According to Bloomberg, U.S. citizens are moving to Mexico at a rate not seen since comparable data became available in 2010. Additionally, the number of temporary residents has increased by 85 percent from 2019. But it’s not just U.S. retirees and young digital nomads moving to Mexico . In fact, even American manufacturers and large-scale companies are deciding to leave the United States behind.
“The US-China trade conflict, supply chain vulnerabilities exposed by the pandemic and Russia’s invasion of Ukraine have accelerated the relocation of Asian, American and European companies to Mexico,” said Co-Production International.
IN In recent years, global companies such as Samsung, Daewoo, Amazon, Nissan, Heineken, Bosch, Alsea, Pirelli and Walmart have made multi-million dollar investments in Mexico. According to Sergio Mireles, CEO of Dates, the pandemic-related influx of businesses to Mexico has bolstered the industrial market. As such, by the end of the second quarter of 2022, the gross take-up of industrial buildings already exceeded 2.7 million square meters. Of course, Mexico’s cheap labor and energy costs and free trade policies also attract automakers. Stellantisfor example, is the latest group to announce that it will close its Belvidere, Illinois plant indefinitely and move Jeep Cherokee production to the Toluca plant in Mexico. Carbuzz reports that this facility will produce gasoline, hybrid and ICE versions of the Cherokee SUV.
That’s why Stellantis is moving Jeep Cherokee production to Mexico
While it’s easy to blame Stellantis for moving manufacturing and American jobs overseas, the government should bear responsibility for not providing incentives to keep companies in the country. With supply chain issues, chip shortages and rising labor and raw material costs already hurting the auto industry, Stellantis must take every opportunity to cut costs. Unfortunately, Washington doesn’t seem to understand this and chooses to remain silent when businesses and workers suffer.
Back in 2021, Mark Wakefield, Global Co-Leader for Automotive and Industrial at Industrial Consultancy AlixPartners told CNN Business that wood chips “is just one of a host of extraordinary disruptions facing the industry—including everything from resin and steel shortages to labor shortages.” He also added, “there is no room for error for automakers and suppliers right now.”
The focus of Washington and state agencies should be to devise strategies to encourage automakers to locate in the United States. From tax credits, loans, monetary incentives, or even free land and infrastructure projects to expedited permits, there are various ways in which the authorities can work with car manufacturers to create win-win situations. Otherwise, American workers should expect more automakers to move jobs overseas, where they can find better deals and more enticing incentives. A more encouraging development is VinFast’s announcement that it plans to build a factory in Chatham County, southwest of Raleigh, where it will manufacture electric cars. In 2027, the plant will employ approximately 7,500 people and be in full operation.
Canada and Brazil are also attracting Stellantis investments
To be fair, it’s not just Mexico that is luring automakers away from the US. The neighbor to the north, Canada, is also taking advantage North American Free Trade Agreement (NAFTA) and the challenging situation in the US to attract car manufacturers. Last spring, Stellantis announced it will invest CAD 5 billion (US$4.1 billion) to develop a lithium-ion battery factory in Windsor, Ontario, Canada. According to Carbuzz, Stellantis will inaugurate the facility in early 2024. At the same time, the European group intends to develop packages there intended for vehicles sold in the North American region. More importantly, Stellantis is creating around 2,500 new jobs in the region with this project.
“The decision to base the factory in Windsor is strategic as it is closely positioned to the country’s automotive hub, enabling a more efficient supply chain network,” says Carbuzz.
In addition, Stellantis has a new production unit located at Fiat Automotive Complex in Betim (Brazil), which builds GSE Turbo engines. The facility had an initial manufacturing capacity of 100,000 units annually and required investments of approximately R$400 million (€60 million), according to a Stellantis press release.
“The inauguration of this turbo engine factory represents a strategic step towards expanding our presence in Latin America. It also provides many opportunities for our product range, as GSE Turbo engines combine the best performance and durability technologies, with gains in fuel consumption and reduced emissions. This new the production will be a source of great pride and motivation for all of us”, says Antonio Filosa, COO of Stellantis for South America.
Sources: Stellantis, Bloomberg, Co-Production International, CNN Business