Auto industry love for Mexico grows with new Audi plant

Sat May 4, 2013 6:47pm EDT
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By Ben Klayman

SAN JOSE CHIAPA, Mexico May 4 (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.

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 billion annually.   Continued...