CNC Machines Are Hot in Mexico

For years China has been luring manufacturing companies (including CNC machine tool users) from the United States and elsewhere, enticing them with the promise of a large and inexpensive labor pool. Recently, however, United States manufacturers have been leaving China almost as quickly as they came. Some have moved operations back to the United States but many others are heading to Mexico. Thanks in part to an increase in skilled labor and improved infrastructure as well as the building of Automotive Assembly Plants such as Honda, Mazda, Audi and Toyota, manufacturing in Mexico is on the rise and the country is poised to become a global manufacturing leader. Let’s look at some of the key drivers behind this trend and how this is impacting CNC machine sales.

Leveling the Playing Field: Wages

Once the Promised Land for manufacturers looking to reduce costs, China is now struggling with significant cost increases. The cost of labor has been the largest of these increases and is still on the rise. While wages in Mexico have remained stable, those in China have risen sharply. This has allowed Chinese labor costs to catch up to Mexico’s previously higher rates, and the two countries now offer similar manufacturing wages. In fact, wages in China have already surpassed Mexico in certain industries.

Dramatic Difference in Transportation Costs

Other cost increases are also negatively impacting China and driving increased manufacturing and CNC machine tool demand in Mexico. Rising fuel costs are making it more expensive to transport goods, particularly when they must travel as far as the United States. Fuel costs are volatile as well, making it difficult to predict and control them when moving goods long distances. In 2013, North American Production Sharing (NAPS) reported that the average cost of shipping a full container from China to the United States was approximately $5,100. The same container could be shipped from Mexico for about $2,900 due to less expensive transport options. Trains and trucks simply cost less to operate than planes and ships.

Speed to Market

Manufacturing in Mexico saves time, as well as money, by reducing the time it takes goods to find their way into the United States and Canada. Goods can be delivered virtually anywhere in the United States within one to three days, while it takes those from China up to 3 months to arrive. Trade agreements are also helping Mexico move goods more quickly — and with less government red tape and fewer tariffs.

Easier Quality Control and Communications

When quality control or other issues require a visit from corporate headquarters, it is faster and cheaper to send staff members to Mexico than China. Quality problems are also easier to control in Mexico, where recognizing and protecting proprietary information is not considered the problem it has become in the Chinese market. There are fewer time zones to contend with between the United States and Mexico, as well, making it easier for manufacturers, distributors and headquarters to communicate with each other in real time.

Impact on CNC Machine Sales

It’s one thing to read about these trends and know them in theory. It’s quite another to feel the activity on the front lines. I can say that here at Okuma we’re seeing a significant increase in CNC machine sales activity in Mexico, especially in the automotive sector. One example is a large Tier 1&2 automotive supplier that had been relatively quiet for about 5 years during China’s manufacturing heyday. But in the last 12 months their activity in Mexico has really heated up to support increased production that’s coming back from China. All of this is keeping HEMAQ, our distributor in Mexico, very busy with installations, training and turnkey projects. CNC machines are hot in Mexico, and we’re proud to support their emergence as a global manufacturing leader.

Are you feeling the impact of reshoring to Mexico or the Americas? Please share your comments below, we welcome your thoughts!

Rich Estes is General Manager Mexico and Central America, Okuma America Corporation.