As BMW, Mercedes, Cadillac, and Infiniti turn their focus to the lucrative compact premium market, they all seem to have the same way of getting there – Mexico. Unlike most other plant locations like Spain or France or the US, Mexico is fast becoming the best place to produce cars.
Besides the obvious cheapness, international manufacturers are taking note of how far the Mexican government has gone to make their country fertile for foreign investment. They have undergone radical public works projects to drastically improve the country’s infrastructure. They’re a part of NAFTA, and have free-trade agreements with 45 countries (compared to America’s 20). And they have a highly-skilled workforce able to produce higher quality cars than practically anywhere else in the emerging Americas.
That’s why it comes as no surprise that luxury car makers looked beyond Texas in order to compete profitably in the booming compact corner of the US premium market. The likes of the Audi A3/4s, BMW 2/3s, and Mercedes C/CLAs for starters will be produced in Mexico in the coming years, with billions more in foreign direct investment towards additional production increasing Mexico’s auto exports for the long-term. In carmakers’ minds, Mexico has the ideal mix of low manufacturing costs, few transaction costs, and low shipping costs and times to their primary North American markets.
How are US consumers impacted? Well, quality is supposed to remain high as a result of the skilled labor force, and carmakers have a more central distribution point for some of their key markets. This could potentially allow them to further expand and test new product offerings while reducing price tags, which could be the needed nudge for many economy car buyers to make the splurge to pretty luxury compacts.
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