Because the industry is growing in the country by leaps and bounds, the automotive supply chain in Mexico must rise to meet the challenge.

Given the fact that, during the last calendar year OEM factories located within its national boundaries produced more than three million passenger vehicles, and that this number is expected to reach four million by 2018, there is wide agreement among industry watchers that, in order to keep up with the pace of growth that has been forecasted, the automotive supply chain in Mexico must step up its game. Strengthening the auto industry supply chain’s capacity has become a fundamentally important consideration and concern of makers of auto parts that are looking at establishing themselves in Mexico for the purpose of supplying the growing number of OEMs with major assembly plants located there.

Automotive Industry Foreign Direct Investment (FDI) continues to flow

In just the last several months, seven companies have announced that they will be establishing, or expanding their Mexican presence. These companies include Nissan-Renault, Honda, Mazda, Audi, Mercedes-Benz, BMW and Hyundai. The calculated sum total of these investments combined will rise above $8.2 billion dollar mark. In order to be able to thrive and to generate a healthy profit these companies must be serviced by an automotive supply chain in Mexico that is capable of accommodating the many OEM supporting suppliers that are sure to follow in their wake to establish themselves in the NAFTA region’s southernmost partner country.

Auto parts manufacturers will increasingly follow OEMs

According to figures provided by the Mexican Autoparts Manufacturers Association, or Industrial Nacional de Autopartes (INA), as regards this segment of the automotive supply chain in Mexico, annual growth is projected to be at six percent during 2015. As the number of units of passenger vehicles in Mexico rises, it is expected that growth in the number of parts supplier servicing OEMs will follow suit.

In this environment it an absolute necessity that the automotive supply chain in Mexico step up its game. This means that both OEMs and auto parts manufacturers will have to associate themselves with logistics service providers that are capable of affording them the support that will enable them to keep production lines up and running without pause, to reduce the time that it takes to manufacture their products and, subsequently, to transport them to market, as well as to reduce the costs associated with doing these things. Logistics service providers in Mexico that are able to help OEMs bridge any gaps that constitute barriers to achieving these ends will be deemed to be invaluable partners by the companies with which they conduct business, and sought out by companies with which they currently do not.

In addition to helping manufacturers to reduce their production costs by providing reliable service, superior a Mexican logistics operation is one that continuously seeks to reduce the costs of their own operations. Part of any savings gained through the constant efforts of cost conscious service providers can be passed down to OEMs and auto parts manufacturers in the automotive supply chain in Mexico that may make up much of their base of customers. Significant improvements can still be made in terms of reducing logistics costs, in that estimates made by Mexico’s Logistics and Commerce Innovation Center, or the Centro de Innovacion en Logistica y Comercio de Mexico, are that between ten and forty percent of the cost of sales of passenger vehicles that are manufactured in Mexico is comprised of logistics and supply chain input factors.

When choosing a Transportation and logistics company in Mexico it is important to choose one that knows the market intimately, as well as has in place cost control programs that allow it to not only provide great service, but, also, to do so at a competitive price.