Following announcements of major investments in both Mexico and India, Ford Motor Co. is set to make a $2.5 billion bet closer to home. Meanwhile, Toyota Motor Co. has confirmed recent reports that it will invest $1 billion in a new Central Mexican plant to produce its compact Corolla model.
Toyota and Ford will join a growing list of manufacturers either entering or expanding operations in Mexico which is now one of the world’s largest producers of automobiles. That includes carmakers from Europe, Asia and Detroit, as well.
While Ford is not officially confirming the announcement — stating it “cannot comment on future product or manufacturing plans” – Toyota North American CEO Jim Lentz said the new Corolla plant is part of a “strategic re-thinking of how and where we build our products will create new opportunities for our company, our business partners and our team members across the region.”
The Corolla currently is produced at a plant in Cambridge, Ontario, but the shift reflects economic realities that will see Toyota switch to “mid-sized, higher-value models” in Canada for which higher production costs can more easily be absorbed.
(Toyota, VW go to war over global supremacy. Click Here for the full story.)
As for Ford, sources are confirming reports that first appeared on the Reuters news service that the Detroit maker will invest $2.5 billion for a series of projects South of the Border. That apparently includes a new transmission plant, as well as an expansion of and existing factory in the northern state of Chihuahua to take on production of two new diesel engines.
After long focusing on its turbocharged gasoline-powered EcoBoost engine family, Ford has recently opened the door to adding a diesel to its F-150 pickup line, according to global product development director Raj Nair. It is not clear if the Chihuahua plant would supply diesels for the F-150. It could also provide those “oil-burners” for export.
Industry analysts note that Mexico has a number of critical advantages luring major investments into the country. That includes not only a low wage base and a relatively weak currency, but also the fact that Mexico has negotiated more free trade agreements than any other country besides Israel.
Ford has already taken advantage of those benefits with a number of Mexican facilities that include the Chihuahua engine plant, stamping and assembly lines in Cuatitlan and Hermosillo, and a transmission joint venture with Getrag located in Guanajuato.
In recent weeks, Ford has announced several major overseas investments, including a $760 assembly plant going into Hangzhou, China, and a $500 million plant to be built in Maraimalai Nagar, India.
(Click Herefor more on Ford’s big plans for China.)
The new Mexican plan would dwarf both of those projects combined. But Ford is by no means the only maker planning a big investment for Mexico.
Toyota is a relative newcomer to the region. Until now, it only has operated a small TKD plant in Baja to perform final assembly on imported Tacoma pickup truck kits. That will create some challenges as it prepares for a 2019 launch of production at the new Guanajuato Corolla plant. Toyota will have to set up a new network of suppliers a sizable distance from its established production base in the U.S.
But there is a growing list of global partsmakers setting up shop in Mexico to feed the industry’s growing needs.
Just last month, Volkswagen said it would spend $1 billion to upgrade and expand its huge assembly complex in Puebla. Less than an hour away, the maker’s upscale Audi division is midway through construction of its first Mexican plant.
(VW will build its new Tiguan at the upgraded Puebla plant. Click Here for the story.)
Daimler AG is partnering with Nissan to add a second assembly line at the Japanese maker’s new Aguascalientes complex. It will ultimately produce both Mercedes-Benz and Infiniti luxury models.
Kia has announced plans for a new Mexican plant and sibling Korean carmaker Hyundai is eventually expected to make a similar move.
General Motors, meanwhile, has invested about $1.4 billion in Mexico over the last two years and said it will pump in another $3.6 billion by 2018, while adding another 5,600 jobs.
Even before these new operations get off the ground, Mexico has already grown to become the world’s fourth-largest auto producing automotive exporter.