Mexico is the new home for US-bound small-car production image

Mexico has seen a big growth in its auto making capacity during the past five years as carmakers built plants here due to the country’s low labor costs, easy access to the American market and also free-trade deals with Europe, Brazil and more than 20 other countries.

Its biggest impact is on production of subcompact and compact cars, vehicles with narrow profit margins and wide appeal in markets outside of North America. This was emphasized by Toyota when it stated last week that the brand would assemble Corolla models in a factory set to be built in Guanajuato, around 100 miles northwest of Mexico City. Andrew Csicsila, director of the operations practice at consulting firm AlixPartners, said that “We are seeing a realignment of capacity in North America. The smaller platforms are going to Mexico.”

The U.S. assembled more small cars than Mexico until 2013 with the Dodge Dart, Ford Focus, Honda Civic and Chevrolet Cruze and Sonic being all made in the U.S. cars. Mexico has been making models like the Volkswagen, Jetta and Golf, Nissan Sentra, adding in 2014 Nissan, the Honda Fit and Mazda Mazda3 to its list of cars being produced in Mexican factories. This made Mexico’s output of subcompact and compact cars to surpass the U.S. number of 1,489,836, reaching 1,514,436 cars. This year, Honda will contribute to the production in Mexico with the HR-V and Mazda with its Mazda2. Moreover, a new Kia plant in Monterrey is set to start producing the Forte model in 2016, with the Corolla manufacturing commencing in 2019.

By Gabriela Florea