Last week the Original Equipment Suppliers Association (OESA) hosted an event entitled “Supplier Opportunities and Challenges in Mexico” that I attended. It was a great program as always by OESA, and I wanted to share some of the highlights that I took away from it.
First of all, nearly every automotive manufacturer who has operations in Mexico has aggressive plans underway to expand that production. And according to a recent OESA survey of suppliers, 69% of the respondents stated that they planned to expand their business in Mexico in the next 18 months. This is consistent with what we were seeing at the Michigan Economic Development Corporation (MEDC), where I served as COO for 18 months before returning to Foley & Lardner in June. In November 2013, the MEDC took about 15 suppliers down to central Mexico (primarily Queretaro), principally tier two and tier three suppliers, to help those companies expand their export sales to Mexico and create new relationships with suppliers and OEMs there. Those opportunities seem to be even more real as the automotive expansion continues in 2014.
Ing. Oscar Albin of Industria Nacional De Autopartes or “INA” (the Mexico auto parts trade association) began the substantive discussions with a review of the Mexico auto parts assembly market. In 2013 Mexico was the #5 producer and exporter of auto parts worldwide, with a market size of about $82 billion expected in 2014. He identified that the #1 challenge in Mexico, according to a recent industry strategic plan, is to strengthen the industry domestically.
Jeff Wegehaupt of LMC followed, with a forecast of about 3.3 million units for the Mexico auto market in 2014, with about 1.07 million units forecast to be sold domestically. LMC forecasts that Mexico will surpass Brazil as the #1 producer of automobiles in Latin America by 2016. Jeff also noted that manufacturers in Mexico have announced 65 new launches in the 2014 – 2021 time frame.
Nissan was the main attraction at the event, given their #1 producer status (24% market share) in the Mexico market and aggressive plans to add capacity in Mexico. Mr. Horacio Saldivar outlined those plans, including plans to move from 82% parts Localization (defined as the NAFTA region) in 2014, to 85% in a couple years, and eventually to 100% a few years after that. He also gave a snapshot of the forecast tooling purchases by Nissan by region, to support its Mexico production.
The OESA survey identified the following four largest challenges that companies are facing in Mexico:
- finding talent,
- maintaining security,
- managing the supply chain and
- dealing with Government Bureaucracy.
The event included a very practical talk by Emilio Cadena of Grupo Prodensa, with a lot of experience and tips about how suppliers can effectively do business in Mexico, especially in hiring the right plant manager and establishing excellent training programs and culture in Mexico.
Foley & Lardner’s Automotive Industry Team is well equipped to work with suppliers as they tackle challenges and opportunities that will be abundant in the Mexico market in the next several years.