Why Mazda, Nissan, Volkswagen and Honda invest $2 billion in Mexico

Mazda, Nissan, Volkswagen, Honda have recently announced investments totaling $2 billion in Mexican plants and facilities, while Audi and Toyota are reportedly looking over the possibility of their own investments.

Mexico is quickly becoming a world leader in manufacturing, according to a recent report in the Dow Jones Newswires. Manufacturing output in Mexico is rapidly growing as evidenced by the fact the fabrication of cars and light trucks between January and June this year rose 14 percent to 1.23 million vehicles.

During this first half of 2011, Mexico's automobile production has reached a record pace due to burgeoning market demand from Latin America, especially Brazil.

This is a two-quarter record for any year in history, according to the Mexican Automobile Industry Association (AMIA).

Nissan Motor Company has referred to Mexico as "one of its fast-growing markets" this year. Nissan recently announced a $1.05 billion investment in its plant in Aguascalientes. The company produced over a half million vehicles there last year and expects to boost the output of its Mexican plants by 20 percent this year. Nissan is second to General Motors Company as the largest automobile distributor in Mexico.

Further, the Volkswagen Group began production of the very first models of the redesigned VW Beetle in Puebla, Mexico predicting the redesigned “bug” will conquer new markets as a "lifestyle" vehicle, according to a recent post in the The Wall Street Journal.

Volkswagen reportedly invested $400 million to re-tool the plant and VW Beetle production will keep 2,000 Mexicans at work. The company hopes to produce 100,000 Beetles by next year, 90 percent for export. The new model should be in dealer showrooms this fall.

The most recent development is Honda Motor Company’s decision to invest $8 million for a new plant in Guanajuato, as reported by TorqueNews August 15. This will create 3,200 jobs in the centrally located state, allow Honda to keep costs down and meet expected demand for small cars in the U.S. market. The maquiladora should open in 2014 ready to produce 200,000 vehicles per year

Mexico's Economy Minister Bruno Ferrari stated this week, "We're expecting to have more of those announcements before the year's end," in an interview this week with Bloomberg.

Auto exports from our Central American neighbor also increased 15 percent during the same period to a record 1.02 million units.

"Production in Mexico is absolutely being driven by exports and exports continue to grow," Eduardo Solis, president of AMIA, was quoted in a news conference on the Dow Jones Newswires via FOX Business last April.

Mazda has been operating for several years already in Mexico with great success. In fact, Mazda recently announced an investment of $500 million to build a new plant in the central Mexican state of Guanajuato to build the Mazda2 and Mazda3 compact cars and engines, according to Reuters. The plant, which will have an output capacity of 140,000 vehicles per year, will help expand the company's Latin American operations. The plant, which plans to employ about 3,000 people at maximum capacity, should be completed by 2013.

Noting the record in sales since he has moved operations to Mexico, Mazda's CEO Takashi Yamanouchi stated to Automotive Business Review, its sales results have steadily improved since October of 2005 and in 2010 the company set a new record for both sales volume and market share.