Automotive Manufacturing in Mexico

Why Mexico is the Future of Automotive Manufacturing

Over the last three decades, Mexico has cemented itself as a powerhouse in automotive manufacturing. With a strategic location, a skilled workforce, and cost advantages, it has become the 7th largest vehicle producer in the world and the top supplier of auto parts to the U.S.. But more than just an assembly hub, manufacturing in Mexico is deeply integrated into North America’s supply chain, making it a key player as automakers shift toward electrification and nearshoring.

• So, what makes Mexico such a strong destination for automotive investment?
• What trends are shaping the industry?
• And how can manufacturers take advantage of Mexico’s automotive clusters, trade agreements, and EV transition to stay competitive?

Mexico's Competitive Edge in Automotive Manufacturing

Global Leader in Automotive Production

• 7th largest vehicle manufacturer in the world.
• 2nd largest exporter of passenger vehicles to the U.S.
• 4th largest producer of auto parts globally.
• Over 1 million workers employed in the industry.
• Home to +15 OEMs, including Ford, General Motors, Nissan, Volkswagen, and BMW.

Automotive Production & Export by OEM in 2024

Heavy Vehicle Production & Export by OEM in 2024

A Strong and Interconnected Supply Chain

Mexico’s tiered supply chain system is one of its greatest strengths. The country hosts:

• Tier 1 Suppliers: Direct providers of complex vehicle components (engines, transmissions, electronics).
• Tier 2 Suppliers: Key parts and sub-assembly manufacturers.
• Tier 3 Suppliers: Raw materials and basic components.

This robust ecosystem ensures seamless integration into global supply chains, enhancing cost efficiency and just-in-time production.

Mexico is the 4th largest producer of autoparts in the world, and the 1st to the United States. More than half of the imported autoparts to Mexico are destined to compliment the local manufacturing lines. Much of this is then exported back to its original country. The primary countries of origin include the United States, China, Germany and Japan.

Mexican Autoparts Production Growth

Electrification and Nearshoring: The Future of Mexico’s Automotive Sector

As automakers pivot toward electrification, Mexico is emerging as a strategic hub for EV production and battery supply chains. In 2024 alone:

• 206,000 electric vehicles were produced by Ford, General Motors, BMW, and Toyota.
• 33.6% of Foreign Direct Investment (FDI) in the automotive sector was directed toward electromobility projects.
• The state of Nuevo León is becoming Mexico’s “EV hub”

EV's Produced in Mexico by OEM & Model 2024

The shift to EVs isn’t just about changing vehicle designs—it’s about transforming entire supply chains. Manufacturing in Mexico stands to benefit significantly, as the country offers a strong industrial base, cost-effective production, and proximity to the U.S. market. However, the transition also brings challenges. OEMs and suppliers must secure reliable sources for battery minerals, expand battery production capacity, and build a network of specialized suppliers that meet the evolving demands of electrification. Additionally, staying compliant with USMCA trade rules will be essential to maximizing incentives and maintaining cost advantages.

Explore more data and insights in the Electromobility E-Book.

Mexico's Strategic Trade and Investment Advantage

USMCA and Nearshoring: A Game Changer for Automakers

The United States-Mexico-Canada Agreement (USMCA) has redefined trade dynamics, making Mexico even more attractive for nearshoring strategies:

• 75% regional content rule for vehicles to qualify for duty-free access.
• Higher labor standards improving workforce quality.
• Investment certainty for long-term automotive growth.

As the 2026 USMCA review approaches, manufacturers must stay ahead of potential regulatory shifts.

Top Automotive Clusters in Mexico

Mexico’s automotive clusters provide world-class infrastructure, supplier networks, and skilled labor pools. The most prominent regions include:

Bajío Region (50% of all vehicle production)

• Guanajuato: GM, Volkswagen, Mazda, Honda, +400 suppliers.
• Aguascalientes: Nissan’s manufacturing powerhouse.
• San Luis Potosí: BMW and GM production hub.

Northern Border States (Auto Parts & Heavy Vehicles)

• Nuevo León: KIA, and electromobility investment hotspot.
• Coahuila: Stellantis, GM, and Daimler Freightliner production.

Central Mexican Valley (Key Manufacturing & Logistics)

• Puebla: Volkswagen and Audi’s flagship plants.
• Mexico State: Tier 1 and Tier 2 suppliers.

Final Thoughts: Why Mexico is the Best Bet for Automotive Growth

Mexico’s strategic advantages, world-class workforce, and trade-friendly policies make it an indispensable hub for OEMs, suppliers, and investors looking to optimize their global operations.

Key Takeaways

• Mexico is a top-tier vehicle and auto parts manufacturer.
• Electrification is accelerating, with record-breaking EV investment.
• Nearshoring & USMCA make Mexico the best alternative to Asia.
• Strategic clusters ensure efficient supply chains and cost competitiveness.

Ready to Expand?

Need expert guidance on site selection, supply chain management, or investment strategy? Our team has helped hundreds of manufacturers establish operations in Mexico.