CELAYA, Mexico (AP) — Mexico is on track to become the United States’ No. 1 source of imported cars by the end of next year, overtaking Japan and Canada in a manufacturing boom that’s turning the auto industry into a bigger source of dollars than money sent home by migrants.
An $800 million Honda plant that opened last week in the central state of Guanajuato will produce more than 200,000 Fit hatchbacks and compact sport-utility vehicles a year, helping push total Mexican car exports to the U.S. to 1.7 million in 2014, roughly 200,000 more than Japan, consulting firm IHS Automotive said. And with another big plant starting this week, Mexico is expected to surpass Canada for the top spot by the end of 2015.
“It’s a safe bet,” said Eduardo Solis, president of the Mexican Automotive Industry Association. “Mexico is now one of the major global players in car manufacturing.”
When the North American Free Trade Agreement was signed two decades ago, Mexico produced 6 percent of the cars built in North America. It now provides 19 percent. Total Mexican car production has risen 39 percent from 2007, to nearly 3 million cars a year. The total value of Mexico’s car exports surged from $40 billion to $70.6 billion over that span.
Manufacturing in Mexico is now cheaper than in many places in China, though most of the cars and trucks made in North America are still produced in the U.S. for domestic consumption and export to other countries.
And many of the vehicles built in Mexico are assembled with parts that are produced in the United States and Canada and cross the border without tariffs under NAFTA.
“There was a realization that there were some structural issues that had to be resolved in the auto industry to make it more competitive again. Moving parts, not all of the production, to Mexico was a good way to deal with that,” said Christopher Wilson, an expert in U.S.-Mexico economic relations for the Woodrow Wilson International Center for Scholars.
Mexico’s government and the car industry say the automotive industry has become the primary source of foreign currency for Mexico, surpassing oil exports and remittances from immigrants in the United States.
Much of the new production is by Japanese companies drawn by the ability to move parts into and out of Mexico without tariffs.