Automakers including BMW and Audi are making Mexico a top spot for luxury car production as the country increasingly becomes a trusted place for companies to invest.
A Bloomberg report puts Mexico at pace to become the fourth-biggest source of German luxury vehicle production by the end of the decade, coming in after Germany, China and the U.S. If an IHS forecast is accurate, Mexico will bump South Korea as the third largest car exporter worldwide by 2016, following Japan and Germany.
Takata's faulty air bags, some of which were manufactured in Mexico, have recently put a damper on things, but overall Mexico is increasingly viewed as a good place to invest.
"Mexico has become the crossroads of automotive trade for the western hemisphere," IHS Automotive Managing Director Michael Robinet told Bloomberg News. "Mexico has proved it can build a vehicle of any stripe."
Audi's new plant in Mexico will start rolling out vehicles in 2016; Daimler will produce Mercedes and Infiniti at a new plant in the country starting in 2017; and BMW is slated to start production in Mexico in 2019.
Volkswagen was the first German luxury name to establish vehicle production in Mexico, launching output of its high-volume Beetle in 1967. The Wolfsburg, Germany-headquartered company has influenced its peers to bring more production to Mexico.
"It's a snowball effect," Bill Rinna, senior manager of North American forecasts at LMC Automotive, told Bloomberg. "As more automotive suppliers move there and more of these OEMs [original equipment manufacturers] add capacity in the country, it attracts other manufacturers to the region. Cost definitely has to do with it, but there's also a highly skilled workforce there."
Besides the German automakers, South Korea-based Kia has announced a $1 billion expansion plan in Mexico, while Toyota is looking to catch up since it stands as the last big carmaker without a high-volume facility in the country.
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