Bright future for production companies in Mexico

Mexico is quickly becoming North America's #1 assembly hub. Even the new trade agreement – which was developed to improve the competitive position of the US's industrial sector – cannot curb this development. This article will explain exactly what is going on.

By means of the trade agreement between the United States, Canada and Mexico (USMCA), President Donald Trump wanted to motivate car manufacturers to move their assembly activities from “low-wage country” Mexico back to the US, the Financieel Dagblad writes. The agreement includes new regulations with regard to the origin of car parts. However, it just so happens that many car manufacturers are already in compliance with these rules and will, therefore continue to assemble their products in Mexico.

75% of the production in the trade zone

Furthermore, 75% of the car now has to be manufactured within the trade zone. That figure used to be 62.5%. On the one hand, this pushes North American car manufacturers to choose suppliers close to home: in Mexico. On the other hand, suppliers themselves opt to relocate their production activities to Mexico or to open a new production site there. The country's competitive wages and the easy access to the world's largest economy are decisive factors in their choice for Mexico. On top of that, many Mexican production sites are state of the art and can easily compete with the best that the US has to offer.