Supplier Investment For Export View Continues To Play Out
Autos supply manufacturer Katcon Global is building a new production facility in Nuevo León, north-eastern Mexico. BMI maintains a bullish outlook on vehicle production in Mexico, forecasting sustained growth over our 2018 forecast period ( see graph), which should continue to drive growth and investment across the supply chain.
|Output Surge To Attract Supplier Investment|
|Mexico Vehicle Production Historical Data And Forecasts, Units|
Following investment of USD20mn, the site is to produce catalytic converters to supply domestic automotive OEMs, although Katcon have yet to specific which carmakers they will work with, and will also export components to the US and Canada. A number of automotive companies have production facilities in Mexico, such as Toyota Motor and Nissan Motor catering to both the domestic and export segments, attesting to BMI's bullish view on the industry.
BMI's bullish outlook on Mexico's auto sector is predicated on low labour costs combined with increasing productivity levels; relative weakness in the peso against the US dollar, which will serve to make exports more competitive; a high number of free trade agreements, including the North American Free Trade Agreement; and comparative weakness in the productive capacity of Mexico's regional competitors, particularly Brazil. We believe these factors will continue to attract auto investment in the country, particularly for export-orientated production.
Additionally, we see these strengths of the country's auto sector continuing to attract autos investment across the supply chain. As auto producers continue to invest in the country, the sector will become more mature, and increasingly advanced and high-tech supply manufacturing will take place in Mexico, where it was hitherto imported. This growth in value-added content usage will beget further investment, and create high-skilled jobs in the sector.