The Automotive Industry in Mexico and the Improbability of Moving Production Lines to the United States

#### The Automotive Industry in Mexico: Why is it Improbable to Move Production Lines to the United States? _By María Gamba_ The automotive industry in Mexico is one of the most outstanding and fundamental for the country's economy. Thanks to its strong integration in the North American supply chain, Mexico has established itself as the main supplier of auto parts and components for the United States. However, the idea of moving production lines from Mexico to the United States is an extremely complex, costly, and even improbable task. In this blog from **Control Terrestre**, we will analyze the reasons behind this improbability, highlighting the logistical, economic, and political challenges that would face a relocation of this magnitude. ### **The Relevance of the Automotive Industry in Mexico** Mexico is the fourth largest exporter of auto parts worldwide and the main supplier to the United States, with around 43% of this country's auto parts and components imports coming from Mexican territory. This sector not only represents a crucial part of the Mexican economy but also constitutes a significant source of employment and economic development. Thousands of companies and millions of workers are involved in the production and export of essential parts for vehicle manufacturing, from engines to electronic components and body parts. According to Alberto Bustamante, general director of the National Agency of Automotive Sector Suppliers (ANAPSA), moving an auto parts production line from Mexico to the United States would not only be costly but also complicated, and could have a negative impact on the US automotive industry itself. This interdependence between both countries makes relocating production a difficult task to carry out. ### **The Challenges of Moving Production Lines** The process of relocating a production line involves a series of logistical and financial challenges. First, the infrastructure in Mexico would have to be dismantled, transported to the United States, and then reassembled in the new facilities. Additionally, it would be necessary to ensure that the new installations comply with all local regulations, which can generate delays and increase costs. According to Bustamante, "the machines are already there, but they require time to remove the production line, dismantle it, move it, assemble it in the United States, hire personnel, processes, and comply with regulations." All this process can interrupt auto parts production for a long period and generate shortages that would affect vehicle manufacturers in the United States. ### **Economic Impact of Relocation** Manufacturing in the United States is much more expensive than in Mexico due to a variety of factors, among which higher salaries, energy costs, and tax burden stand out. Additionally, Mexico benefits from key trade agreements, such as the Treaty between Mexico, the United States, and Canada (USMCA), which ensures the competitiveness of the automotive sector and facilitates cross-border trade. In practical terms, each vehicle sold in the United States contains between 8,000 and 10,000 dollars in auto parts manufactured in Mexico. This means that not a single internal combustion engine vehicle can be manufactured in the United States without using parts from Mexico. This is an important factor to consider, as a drastic change in production would have negative effects for both the Mexican and American industries, given the high dependence on Mexican auto parts. ### **Global Competition and the Relationship with China** While the United States also depends on China for auto parts supply, this country's participation is much smaller, with 13% of total auto parts imports to the United States. Despite this dependence, commercial and political tensions between the United States and China have led to an increase in nearshoring, a trend that favors relocating production close to the United States, and that has benefited Mexico by attracting more foreign investment. Large automotive companies like Tesla and Rivian have established agreements with Mexican suppliers to ensure the supply of key components, which further reinforces the interdependence between Mexico and the United States. This constant flow of investment and trade has made Mexico a strategic partner within the automotive industry. ### **Final Reflection: Mexico, a Pillar for the Automotive Industry** The idea of moving auto parts production lines from Mexico to the United States, for political or economic reasons, is not viable due to the complexity of the process, associated costs, and interdependence between both markets. The Mexican automotive industry plays a fundamental role in vehicle production in the United States, and any attempt to relocate manufacturing would have negative repercussions on both economies. Mexico will continue to be a key partner for the global automotive industry, offering competitive advantages such as lower costs, specialized labor, and a well-established supplier network. Logistics companies, like **Control Terrestre**, will play an essential role in ensuring the efficiency of cross-border supply chains, guaranteeing that auto parts and components arrive on time and without setbacks. Instead of trying to move production to the United States, automotive companies should focus on strengthening their supply chains, taking advantage of the opportunities offered by economic integration between Mexico and the United States, and continuing to consolidate their relationship to face future challenges.