Mexico’s Manufacturing Sector: Key Trends and Challenges Shaping 2025
Mexico registered a record US$31 billion in Foreign Direct Investment (FDI) in the first half of 2024, a 7 percent year-over-year (YoY) increase, according to Mexico’s Ministry of Economy. About $30 US billion came from companies with an existing facility in Mexico, while new investments totaled more than US$900 million. More than half of the total FDI comes from manufacturing.
Mexico’s manufacturing sector is now navigating a dynamic landscape shaped by global trade shifts, technological advancements, and evolving economic policies. As businesses continue to assess cost efficiencies and strategic locations, Mexico has emerged as a strong contender, drawing the interest of major players across the automotive, electronics, and aerospace industries.
These are some of the sector’s growth drivers and challenges:
Nearshoring and the Shift in Global Supply Chains
One key trend driving this growth is nearshoring, as companies aim to bring their production closer to North American markets. This shift is primarily driven by the need to mitigate supply chain disruptions seen during the pandemic. Moreover, global manufacturers are increasingly looking to relocate operations closer to the U.S. market, with Mexico becoming a prime nearshoring destination.
The country’s favorable trade agreements, such as the United States-Mexico-Canada Agreement (USMCA), coupled with its strategic proximity to the U.S., are propelling this shift. Nearshoring not only reduces transportation costs but also helps manufacturers manage risks associated with longer supply chains.
In 2024, around 200 foreign companies made public announcements about their plans to invest in Mexico, and others are expected to follow.
Technological Innovation and the Move Toward Industry 4.0
Mexico’s manufacturing companies are embracing Industry 4.0 practices and investing in automation, robotics, and advanced data analytics to remain competitive. This push toward digitization, particularly in automotive and electronics manufacturing, enables companies to streamline operations and improve product quality. Today, companies are increasingly incorporating automation as part of their processes to increase productivity and some of the increased labor cost challenges.
Automotive and Aerospace Industries Lead the Way
The automotive and aerospace industries continue to be pillars of Mexico’s manufacturing sector. The country remains one of the largest exporters of vehicles and automotive parts, with companies like Ford, Toyota, BMW, and General Motors expanding their operations. The aerospace sector, with players such as Bombardier and Safran, is also experiencing robust growth. Moreover, the electronics industry is also registering significant growth in investment and operations.
Rising Interest in Advanced Manufacturing Hubs
Regions such as Querétaro, Nuevo León, Baja California, Guanajuato, and Chihuahua are gaining recognition as advanced manufacturing hubs. These areas offer well-developed ecosystems, access to skilled labor, and favorable operating conditions for sectors like automotive and aerospace. The growth of these hubs reflects a trend toward geographical diversification, with manufacturers increasingly looking beyond traditional border locations.
Renewable Energy and Sustainable Manufacturing Practices
Sustainability has become a focal point for many manufacturers in Mexico, aligning with global trends. Companies in Mexico’s manufacturing sector are adopting renewable energy sources and aiming for more sustainable production processes. In Mexico, manufacturers can use solar and wind power, mainly to reduce their carbon footprint while lowering energy costs. Companies are also adopting eco-friendly processes and materials driven by consumer demand and international regulations.
Workforce Development and Skill Challenges
Mexico has 5,220 manufacturing companies operating under the IMMEX program. These manufacturers employ directly 2,938,872 people in the country, but millions of other jobs depend on the industry.
As Mexico’s manufacturing sector grows, so does the demand for skilled labor. However, the rapid expansion has led to challenges in workforce development, particularly in advanced sectors like aerospace and electronics that require specialized skills. Educational institutions and industry leaders collaborate to provide targeted training programs, but the sector continues to face a skills gap in some regions, which could affect growth if not addressed.
Increased Investment in Infrastructure
With rising demand for industrial real estate, investments in infrastructure have surged, especially along the U.S.-Mexico border. Cities like Monterrey, Ciudad Juárez, and Tijuana are expanding their industrial space to accommodate new facilities. Enhanced transportation and logistics infrastructure are also high on the agenda to support efficient cross-border trade, a critical component of Mexico’s export-oriented manufacturing sector.
Challenges Ahead
While the future looks promising for Mexico’s manufacturing sector, challenges remain. Regulatory uncertainty, shifts in global economic policies, and competition from other low-cost countries can impact Mexico’s appeal. Also, the industry faces rising wage pressures as demand for labor intensifies, potentially affecting cost advantages in the long run.
Moreover, compliance with USMCA regulations and potential adjustments to tariffs are key trends to monitor. The USMCA introduces specific challenges for manufacturers in Mexico, particularly related to compliance with rules of origin requirements. Meeting these standards requires adjustments in sourcing strategies, supply chain logistics, and verification processes. Manufacturers must also prepare for potential agreement updates during the 2026 review, which could introduce new regulations or modify existing ones.
Overall, the outlook for Mexico’s manufacturing sector remains optimistic. With these trends, Mexico’s manufacturing sector stands as a robust player on the global stage, balancing traditional advantages with new technological advancements and sustainability. As manufacturers worldwide continue to navigate a complex global landscape, Mexico’s ability to adapt to evolving demands will be crucial in cementing its role as a premier manufacturing destination.
The message for investors and manufacturing companies is clear: Mexico is open for business and offers lucrative opportunities for those willing to invest in its dynamic and evolving manufacturing sector.
If you are looking for a partner for a soft landing in Mexico, contact TECMA Group
