mexico auto factory worker
A factory employee works in the General Motors plant in Silao, in the state of Guanajuato, Mexico, in 2008. Since then Mexico has seen major investments in auto manufacturing thanks to its web of free trade agreements, proximity to the U.S. and low labor costs. Reuters

With more than a dozen free trade agreements with 45 countries, Mexico’s automotive industry is firing on all cylinders. Some of the world’s largest automakers have been spending much of the past two decades setting up shops in the center and north of the country.

This week, Toyota and Ford are expected to announce billions of dollars’ worth of investments to expand operations south of the U.S. border.

Ford’s $2.5 billion will go toward expanding engine and transmission systems manufacturing at two existing facilities, one in northern Chihuahua state and the other in central Guanajuato state, the Mexican newspaper El Economista reported on Tuesday, citing local industry insiders. The official announcement is expected to be made by Mexican President Enrique Peña Nieto on Friday at an event marking the 90th anniversary of Mexican automotive manufacturing.

In a separate deal, Peña Nieto will announce a new Toyota factory in Guanajuato that will make 200,000 Corollas a year for the North American market, El Fianciero reports. The plant is expected to cost about $1 billion and will be up and running in 2019.

For Toyota, this will be the first car factory in Mexico that will build entire vehicles from scratch. The world’s largest automaker assembles Toyota Tacoma pickup trucks and pickup truck beds in Baja California Norte, just south of California, but completed components are shipped to the factory rather than assembled at the plant.

In 2011, Toyota announced a temporary freeze on building factories after the company was hit with a unintended acceleration recall crisis in 2010, a year after it posted the first annual loss in its history. But spurred by a weak yen, Toyota and other Japanese automakers have been emboldened to increase investments, according to Nikkei. Toyota also is installing an assembly line in Guangzhou, China, with its local partner FAW Group, which will be online in 2018 making 100,000 compact cars for the Chinese market.

Currently, nine global automakers operate 17 automotive factories and eight parts plants in Mexico, largely clustered in the center of the country where infrastructure support is strongest. Kia Motors and Mazda Motor also recently announced they would set up shop in Mexico.