Audi Chief Executive Officer Rupert Stadler
delivers a speech during the opening ceremony of the carmaker's new plant in the
town of San Jose Chiapa, in the state of Puebla, Central Mexico May 4, 2013.
Audi expects to produce 150,000 cars a year at the plant, according to a
statement from Audi.
Credit: Reuters/Imelda
Medina
reuters.com
SAN JOSE CHIAPA, Mexico (Reuters) - The automotive industry's growing love affair with Mexico was celebrated here on Saturday as Audi executives laid the foundation stone for its first assembly plant in the Americas.
"Mexico was chosen very deliberately,"
Audi Chairman Rupert Stadler told more than 500 industry and government
officials outside the town of San Jose Chiapa in central Mexico. "It is situated
between North and South America, making it a linchpin between the two regions."
He added that Mexico was an "ideal export base."
With numerous free trade agreements, a cheap, well-educated
labor force, and proximity to the lucrative U.S. auto market, combined with
growing demand in South America, automakers have been lining up for two years to
set up shop in a country that could eventually overtake Brazil as Latin America's biggest economy.
Audi's ceremony came two days after
Japanese automaker Honda Motor Co (7267.T) said it would
build a $470 million transmission plant in the central state of Guanajuato, near
an $800 million assembly plant that is expected to begin operations in February
2014.
Other automakers who have announced plans
to open plants in Mexico include Mazda Motor Co (7261.T) and Nissan
Motor Co(7201.T), while
companies already there - General Motors Co (GM.N) and Ford Motor Co
(F.N) - continue to pump
hundreds of millions into their plants. The new plants also are attracting
supplier factories and more could be on the way as Nissan's Infiniti brand, BMW
(BMWG.DE) and Hyundai (005380.KS) are weighing
the possibility of building plants in North America.
When Nissan said in January 2012 that it
would build a $2 billion plant in the central state of Aguascalientes to open in
late 2013, CEO Carlos Ghosn called Mexico, where it has now two plants and is
the market leader
in sales, production and exports, a "key engine" to Nissan's growth in the
Americas. The Japanese automaker exports to 115 countries from Mexico.
Last year, Mexico attracted $3.7 billion
in announced investments by automakers alone, matching the U.S. total, according
to the Center for Automotive Research in Ann Arbor, Michigan. IHS Automotive
estimated that investments by automakers in Mexico over the next few years could
total $3 billion annually.
From 2000 to 2013, vehicle production in
Mexico has risen almost 3 percent annually, compared with declines in the United
States and Canada of 1.3 percent and 2.4 percent, respectively, according to
Boston Consulting Group. That trend will hold through 2018 as Mexico's
production is forecast to grow 5 percent annually, compared with 3 percent
growth in the United States and a 4 percent decline in Canada.
Mexico is the eighth largest producer of
vehicles in the world.
Audi executives touted Mexico's good
infrastructure, competitive cost structures and existing free-trade agreements
in picking the site for the new plant, which will cover an area the size of 400
soccer fields. They called the Mexian plant a "dream moment." VW has a VW plant
in nearby Puebla City and an engine plant in Silao.
VW has said it wants to boost sales in the
United States, the world's No. 2 auto market, to 1 million vehicles by 2018,
including 200,000 from Audi. It is the same time frame in which VW has pledged
to become the world's largest automaker. Last year, VW's U.S. sales totaled more
than 577,000, including 139,310 for Audi.
The new plant in Mexico is also part of
the automaker's plan for Audi to reach annual global sales of more than 2
million by 2020 with the aim of snatching the luxury crown from BMW globally as
well as challenging its luxury rival and Daimler's (DAIGn.DE) Mercedes-Benz
in the U.S. market. BMW and Mercedes have had production footprints in North
America since the 1990s and each sell about twice as many cars in the United
States as Audi.
Access to the lucrative U.S. market isn't
the only draw though as Mexico has 12 free trade agreements with 44 countries,
while the United States' 14 trade deals cover only 20 countries. Xavier Mosquet,
leader of Boston Consulting Group's automotive practice, said Mexico was the
"better choice" over the United States for exporting to the rest of Latin
America.
Also in Mexico's favor are the rising
labor costs in China, lower transportation costs and even Mexico's own
growing economy,
industry officials and analysts said.
In 2010, Mexico's total compensation per
worker was $3.94 an hour, said Kristin Dziczek, director of labor and industry
at the Center for Automotive Research, citing Bureau of Labor Statistics data.
That compared with $3.45 in China, $34.59
in the United States and $52.60 in Germany.
And the Mexican work force is increasingly
well educated. Audi officials say 2,500 applicants, many with degrees, have
expressed interest in the 3,800 jobs they will have at the San Jose Chiapa plant
and they haven't even advertised the jobs yet.
Nomura said last August that Mexico could
overtake Brazil as
Latin America's top economy as early as 2022. Mexico's annual economic growth is
projected to increase 4.5 percent in that period, up from 2.1 percent annual
growth from 2002 to 2010.
Mexico also serves as a natural hedge for
many foreign automakers against stronger currencies at home or disasters like the tsunami in 2011
that hurt the Japanese automakers, IHS analyst Guido Vildozo said.
"It's probably one of the reasons why
you're hearing that some of the other automakers are also kicking the tires," he
said.
(Reporting by Ben Klayman in Puebla,
Mexico; editing by Gunna Dickson)
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