By on March 11, 2014

Mazda3s Loading Onto Three-Tiered Train Car

Within four months of each other, Honda, Mazda and Nissan have opened new factories in Mexico, taking advantage of the opportunities within the nation’s automotive industry to grow a new export base into the United States, Latin America and Europe while also gaining ground in the rapidly expanding local market, all in direct challenge to the Detroit Three and other automakers on both sides of the border.

Automotive News reports Mexico will become the No. 1 exporting nation to the U.S. by 2015 at the earliest in large part due to the 605,000 units per year added by the three Japanese automakers. Meanwhile, Toyota will begin production in 2015 at Mazda’s newly opened Salamanca plant prior to deciding whether or not to build a new factory of their own. Nissan’s premium brand, Infiniti, may also set-up shop in Mexico.

In turn, the Japanese will see benefits from the move, from mitigating losses from a weaker yen in exports from home and greater profit due to cheap labor, to no tariffs on exports to the U.S. due to the North American Free Trade Agreement and improved product availability resulting from shorter distances between markets.

Speaking of free-trade agreements, Japanese automakers will also have access to some 44 countries and up to 40 million sales annually as a result of Mexico’s many agreements, allowing them to take on competitors in Latin America and Europe.

Finally, the Japanese have taken market share away from the Detroit Three in Mexico’s own automotive market, holding a collective 42 percent over Detroit’s 35 percent in 2013, when just four years earlier Detroit dominated with 57 percent of the market over Japan’s 23 percent.

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27 Comments on “Japanese Automakers Find New Export Base, Opportunity In Mexico...”

  • avatar

    This trend will continue for reasons of economy, logistics, and environment. Honda, of the OEMS newly opened, will be the most interesting one to watch IMO.

    Additional: Lexus or Infiniti will be next to leave Japan, although I personally don’t think Lexus will build in Mexico.

  • avatar

    “mitigating losses from a weaker yen in exports from home”

    That should be “stronger yen” Weaker yen increases profits at home.

  • avatar

    Major excess auto manufacturing capacity NA.
    Reductions coming USA.

    • 0 avatar

      Except that this capacity is largely the result of Japanese manufacturers shifting production from Japan to Mexico. Not the US. Most of the excess capacity was wrung out in the last recession.

  • avatar

    One has to wonder if quality will go down.

  • avatar

    Mexico is an excellent source of cheap cars for the US. Judging from personal experience with new ’14 Nissan Versa Note fresh from Aguas Calientes, Mexico – outstanding value, although obviously not up to Japanese standards of assembly quality. Still, very good car, 80% Mexican content, including the engine and transmission.

  • avatar

    I, for one, think this is a good thing! Employing more Mexicans at home not only raises their living standard but it keeps them from coming over here illegally and having to live an indigent lifestyle in squalor.

    It also precludes UAW interference by not locating in America and it preserves the spirit and intent of NAFTA to encourage free trade between member nations.

    Most of all, it improves the automaker’s bottom line.

    In America, the unionized workers want to share in the profits but not in the losses, all without having to buy a share or stock in their employer.

    Such lobsided union-logic has seen two of America’s automakers bite the dust. Why would the foreigners and transplants want that to happen to them?

    I think this is a great move on their part to move to Mexico. I wish more automakers assembling in the US, such as VW, would do the same. That sure would keep the UAW at bay and unable to harm the automakers.

    • 0 avatar

      Give me a break.

      While unions may have overstepped their bounds in the past, more damage was caused by poor management (Germany, Korea and Japan have stronger auto unions and they are export powerhouses).

      And recently, the UAW has given up a no. of things – such as allowing for a 2 tier wage system which made it profitable for a domestic (GM) to build a SUBcompact in the US (the Sonic).

      What’s more unconscionable is the amount of compensation paid to the top execs – Mullaly and Ford, Jr. were both making more than VW’s Winterkorn and at the time, VW was more profitable than all 3 domestic automakers combined.

      Also, NAFTA was a big reason why so many Mexicans and Central Amercians ended upo departing for the US – since heavily subsidized American big-agri decimated local farming in the region.

      And people wonder why incomes for the middle class has stagnated (actually gone down when it comes to purchasing power) over the past 3 decades.

      The top 1% has gotten an ever increasing portion of the pie, which is fine when the pie is growing but it hasn’t.

      The top 1% and big corps. are flush w/ cash and assets but middle America is suffering b/c they ended up paying for it.

      Eventually, this will bite America in the arse b/c a country cannot continue to progress w/o a thriving middle class and it’s the middle class that is the engine for growth (which is why Henry Ford doubled wages for his workers and yet saw his profits increase).

      • 0 avatar

        bd2, I’m not into this envy and jealousy thing that so many people subscribe to. I’m pretty much into helping myself and mine to get ahead without worrying about what others around me make or earn.

        I watched Richard Trumka on Bloomberg when I was having my breakfast. He laid out what the AFL-CIO was all about. He made a great case for unions. Then again, that’s his business and livelihood.

        I completely understand that there are people who need the union to do their bidding for them, as well as the government with its mandates and regulations for employers. And that’s precisely why I think that moving more production to neighboring Mexico is a good thing.

        It allows the manufacturers to make money, add to their bottom line, and it allows their customers to buy those goods at a lower price, not enhanced by paying for union-scale wages and benefits.

        If the employees want to share in the profits (and losses), let them buy stock in their employer.

        Bill Clinton, a Democrat, was a fervent believer in NAFTA. He signed it into law and promoted it nationwide! Even he thought that exporting jobs to NAFTA partners was preferable to union demands that drove employers into bankruptcy.

    • 0 avatar

      Maria: “Pedro, what are you doing, packing up all our squalor?”

