Good bye Asia, Hello Guanajuato!

The main auto assembling agencies have stopped production in Mexico because of the lack of components, the manufacturers have started to say the “Yes, I accept”, to the sustitution of Asian suppliers.

Auto makers are considering to buy components in North America, rather than buying in Asia as they have done for decades; that would benefit Guanajuato

Mexico/Agencies/Gto News

For Oscar Albin, the President of the National Industry of Auto Parts, the lack of components in the auto plants, after the colapse in the global supply chains because of the Coronavirus Covid-19 crisis, it is the third call to reduce their dependence on China as a supplier of electronic components.

In a story published by Expansion with information from Reuters, it is said that many manufacturers of auto parts are thinking of moving their production from China to Mexico.

“The first reason was the tax tariffs imposed by the United States to Chinese components in mid 2019, the second reason was the incresease of regional content for automobiles that is demanded in the T-MEC (which demands manufacturers of automobiles to buy more auto parts in North America), the third and latest is the Coronavirus. Is it that we need a fourth call?”, said Albin in a press conference in the first week of March.

The auto industry located in Mexico has tried for a decade to substitute the Chinese components for a local production without much success. China offers an unmatched industrial size and the auto assemly agencies that operate in the area can not resist.

During the last 20 years, they have turned the Asia country into their electronic components factory and of other dozens of pieces.

The steering wheel gears of the Wrangler that Jeep manufactures in its plant in Toledo, Ohio, for example, are built 12 thousand kilometers far in a factory in Wuhan, China, the epicenter of the outbrake of coronavirus, reports Expansion in his story.

But with the first plants stopping their operations in North America because of the lack of components the manufacturers have started to express the “Yes, I accept” to the sustitution of the Asian suppliers on behalf of the national.

“Many of the international companies have started to accept the national supply. Until before the pandemic, some customers had not authorized the change of foreign supplier for the national producer, even though the national offer the same quality and delivery times, even if it is a little more expensive. This situation came as a help and make them take a decisión”, said Luis Aguirre to Expansion, the President of the National Council of the Exportation Maquiladora and Manufacturing Industry (Index), an organism that has been promoting the substitution of imports since 2015.

Other manufacturers, like Mazda, have also started to work with their japanese suppliers with plants in Mexico to settle more suppliers in the country and face the lack of production of components that come from Asian manufacturing plants.

Recently a supplier of a component used to make the exterior finish of models Mazda3 and CX-30 that Mazda assembles in Guanajuato, increased in 50% the production in its plant in Mexico, transfering the assembly line from the Chinese province of Jiangsu, where the supplying chain has been most affected by the outbreak of coronavirus Covid-19. This change has costed Mazda more than 5 million dollars, reports Expansion based on information by Reuters.

A speaker by Mazda in Japan said to Reuters that the company is “considering many counter-measures for a fast recovery while minimizing the impact in production”.

As the automotive industry has gone deeper into connectivity, electrification and automation, it has increased the amount of electronic components in its models. For Albin, the capacity of a country to be self-sufficient in this kind of supplies has turned to be a “strategic topic”.

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Today you should not just limit, as a country, your energetic dependence, but also the technological. But if all the electronic components that the industry requires are manufactured in another country, you don’t have technological autonomy”, said Albin for Expansion and Reuters.

But Albin believes that, even though there have been some investments that have come to Mexico after the pandemic, like the one from a supplier of Mazda that is increasing its capacity in Mexico to reduce its imports from asia, most of the new projects will disembark in the US.

Albin estimates that in the next two years there will be a wave of announcements of investment by auto suppliers in North America.

“It may well be true that today the automobile and auto parts manufacturers are looking for alternative suppliers than those form China and South Korea in North America, Mexico does not represent in this moment a good landing strip for potential investors. The energy is very expensive and there are no tax incentives for investors”, said Albin. “We know that the White House has as a part of its activities attract the electronics industry to the US”, said Albin in the story by Expansion and Reuters.

The group leader said that he has been in contact with the Office of the Presidency of the Republic, whose head is Alfonso Romo, to turn him information to make the country attractive for the foreign investment. Still, Albin considered that the tax reform enacted in the United States in 2018, and which lowered the corporative rate; the cost of energy and the new labor laws in the T-MEC have reduced competitivity to Mexico.

With information by Expansion and Reuters