The Basics of Manufacturing Industries and Advantages in Mexico
Choosing Mexico for the location of your manufacturing factory and production has many benefits, but is it the right decision for your business – and if it is, how do you go about developing a Mexico entry strategy? To make an investment decision, you must first understand the basics of the manufacturing industry in Mexico.
What is Mexico's reputation for manufacturing?
Mexico is a manufacturing hub and has served foreign production teams across every industry since the early 1970's. The manufacturing sector is established and reputable, with companies entrusting the Mexican maquiladoras for decades.
By moving your factories and production to Mexico, you may be able to lower labor costs without compromising on quality. Mexico's manufacturers offer the same, high-quality materials and professionalism with access to favorable tax incentives and reduced trade transportation costs.
What does Mexico mainly manufacture?
Mexico is the manufacturing center for several industries. The leading industries in Mexico include automotive, aerospace, medical device, electronic, appliance, and textile manufacturing. Each industry has a strong economic presence in Mexico and continues to grow over time.
The Top 3 Questions Business Industries Ask About Mexico Manufacturing
Why, where, and how should you approach expanding your production into or starting-up a maquiladora in Mexico?
When you begin manufacturing in Mexico, you can enjoy premium services, no matter your industry. This includes:
- Advanced manufacturing
- Car manufacturing
- Electronics manufacturing
- Core manufacturing
No matter your industry or production trade, you can enjoy cost savings with high-quality production resources in Mexico. By moving your production and manufacturers to Mexico, you can enjoy a competitive advantage, a skilled and educated labor force, and potentially trade benefits from the United States-Mexico-Canada Agreement (USMCA), such as lower costs on exports. This can positively impact your supply chain, revenue, and your bottom line.
Why Manufacture Products and Materials in Mexico?
Why should your business choose Mexico to launch or expand its manufacturing production services? Mexico’s manufacturing industry has competitive advantages benefits including lower labor and factory costs, greater industrial skills, and better local employee attitudes. There are countless other advantages for manufacturers in Mexico.
Where to Manufacture Products and Goods in Mexico?
Mexico is a big region – what location and site is the best option for your company’s manufacturing production operations? Several strategic manufacturing options are available to cater to your industry, labor, and infrastructure needs. There are several border cities, cities in border states, and states in Mexico's interior to choose from when selecting a location for your facilities.
When selecting where your business will set up production and Mexican manufacturing, you need to consider how you can leverage your trade exports. Mexico is a member of the United States-Mexico-Canada Agreement, which replaced the North America Free Trade Agreement (NAFTA) in 2018. This can result in lowered or eliminated taxes and tariffs for certain products and commerce.
To make the most of your options in regards to where to start your supply chain and set up your manufacturers, explore our wide variety of locations for your business.
How to Manufacture Products in Mexico?
Now that you understand why and where to manufacture, how does your business company enter Mexico's manufacturing industries? There are 5 major manufacturing entry models for beginning and continuing manufacturing operations in Mexico.
These five models include:
The Standalone model: This model requires the formation of a new legal entity in Mexico and offers foreign companies total control of their operations and development. Rather than setting up a factory to outsource one component of the business, Standalone factories utilize a full administration team to keep the factory moving and work towards total independence.
- The Shelter model: Shelter manufacturing refers to a hybrid between standalone and contract manufacturing models—these operations are run by both the foreign company and the “shelter” company (the Mexican legal entity of record). The shelter company oversees compliance, administrative duties, and trades with local service providers.
- The Contract Manufacturing model: Compared to the standalone model, the contract manufacturing model owns nearly all of its production assets, charges a foreign company fee for the production of products, and controls all aspects of production.
- The Merger or Acquisition model: This model occurs when a foreign company merges with an established Mexican manufacturer to shorten a usually extensive learning curve about manufacturing in Mexico.
- The Joint Venture model: Unlike the merger or acquisition model, a joint venture initiates a more equitable role between the two companies, joining them with a common economic goal. This typically works best when the foreign company has an established, captive market of customers and the Mexican manufacturer has the resources and knowledge necessary to execute the foreign partner’s demands for products.