Mexico’s Manufacturing Resurgence

Mexico is capitalizing on the macroeconomic factors that are demanding companies look beyond Asia-Pacific for manufacturing. Through careful planning and partnerships, Mexico has created advantages in labor, education, and legal protections that will continue to build its reputation as a leading source of skilled manufacturing. 

For decades consumer demand has been efficiently met by outsourced, global contract manufacturing. Asia-Pacific has leveraged its growing populations to create skilled labor pools from at least two generations of citizens. This growth has led to better education, healthcare, disposable income, and a desire to compete globally in manufacturing and innovation. According to data from the World Wage Report of the International Labor Organization, average real wages in China almost doubled between 2008 and 2018, far exceeding the pace of global growth in the same period. US manufacturers are feeling this growth as these sources of efficient labor are becoming more expensive. Changing labor realities coupled with a 2018 tariff war between the US and China leaves US manufacturers looking for more control in getting their products in the hands of consumers. 

Today’s logisticians have grown their careers in ever-expanding supply chains. Those lengthy supply chains have become politically unstable, creating increased expenses. 

To collapse this expensive space in current supply chains, teams are moving portions of their supply chain closer to the consumer by establishing nearshore operations. With the USMCA (United States, Mexico, Canada) formerly NAFTA, Mexico became a key player for global companies seeking to maintain a competitive position in the North American market. Nearshoring to Mexico has gained increased popularity in recent years.  

In the Auto sector, Mexico is making significant strides. With the advent of BMW in San Luis Potosi, Mexico has attracted another top auto manufacturer along with scores of international suppliers directly tied to the production of BMW vehicles. Others have chosen to do the same by moving manufacturing to Mexico which is steadily growing the ability to specialize and increase its capacity so that large automotive, aerospace, electronics, and medical device industries can continue to grow.  

As companies invest in North American production in Mexico, the benefits of a diverse upskilled population are becoming more widely known and appreciated. Here are some examples of why manufacturing in Mexico is on the rise. 

Labor Prices that win: China's Manufacturing Labor is 34% more expensive than Mexico's. According to Statista, in 2020, manufacturing labor costs per hour for China averaged $6.50 USD, while Mexico experienced a much smaller increase from $4.66 to $4.82 USD over the same period. 

Faster Supply Chains: Overland delivery from Mexico to the US takes 3 - 5 days compared to 3 - 4 weeks for a transpacific shipment 

Rising Skilled Workforce: More than 130 thousand engineering students graduate per year in Mexico. The Mexican workforce is surpassing the Chinese not only in productivity rates but also in quality.  

Intellectual property protection: The risks of trade secret theft are lower due to intellectual property laws in Mexico which are modeled on those in the US and are strictly enforced by the Mexican authorities. 

As you look to absorb the changing global supply chain, the strides Mexico has been taking hold that country up as the nearshore solution for North American manufacturing. If you are interested in leveraging over 75 years of Mexico / North American supply chain and logistics expertise, go with a provider that has operating entities in both the US and Mexico. At G4 Logistics International our teams have the pulse of Mexican manufacturing and logistics. We know how the Mexican market can support your growing needs here in North America.