By Oscar Silva Eguibar and Stephan Keese

As the global automotive industry evolves, companies seek new opportunities to optimize operations and reduce costs. One trend that has gained significant momentum in recent years is nearshoring, which involves moving manufacturing closer to the end market. Mexico, in particular, has emerged as a top destination for automotive companies looking to nearshore.

We explore the advantages of nearshoring to Mexico, the best-fit automotive sectors to nearshore, and critical messages for successful nearshoring.

According to our recent report, Mexico's advantages over competitors include lower costs, more resilient supply chains, easier-to-manage external risks, and better proximity to the US. While these advantages must be carefully weighed against disadvantages, such as overall financials, access to resources and labor, and risks and potential mitigation measures, Mexico's overall case for nearshoring is clear.

There are several advantages of nearshoring to Mexico:

1. The lower costs: With a lower labor cost and a more favorable business environment, Mexico offers significant cost savings compared to other nearshoring destinations. According to the report, Mexico's labor cost is around $3.50 per hour, while China's is $4.50 per hour.
2. The more resilient supply chains: Mexico's proximity to the US, its free trade agreements with major economies, and its well-established supply chain infrastructure make it an attractive option for automotive companies looking to reduce supply chain risks.
3. Easier-to-manage external risks: The country's favorable business environment makes it a more predictable and less risky option than other nearshoring destinations.
4. Better proximity to the US: Mexico's proximity to the US allows automotive companies to reduce transportation costs and lead times and has better access to the US market.

While these advantages are significant, several disadvantages must also be carefully considered. Overall financials, access to resources and labor, risks and potential mitigation measures are all important factors to consider when deciding whether nearshoring to Mexico is the right choice for your company.

Roland Berger can help assess your company’s situation, from the nearshoring decision to planning and execution.

You can download our report for insights and contact our in-country experts for bespoke recommendations.

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