      Pedro: “I’ve decided to move to the US illegally, so I can live an indigent lifestyle in squalor”

      Maria: “Well, we are Mexican, and that’s what we love to do. But, hey, Pedro, you could apply for a job at the Mazda factory opening up down the street.”

      Pedro: “Great idea, Maria, then I could actually use my engineering degree, rather than clean up HighDesertCat’s trash all day.”

      And everyone lived happily ever after..

      • 0 avatar

        We have to haul our own trash to the county landfill, I live out in the boonies, 26 miles from the nearest town. I burn most of mine using old motor oil and a little bit of gasoline as the accelerant.

        I employ a lot of illegals, and have done so for decades. Most of those illegals really do live as indigents and in squalor. They work hard and are grateful to find work.

        NM is one of the few states that encourages illegals to get a NM drivers license, and then get the hell out of NM to any other place, and be a burden there.

        The Democrats of NM do not want to see this law changed.

        • 0 avatar

          The local auto plants, in Mexico, do not employ the types that migrate to the US. They employ people who have education in technical skills. There are quite a few technical schools in the area where I live. Unfortunately, Mexico, like the US does not provide a quality education to all. That will change as the need for more educated workers grows. The people who went North did so because they were not able to find good paying work here. The people that I talk to who have returned from the US voluntarily mostly have used the money made in the US to start small businesses here. I know that where I live is not typical of Mexico, as the state of Jalisco is the richest state in the country. Living close to Guadalajara means that I am exposed to some of the most successful people in Mexico. The people of Guadalajara come down to the lakeside for weekends and vacations. Except for the language, you would mistake them for any upper middle class people in the US.

          • 0 avatar

            There have been a number of illegals from Southern NM and West TX who have “gone home” over the years since the Hermosillo plant opened.

            While not all of them have gone back to Mexico to work in Auto assembly plants, there are plenty of other Maguiladoras that have opened South of the Border, and they have also acted as employment magnets.

            My American-born Mexican foreman, Federico, has told me on several occasions that some of his best workers, long time members of his team, have moved back to Mexico voluntarily.

            In NM, we do what we can for them, issuing them drivers licenses and selling them cheap cars so they can “get the hell out of Dodge” and head out of NM to the other 49 states and Canada.

          • 0 avatar

            Good jobs in Mexico can only improve conditions there, and that would motivate more people to stay than emigrate to the US illegally.

            The driving force for illegal immigration is the difference between conditions in the two places. An economic downturn here reduces the disparity (and subsequent measured change in illegal immigration), and increasing prosperity there does the same. Personally, I prefer them being successful to us being in recession, but that’s just me.

      • 0 avatar

        Pedro: But Maria how will I live without HDCs generosity using his government paid retirement plan. He has worked for the us government his entire life, if he employs Gringos he might have to pay taxes.

        Maria: f that condescending pr!ck!

        • 0 avatar

          ExPatBrit, I haven’t worked for the us government my entire life!

          Only for the period Jun65-Jul85, while serving in the military.

          After that I kept busy making money on my own.

          I have never been in anyone’s employ after I retired from the military at age 38.

          Yours must be the Brits’ way of thinking; 6000 years of history, uninterrupted by progress.

    • 0 avatar

      There are not nearly enough jobs in automotive manufacturing to solve the unemployment problems in Mexico. The birth rate is way too high, there are not nearly enough schools, and there are too many uneducated people living in rural areas with no economic base to sustain them. Those who emigrate to the US (and other places), either legally or not, do so out of hunger, desperation, lack of opportunities, and a wife and child (or two or three) to maintain.
      Endemic corruption (as in all third-world countries) saps the government of its ability to create any sort of positive change. It’s been that way for a long time, and will likely stay that way.

  • avatar
    jim brewer

    Its a long time coming. Mexico is a good place to make cars. I suspect the cruddy cars VW turned out slowed the entry of other manufacturers who suspected it had something to do with the work force.

    • 0 avatar

      As Charliej correctly pointed out in his comment above, the automakers in Mexico hire the applicants who are better than the average bear, and smarter than the normal Jose.

      Anytime you open up anything anywhere, there are bound to be spin-off businesses and service-providers that spring up all around the core employer.

      This happened around the Toyota plant in Lexington, the Honda plant in Marysville and the Hyundai plant in Montgomery.

      When I visited those sites, years ago as part of a business-related trip, it was plainly evident that each plant brought prosperity to the community, the area and the region of that state.

      It is reasonable that building in Mexico has done the same for them, but I never venture more than twenty miles south of Ciudad Juarez into Mexico.

      • 0 avatar

        HDC, why not? Central Mexico is such a beautiful, friendly place to live or visit. Many Americans and Canadians are making this area their retirement home. It is very much different than the border areas of Mexico. Living in the mountains, South of Guadalajara, the climate is perfect and the cost of living is also low. All in all a perfect retirement area.

        • 0 avatar

          Charliej, I know. My daughter-in-law was originally from South of Guadalajara, came here illegally at age 11 when her parents entered the US illegally, but had to become a US citizen when my youngest son got his Commission in the US Army.

          The rest of her family never became US citizens but continues to live in the US in South TX and act as if they are Americans; yup, they even vote.

          People figure they’ve been here so long it doesn’t matter if they are US citizens or not. Don’t even ask if they have a Green Card. Millions upon millions like them all over the US, everywhere.

          My son is now an SA with the Border Patrol in South TX, after his retirement from the US Army in 2012.

          He and my daughter-in-law make frequent trips to Guadalajara and have set up an import business for ceramics and other goods made there. They distribute much of it to souvenir shops all over the Southern US.

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