Nearshoring: how can it drive the automotive industry?

by Advance Real Estate 22 de November, 2022 741 Views

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Several companies in the automotive sector are adopting the practice of nearshoring to boost the industry. Primarily, they aim to promote the interconnection between markets at a global scale while keeping local infrastructure at the forefront.

Overview of the automotive industry in Mexico

The automotive sector has positively impacted the domestic economy. The Mexican Automotive Industry Association (AMIA)¹ stated that in 2022 the automotive industry will account for 3.6% of the national GDP and 18% of the manufacturing GDP.

Nevertheless, this important market area has faced many challenges in the last few years: the pandemic supply chain disruption, a halting production operation caused by mobility restrictions imposed during the pandemic, and a continuous rise in prices² to name a few.However, to keep making progress, companies in the automotive field are looking for new strategies to enhance their growth, and the most remarkable one is nearshoring.

What is nearshoring?

It’s a practice that focuses on outsourcing services to countries close to the company’s headquarters. This simplifies operations and cuts costs. It focuses on proximity to suppliers and optimizing the logistics chain.

Manufacturing companies employ a similar idea; they are located in an industrial park close to the main regions where they export their products. It’s worth noting that this practice is gaining ground globally with Canada, Mexico, Brazil, and the United States already implementing this practice.

Now the automotive sector is going through the same process, specifically in the Mexican cities that border the United States, including those located in the automotive corridor of El Bajio, such as Queretaro or Guanajuato.

How is nearshoring boosting the Mexican automotive industry?

The nearshore strategy leads to new opportunities for companies in the automotive sector through actions like:

1. Promoting foreign investment

It’s fundamental to establish operational centers in strategic cities. This way, automotive companies can strengthen their operations and enter new markets. To achieve this, it is essential to choose nearshoring and a growing industrial park.

Following the above, and based on the report Automotive Investment during 1Q 2022³, foreign investment has propelled the industry through this year’s first quarter, resulting in:

3 new industrial park projects in Mexico’s central region (an investment of US$1.563 billion).
13 new projects in the Bajio region (an investment of US$1.284 billion in automotive assembly plants and industrial parks).
9 different projects in Mexico’s northern region (an investment of US$213 million).

2. Opening of new industrial parks

Beyond what’s mentioned above, the promising Bajio region (mostly Queretaro and Guanajuato) is investing in over 1.3 million sqft of new industrial park and automotive assembly plant construction.

3. Creating thousands of jobs

The Bajio region regained 3,128 jobs; meanwhile, in Mexico’s central and northern regions, 25,550 and 5,557 new jobs were created, respectively.

Therefore, nearshoring is improving the domestic economy, and this trend seems to be on the rise.

Solili estimated⁴ that 80% of the companies in Guanajuato belonging to the automotive industry would thrive in the next two years.

Adopting nearshore strategies is the motivation the automotive sector needs to expand and boost the country’s economic recovery.

If you want to join this trend, you can do it with Advance Real Estate. We provide industrial space and buildings for companies interested in industrial parks located in strategic regions of the country.

We want to help your business to empower its operations in Mexico by promoting its growth with our full support to meet your infrastructure needs.

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About us

Advance Real Estate

Advance is a leading company in the acquisition, leasing and operation of industrial and logistics assets, with presence in 12 cities within Mexico and a portfolio of 11.5 million sf of industrial space.

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