3 Unique Advantages of Manufacturing in Mexico01.19.22
The manufacturing industry has experienced a heightened sense of uncertainty over the past two years due to the pandemic. However, despite the ups and downs of change, Mexico’s manufacturing solutions still remain a highly competitive opportunity. Global manufacturers in industries like aerospace, automotive, and electronics have been increasing their foreign investment in Mexico for decades. And now an increasing number of manufacturers are following suit of the ones successful before them.
Manufacturers can rely on an established infrastructure, cost-effectiveness, and customizable capabilities when operating in Mexico. Whether moving operations from China or expanding facilities internationally for the first time, here are three of the country’s unique advantages.
Cost-Effectiveness of Skilled, Available Labor
The cost of labor in Mexico delivers significant savings for U.S. and other foreign manufacturers. On average, companies can expect approximately 65%-75% savings in Mexico labor costs without compromising the quality of work performed. Furthermore, there’s is an expansive talent pool of qualified candidates to choose from. Mexico graduates over 100,000 engineers every year and continually invests in industrial education and training.
Whereas, America is facing a worker shortage in all industries, including manufacturing, leaving many without enough employees to fulfill the roles. The cost-effectiveness of skilled labor has been a driving factor for manufacturing in Mexico, but now the availability of qualified workers provides an even greater value.
Close Proximity to the U.S.
When it comes to transportation costs and travel restrictions, Mexico outshines China as the more desirable manufacturing option. Delayed shipments from China have caused huge disruptions in the supply chain. Plus, costs have dramatically increased from approximately $3K per shipping container to the U.S. a few years ago to upwards of $10K-$15K today. Comparably, due to the close proximity, a shipment from Mexico’s border region to the U.S. border region will cost closer to $250.
Additionally, there are still quarantine restrictions in place when traveling to China. This disadvantage only adds to the other limitations of how often U.S. manufacturers can visit their overseas facilities. The cost and time of traveling to China require advanced planning and larger budgets. Whereas, for many, it’s a convenient trip to their production site in Mexico to oversee operations and meet with their teams.
Trade and Tax Benefits
Prior to the pandemic, U.S. manufacturers were already facing another challenge from operating in China. The trade war between the two countries resulted in retaliatory tariffs and cost and operational instability. This alone caused many to rethink their strategies and either diversify their production or alter the course to nearshoring to Mexico instead.
Conversely, there are far more favorable trade relations between the U.S. and Mexico. With both countries part of the USMCA, they receive incentives and provisions which encourage and protect foreign investments. Furthermore, the IMMEX program, unique to Mexico, exempts 16% VAT tax from all temporarily imported goods and materials used for industrial purposes. This is a cost-savings advantage available from the first day of operations when foreign manufacturers partner with a shelter services operation.
Enlisting the Expertise of a Shelter Company
The shelter model is another unique advantage of manufacturing in Mexico. It reduces risk and liability for foreign companies while providing all the administrative duties necessary to get production up and running quickly and efficiently. Companies retain ownership and control over all manufacturing and receive the benefits of all that shelter services provide.