Economy for the Government of Mexico, Ildefonso Guajardo Villarreal, presented a keynote address at the event.

Challenges

This positive growth brings great challenges, mostly in these areas:

  • Logistics and Supply Chain: The government and the private sector agree that Mexico has adapted well to the growth of the industry, but with forecasts for the next five years, the challenge is to modernize the port infrastructure, especially roads and railways (85 percent of automotive exports to US and Canada are made by rail). The Minister of Economy of the Federal Government said that investments in infrastructure improvements will only be achieved through public-private partnerships.

Also, the need to improve the competitiveness of the logistics and supply chain, especially in cost and performance was expressed as a concern.

  • Security: Despite government efforts, the issue of security and delays at border crossings are an issue for many of these companies. Some companies have implemented systems for monitoring and tracking to manage border crossings and integrate logistics networks throughout the region.

The government, meanwhile, has made great strides to improve this critical area. There are several certified in the American security program, C-TPAT companies, and in the NEEC of Mexico.

  • Skilled labor: Luxury brands require high technology, innovation, high quality processes and skilled labor force. Even many of the big manufacturers import engineers from Germany and other countries. Executives from several participating organizations also commented that they often have to bring specialized staff in the areas of logistics and supply chain from other countries, which is costly and it is an area of ​​improvement for the Mexican market.

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To view this post in Spanish, click here.