The development was so important to Mexico's economy that the president made the announcement himself. On the same day that General Motors Co. (NYSE:GM) said it would be calling home Cadillac SRX crossover production from Mexico in a deal worked out with the United Auto Workers union, South Korean automaker Kia Motors Corp. (KRX:000270) said it will spend more than $1 billion to construct its first auto manufacturing plant in Mexico, according to the Spanish-language El Financiero news agency.
President Enrique Peña Nieto delivered the news Wednesday in Mexico City, highlighting the country's determination to attract automotive investment.
“The Kia plant in LaGrange, Georgia, is working at capacity, and they had a choice to expand capacity there or follow what the industry has been doing in recent years,” Dean Barber, founder of Barber Business Advisors, a corporate site-selection adviser, told International Business Times by phone after the announcement was made. “Kia is building at the doorstep of the United States. Another good thing about that is Mexico has more free trade agreements than the United States, about 40.”
Bordering the world’s second-largest auto market to its north, Mexico has long been an ideal location for car manufacturing, especially after Canada, the U.S. and Mexico began dismantling protective trade barriers starting in 1994 with the North American Free Trade Agreement. At the time, Mexico produced a little more than one in 20 cars in North America; the most recent figures from the INEGI, the country’s statistics and census bureau, puts that figure at closer to one in five.
“Having a Korean company enter Mexico will mean that practically all global automakers will be represented in the country,” Armando Soto, president of Kaso y Asociados, a Mexico City auto industry consultant, told Bloomberg Businessweek.
Automakers have been attracted to Mexico’s low labor costs to produce small sedans, which offer slim profit margins compared to trucks, SUVs and luxury cars. In February, Honda Motor Co. Ltd. (TYO:7267) began making its Fit at a new $800 million plant in Celaya, Guanajuato state, marking the first time the five-door subcompact – popular among price-conscious empty nesters and first-time new-car buyers – is being built in North America. In February, Mazda Motor Corp. (TYO:7261) opened its first wholly owned plant in North America, a $770 million facility in Salamanca, Guanajuato state, that can make as many as 175,000 Mazda2 supermini cars and Mazda3 compacts.
“The Forte compact, Soul subcompact or Rio subcompact could be among the possibilities to be built [at the Kia plant],” reported Automotive News. Reuters confirmed Wednesday afternoon the Kia Forte would be the first car made at the plant.
In recent years Mexico has begun attracting the attention of companies seeking to build more high-end vehicles, a nod to the country’s improving workforce, which 20 years ago might not have been considered reliable or experienced enough to put together a BMW X5 or an Infiniti Q.
In June, Daimler AG (FRA:DAI), the maker of Mercedes-Benz, and Nissan Motor Co. (TYO:7201) announced plans to spend about $1.36 billion building a plant near Nissan’s existing one in the Mexican state of Aguascalientes. The project would see production of the Nissan’s Infiniti luxury cars by 2017 and future Mercedes models as part of an expanding alliance between the German luxury carmaker and Japan’s third-largest car company.
A week after that announcement Daimer rival Bayerische Motoren Werke AG (ETR:BMW) said it was spending $1 billion to build another plant in Mexico, one that will produce about 150,000 vehicles a year beginning in 2019. The German carmaker will make four of its popular models for the North American market in the central industrial city of Toluca.
“BMW and Mercedes are going to be building cars down there. They traditionally might have focused on lower end cars, but BMW, Mercedes, Infiniti – these aren’t low-end cars,” said Barber.
Mexican automotive workers make in a day roughly what U.S. car factory worker make in an hour, and there are more than a half-million of those Mexican automotive workers. Since 2011 Mexico has attracted nearly $10 billion in foreign direct investment (including commitments that have not yet been fulfilled) from the automotive sector, according to the Center for Automotive Research in Ann Arbor, Michigan.
Here’s a list of automotive assembly facilities in Mexico, including ones that have already broken ground but aren’t ready yet for production.
Bayerische Motoren Werke de México S.A. de C.V.
Toluca, State of Mexico
BMW 3 Series compact sedan
BMW 5 Series mid-sized sedan
BMW 7 Series full-sized sedan
BMW X5 mid-sized luxury SUV
Mercedes-Benz México S. de R.L. de C.V.
Santiago Tianguistenco, State of Mexico
Monterrey, Nuevo León state
Urban and touring buses
Saltillo, Coahuila state
FIAT CHRYSLER AUTOMOBILES
Saltillo Truck Assembly
Saltillo, Coahuila state
Ram pickup truck
Toluca Car Assembly
Dodge Journey mid-sized crossover
Fiat 500 city car
FORD MOTOR COMPANY
Cuautitlán Stamping and Assembly Plant
Cuautitlán Izcalli, state of Mexico
Ford Fiesta supermini
Hermosillo Stamping and Assembly
Hermosillo, Sonora state
Ford Fusion mid-sized sedan
Lincoln MKZ mid-sized luxury car
GENERAL MOTORS COMPANY
San Luis Potosí Assembly
San Luis Potosí, San Luis Potosí state
Chevrolet Aveo subcompact cars
Silao, Guanajuato state
Ramos Arizpe, Coahuila state
Chevrolet HHR station wagon
Cadillac SRX crossover (production will move to Tennessee)
HONDA MOTOR COMPANY
Honda De México S.A. de C.V.
El Salto, Jalisco state
Honda CR-V compact crossover
Celaya, Guanajuato state
Honda Fit five-door subcompact
Honda HR-V subcompact crossover
NISSAN MOTOR COMPANY
Nissan Mexicana, S.A. de C.V. Aguascalientes
Aguascalientes, Agusacalientes state
Nissan March supermini
Nissan Versa subcompact sedan
Nissan Sentra compact car
Nissan Frontier pickup truck
Nissan Mexicana, S.A. de C.V. Cuernavaca
Cuernavaca, Morelos state
Nissan Frontier pickup truck
Nissan NV1200 light commercial vehicle
Nissan NV200 taxi for New York City
TOYOTA MOTOR CORPORATION
Toyota Motor Manufacturing de Baja California S. de RL de C.V
Tijuana, Baja California Norte state
Tacoma pickup truck
Volkswagen de México, S.A. de C.V.
Puebla, Puebla state
Golf compact five door
The list above excludes plants that make car components, like engines and chassis used by other assembly plants to build passenger vehicles.