Mexico's Manufacturing Market Fuels Opportunities and Support for Robotics Industry

Mexico’s manufacturing has made the country one of Latin America’s powerhouses for innovation and technology. Out of 40 countries, Mexico ranked eighth in the 2016 Global Manufacturing Competitive Index, which is derived from responses by global CEOs asked to rank nations in terms of their current and expected competitiveness.

As automotive, electronics, machinery, appliances, aerospace, and plastics production continues to grow in Mexico, so do the opportunities for U.S. and global robotics and advanced automation system stakeholders. Mexico is ripe for investments in advanced automation, but navigating the cumbersome business process can require significant planning. Good guidance is especially important when first setting up shop in Mexico.

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Business Takeaways:

Several robotics industry players such as FANUC, KUKA, and ABB already have a significant presence in Mexico, but the increase in manufacturing and the use automaton offer significant investment opportunities.
Mexico’s existing liberal trade policies and open economies are favorable for OEMs.
Establishing a Mexico manufacturing business requires significant due diligence, patience, and strong legal support. Mexico’s monetary system is primarily digital now, but businesses must be prepared to work through Mexico’s laborious tax-paying system.

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Mexico has become a hub for manufacturing in Latin America.

To support the proliferation of robotics in Mexico’s manufacturing sector, the Association for Advancing Automation (A3) has launched A3 Mexico. A3 is the umbrella group for Robotic Industries Association (RIA), AIA (Advancing Vision + Imaging), and the Motion Control & Motor Association (MCMA). The entity will operate in Mexico as A3 Holdings LLC.

A3 Mexico seeks to provide the following:

Education initiatives
Career development
Raising industry and technology standards
Offer robot installer certification
Raising supplier quality to meet increased demand
Provide guidance and support for robotics and advanced automation stakeholders coming into Mexico

“We see solid growth in the use of automation and robotics in Mexico, which currently does not have an association that can help with training, guidelines, and overall needed support,” said Jeff Burnstein, A3 president.

Mexico’s manufacturing landscape

As the 11th largest global economy at $2.2 trillion, Mexico is home to more than 20 automotive assembly plants including those operated by BMW, Mercedes, Audi, Ford, Chrysler, and Nissan The country accounted for 3.7 percent share of global vehicle production in 2014.

Between 2002 and 2012, Mexican automotive exports increased by 152 percent, from $27.9 billion to $70.3 billion, and electronics increased by 73 percent, from $43.3 billion to $74.9 billion. This positions Mexico as seventh in global auto production and inches it closer to larger players such as U.S., Japan and China.

Mexico's manufacturing is helping the country be a leader in automation use.

Source: Deloitte 2016 Global Manufacturing Competitiveness Index

Other Mexican manufacturing sectors ripe for increased adoption of industrial automation include the food and beverage industry and the medical device market, according to A3.

The adoption of robotics to support Mexico’s leading growth engine is already under way. In 2015, more than 6,320 robotic units (exceeding $243 million) were sold into Mexico. Although 2015’s shipments to Mexico represent a 21 percent increase from the previous year, A3 said a “few very large” orders contributed to that spike.

“It skews the numbers a bit, with 2016 numbers coming in a bit lower,” said Bob Doyle, director of communications for A3. “Regardless, the numbers continue to scale at significant levels.”

By comparison, North American sales of robotic units were up 14 percent in 2015.

It’s all in the numbers:

With about 10 free-trade agreements with 45 countries, Mexico is considered to have the most liberal trade policies as one of the most open economies in the world, including the ability to export tax-free.
Mexico surpassed Canada in 2015 as the largest purchaser of U.S. automation exports, according to the U.S. Department of Commerce, International Trade Administration’s 2016 ITA Study.
Mexico’s manufacturing was the largest purchaser of U.S.-made electrical relays and industrial controls, totaling $472 million in 2015, making it the fastest-growing sector in Mexico, with a compound annual growth rate of 21.6 percent, said the ITA study.
Mexico accounted for over one-fifth of all U.S. electric motor and actuator exports, which totaled $926 million, said the Commerce Department.
Capital invested in Mexico surged to $978 million in just the first half of 2015, up from $403 million in 2014, according to the Latin American Private Equity & Venture Capital Association.
S. goods and services trade with Mexico totaled an estimated $583.6 billion in 2015. Exports were $267.2 billion; imports were $316.4 billion. The U.S. goods and services trade deficit with Mexico was -$49.2 billion in 2015, found the Office of the U.S. Trade Representative.

There is a misperception that Mexico’s lower wages mean a smaller pool of educated candidates to support advances in manufacturing technology. But according to Center for Automotive Research, there is a significant pool of skilled Mexican labor that has been trained in the electronics and automotive industries.

In addition, the number of engineering graduates has been rapidly increasing — beyond the number of U.S. graduates in some cases. During last week’s annual A3 Business Forum in Orlando, Fla., integrators and robotics manufacturers already doing business in Mexico said they are improving the education process and working with engineering institutions to create their own talent pool.

Nothing good comes easy

A3 has been working for years to develop a presence in Mexico.

Despite the potential reward, companies looking to establish themselves in Mexico should brace for businesses processes that are “lengthy and sometimes very taxing,” said Doyle. His association, which has been working to establish a presence in Mexico for years, went through months of processes to establish A3 Mexico.

Having achieved success, A3 says its presence in Mexico will be a significant benefit for robotics and automation stakeholders looking to do business.

“You really need someone on the ground here, and with experience to guide you through it, and that is one of the main reasons we are setting up in Mexico,” Doyle said. “You have to be committed and just learn go with the flow.”

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Don’t Trump on me

Those looking to invest in robotics for Mexico’s manufacturing market will also have to monitor newly elected U.S. President Donald Trump’s threat to the North American Free Trade Agreement (NAFTA). Trump has announced his intent to revamp the 23-year-old trade pact and has even said that he wants Mexico to pay for a wall along the U.S.’s southern border through tariffs, which would be a direct violation of NAFTA.

“We made the decision to move into and offer support to Mexico way before Trump was elected,” said A3’s Burnstein. “We might see some minor issues related to all this, but the automation market is strong and promising, and no one is going to back away from the opportunity.”

To learn more about A3 Mexico and Mexico’s manufacturing sector and automation, visit www.a3mexico.com.mx.