Mexico has won new auto investments worth $2.4-billion (U.S.) in one week, just $800-million less than the $3.2-billion invested by auto makers in Canada since 2010.
BMW AG said Thursday it will spend $1-billion to build a new plant in Mexico, on the heels of an announcement last week by Daimler AG and Nissan Motor Co. Ltd. that they will invest $1.4-billion to build luxury cars.
The two new plants, which are scheduled to come on stream later this decade, underline how Canada is being eclipsed by Mexico when it comes to new auto investment.
“Mexico simply wants jobs and economic growth more than Canada,” and recognizes that assembly plants with thousands of direct jobs and thousands more spin-off jobs are one way to generate employment and growth, one senior industry executive said Thursday.
Mexico has already knocked Canada into third place when it comes to vehicle production in North America and output will expand again in 2014 with new Honda Motor Co. Ltd. and Mazda Motor Corp., plants that began turning out vehicles earlier this year.
Audi AG said late last year it will build an assembly plant in Mexico. With the announcements by BMW and Daimler, three of the largest and fastest-growing luxury manufacturers in the world will be building vehicles in that country.
When it comes to winning such investments, Canada is battling against a country with formidable advantages.
In addition to significantly lower labour costs than both Canada and the United States, Mexico is also an export powerhouse, boasting free-trade agreements with more than 40 countries and ports on both the Atlantic and Pacific oceans that operate year-round.
“The large number of international free trade agreements – within the NAFTA area, with the European Union and the MERCOSUR member states, for example – was a decisive factor in the choice of location,” BMW said in a statement announcing the investment.
Mexico’s foreign investment agency, ProMexico, is aggressively courting auto investments and offers generous incentives, industry sources have said.
“When Mexico goes on to the world stage, they go as a national player, not provincial, not municipal, not regional,” said former Ontario economic development minister Sandra Pupatello, who now is chief executive officer of the WindsorEssex Economic Development Corp.
“ProMexico is streamlined, it’s one door, it makes a difference. [Companies] only have to talk to one person,” Ms. Pupatello said.
The federal and Ontario governments offer incentives to auto makers to locate in Canada. But a report issued last year by the Canadian Automotive Partnership Council, an industry-union group set up to advise the governments on the auto sector, complained about the way the Canadian funds are administered.
“In Mexico, for example, rarely will one see repayable contributions or restrictive covenants that can claw back co-investment programs,” the report said. “Through ProMexico, companies can secure cash grants with no strings attached.”
The report described Mexico as a preferred location for auto investment, although car companies always consider the United States first because it is the largest market.
“However, what has changed is that their second choice is now Mexico, not Canada,” it concluded.
BMW already has an assembly plant in North America. Its factory in Spartanburg, S.C., is in the midst of a $1-billion expansion that will boost production to 450,000 vehicles by the end of 2016.Report Typo/Error