Build it Mexico. Laborers are cheap and educated.
Auto industry love for Mexico grows with new Audi plant
SAN JOSE CHIAPA, Mexico (Reuters) - 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 export base."
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 economy.
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.
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 said.