| SAN JOSE CHIAPA, Mexico
SAN JOSE CHIAPA, Mexico May 4 The automotive
industry's growing love affair with Mexico was celebrated here
on Saturday as Audi executives laid the foundation stone for its
first assembly plant in the Americas.
Volkswagen AG's premium brand is joining a
parade of automakers who have announced plans to build cars in a
country that is seen as a doorway not only to the rest of North
and South America but to the world. Audi officials said the $1.3
billion plant will open in three years and eventually be the
German brand's only source globally for its Q5 SUVs after it
opens in mid-2016.
"Mexico was chosen very deliberately," Audi Chairman Rupert
Stadler told more than 500 industry and government officials
outside the town of San Jose Chiapa in central Mexico. "It is
situated between North and South America, making it a linchpin
between the two regions." He added that Mexico was an "ideal
With numerous free trade agreements, a cheap, well-educated
labor force, and proximity to the lucrative U.S. auto market,
combined with growing demand in South America, automakers have
been lining up for two years to set up shop in a country that
could eventually overtake Brazil as Latin America's biggest
Audi's ceremony came two days after Japanese automaker Honda
Motor Co said it would build a $470 million
transmission plant in the central state of Guanajuato, near an
$800 million assembly plant that is expected to begin operations
in February 2014.
Other automakers who have announced plans to open plants in
Mexico include Mazda Motor Co and Nissan Motor
Co, while companies already there - General Motors Co
and Ford Motor Co - continue to pump hundreds of
millions into their plants. The new plants also are attracting
supplier factories and more could be on the way as Nissan's
Infiniti brand, BMW and Hyundai are
weighing the possibility of building plants in North America.
When Nissan said in January 2012 that it would build a $2
billion plant in the central state of Aguascalientes to open in
late 2013, CEO Carlos Ghosn called Mexico, where it has now two
plants and is the market leader in sales, production and
exports, a "key engine" to Nissan's growth in the Americas. The
Japanese automaker exports to 115 countries from Mexico.
Last year, Mexico attracted $3.7 billion in announced
investments by automakers alone, matching the U.S. total,
according to the Center for Automotive Research in Ann Arbor,
Michigan. IHS Automotive estimated that investments by
automakers in Mexico over the next few years could total $3
From 2000 to 2013, vehicle production in Mexico has risen
almost 3 percent annually, compared with declines in the United
States and Canada of 1.3 percent and 2.4 percent, respectively,
according to Boston Consulting Group. That trend will hold
through 2018 as Mexico's production is forecast to grow 5
percent annually, compared with 3 percent growth in the United
States and a 4 percent decline in Canada.
Mexico is the eighth largest producer of vehicles in the
Audi executives touted Mexico's good infrastructure,
competitive cost structures and existing free-trade agreements
in picking the site for the new plant, which will cover an area
the size of 400 soccer fields. They called the Mexian plant a
"dream moment." VW has a VW plant in nearby Puebla City and an
engine plant in Silao.
VW has said it wants to boost sales in the United States,
the world's No. 2 auto market, to 1 million vehicles by 2018,
including 200,000 from Audi. It is the same time frame in which
VW has pledged to become the world's largest automaker. Last
year, VW's U.S. sales totaled more than 577,000, including
139,310 for Audi.
The new plant in Mexico is also part of the automaker's plan
for Audi to reach annual global sales of more than 2 million by
2020 with the aim of snatching the luxury crown from BMW
globally as well as challenging its luxury rival and Daimler's
Mercedes-Benz in the U.S. market. BMW and Mercedes
have had production footprints in North America since the 1990s
and each sell about twice as many cars in the United States as
Access to the lucrative U.S. market isn't the only draw
though as Mexico has 12 free trade agreements with 44 countries,
while the United States' 14 trade deals cover only 20 countries.
Xavier Mosquet, leader of Boston Consulting Group's automotive
practice, said Mexico was the "better choice" over the United
States for exporting to the rest of Latin America.
Also in Mexico's favor are the rising labor costs in China,
lower transportation costs and even Mexico's own growing
economy, industry officials and analysts said.
In 2010, Mexico's total compensation per worker was $3.94 an
hour, said Kristin Dziczek, director of labor and industry at
the Center for Automotive Research, citing Bureau of Labor
Statistics data. That compared with $3.45 in China, $34.59 in
the United States and $52.60 in Germany.
And the Mexican work force is increasingly well educated.
Audi officials say 2,500 applicants, many with degrees, have
expressed interest in the 3,800 jobs they will have at the San
Jose Chiapa plant and they haven't even advertised the jobs yet.
Nomura said last August that Mexico could overtake Brazil as
Latin America's top economy as early as 2022. Mexico's annual
economic growth is projected to increase 4.5 percent in that
period, up from 2.1 percent annual growth from 2002 to 2010.
Mexico also serves as a natural hedge for many foreign
automakers against stronger currencies at home or disasters like
the tsunami in 2011 that hurt the Japanese automakers, IHS
analyst Guido Vildozo said.
"It's probably one of the reasons why you're hearing that
some of the other automakers are also kicking the tires," he