Although Mexico saw a decrease in inbound greenfield investment projects last year, according to the fDi Markets data service, its top FDI sector of automotives is continuing to perform well.
Automotive components is the number one sector for inward investment into Mexico when measured by number of projects, and automotive OEM dwarfs all others when it comes to capital expenditure, with $26.5bn having been invested between 2010 and 2014. And despite a general decline in FDI levels across much of Latin America and a commensurate drop in Mexico’s general greenfield FDI figures, Mexico has maintained strong appeal as a manufacturing destination and has capitalised well on China’s declining competitiveness due to its rising labour costs.
According to fDi Markets, capital investment into automotive OEM and automotive components in Mexico has doubled from an estimated $6bn in 2010 to $12bn in 2014. This increase comes when the global FDI market has been either stagnant or in decline, making the performance all the more impressive.
Capital investment in the sector is well spread among Mexican states with 10 states receiving $1bn or more in the past five years and at least 20 states receiving one or more automotive projects since 2010. But a few destination states stand out: Guanajuato tops the capex table, with $6bn in investment, followed by Aguascalientes with $5bn and Coahuila with $4bn. Guanajuato leads also for project numbers, with 67, followed by Coahuila (38) and Nuevo Leon (28).
These same states also attract the most investment overall, across all sectors, with Guanajuato, Nuevo Leon and Coahuila leading for capital investment between 2010 and 2014, and Federal District, Guanajuato and Nuevo Leon receiving the most projects.
Unsurprisingly, the neighbouring US is the largest source country for automotive investments into Mexico, accounting for $15bn in investment from 2010 to 2014, although Japanese companies contributed a greater number of projects with 108 compared with the US’s 79. The largest investors are General Motors, Nissan and Ford. Automotive companies investing in Mexico cite proximity to markets or customers as the top motive, according to fDi Markets data, followed by the availability of skilled workers. Regardless of a Latin American downturn dragging down the region’s FDI flows, Mexico’s proximity to the US will continue to serve it as well as a manufacturing platform for the automotive industry.