Mexican suppliers fueled by auto output boom image

Metalsa SA, a parts maker that makes elements for Ford F-150 pickup trucks and Toyota Sienna minivans, or Tenedora Nemak SA, a Mexican maker of aluminum parts, are among the companies that reward their investors with some of the auto industry’s largest gains.

Mexican auto production output has jumped in recent years thanks to the continued investment and implication of new automakers – plants and suppliers have flocked to the Latin American country over the past few years (and will continue to do so for another four or five). The reasons are simple: it’s a cheap production base, a rising international export hub, it’s ideally placed in between the Southern and Northern part of the American continent and has nailed numerous commercial agreements with regions across the world. Additionally, the US auto market is on its way to grow for the sixth consecutive year, thanks to low interest rates, a rising economy and falling gasoline prices.

Apodaca, Mexico-based Metalsa is, for example, buoyed by the rising North American sales of pickups and sport-utility vehicles – the company outfits such vehicles with chassis frames and body structures, according to Fitch Ratings. Mexico last year posted a record auto production level and in 2014 alone carmakers announced investments worth $7 billion, meaning their local suppliers will keep busy for years to come. “In auto parts, Mexico is an appendage to the U.S. production chain, so in that way this is more of a U.S. manufacturing play,” comments Carlos Legaspy, a money manager at InSight Securities. With US auto sales continuing to grow, Mexico exports more than 50 percent of its total output to the neighboring country.

Via Bloomberg