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Why should you start manufacturing in Mexico?

Updated: Sep 28, 2023

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Manufacturing in Mexico comes with its own set of advantages. Mexico is fast becoming the go-to place for cheap production costs. The country has promised a lower cost as well as faster connectivity to North America for over a decade, beating Asian countries right out of the water. Here’s specifically why you should start manufacturing in Mexico and save a fortune.

Competitive labor costs

Mexico provides much cheaper labor than the US. The wages are cheaper, but it doesn’t mean that you will be compromising on the quality of your manufacturing process. The minimum wage is nearly $4 per hour less than the United States on average.

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Manufacturing labor workers in Mexico are well-trained apart from being remarkably cheaper – in fact, they are up to 70% less expensive.

The comparatively lower labor cost in Mexico allows companies to invest more in expanding, diversifying, or research and development.

When China saw an increase from $5.78 to $6.50 per hour in its manufacturing labor costs, Mexico saw a much smaller increase, that to $4.82 from $4.66 (2019 to 2020).

Proximity to the United States

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Proximity to the United States ensures that your products and goods reach the mainland sooner than later. Apart from cutting down on the time, it also cuts down on the costs involved in transporting manufactured goods and equipment.

Manufacturing in Mexico can be significantly cheaper thanks to Mexico’s proximity to the United States. Executives can schedule a visit to their manufacturing plants much more easily without having to fly halfway across the globe.

If proximity is critical then you want your plant to be in the border region. This region includes Tijuana, Mexicali, Ciudad Juarez, etc. In other cases, you might want to go further south to cut costs. The Central Mexico region, or the Bajio region, includes Guanajuato, Aguascalientes, Queretaro, San Luis Potosi, and so on.

Savings on transportation costs

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You will be saving a fortune on transporting the equipment and manufactured goods to and from Mexico. Manufacturing in Asia is marred with logistics problems as it is not connected by land. Mexico, on the other hand, has federal highway systems connected to the US via land. Transportation is, therefore, cheaper and faster.

A myriad of shipping problems is associated with manufacturing in Asia. This is especially true now when companies are having to wait months to procure raw materials and ship finished goods. These problems do not affect manufacturing plants situated in Mexico.

Transporting goods to and from Mexico for various needs is extremely hassle-free. It’s relatively effortless because no air freight or sea routes are involved as Mexico is part of the same landmass as the US and Canada.

Low-cost manufacturing in Mexico

IMMEX programs make it effortlessly easy to import goods and materials. Companies in the US can gain a lot by importing raw materials duty-free and tariff-free. This also applies to equipment and heavy machinery, given you have the right permits and documentation. Tax write-offs also help reduce operational costs involved across the board.

The program, also known as the Mexico shelter program and the maquiladora program, is single-handedly the key reason why more and more companies are moving out of Asia and transferring their manufacturing plants to Mexico.

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For decades Mexico has been known to offer low-cost manufacturing to American businesses. Things have changed rapidly, however, in the last decade or so. Countries from around the world apart from just the US and Canada are seeing the benefit of manufacturing in Mexico as compared to, let’s say, China in Asia or countries in South America. It’s simply a better choice.

Better skill

Mexico beats China not only in labor costs but also in terms of the skill of the workforce. For over three decades, Mexico has been helping leading US industries and companies manufacture and assemble products. And the main reason is that you can expect a high-quality process in Mexico as compared to China.

The Cali-Baja Mega Region with Tijuana at its heart is the main manufacturing hub for over 50 years. Many manufacturing plants operating under the IMMEX program (also called Maquiladoras collectively) make up for the bulk of the products and parts in use today in Northern America.

Leading automobile companies such as Toyota, Volkswagen, Daimler, BMW, Ford Motors, General Motors, Honda Motors, Hyundai Motors, and so on made the decision to host the primary manufacturing and production in Mexico and that tells you why it’s so profitable.

Mexico’s main exports include machinery and transport parts, electrical equipment, chemicals, food products, consumer products, and textiles. This is a testament to the higher skill of the Mexican workforce.

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Mexico manufacturing to reduce labor costs

You can manufacture in Mexico to bring down the labor costs significantly. The Mexico shelter program makes it even easier to do so. The program essentially allows US and Canadian companies to outsource manufacturing to Mexico with tax breaks. This applies to companies involved in producing goods for their own markets but choosing to manufacture them in Mexico.

American companies looking to cut costs see Mexico as an economically-viable option. Apart from the direct labor cost reduction, there’s also a hefty reduction in transportation costs of raw materials when you compare things to Asia.

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A large number of companies in industries such as automotive, electronics, medical devices, clothing, and aerospace are choosing Mexico over other cheap alternatives. Plants and factories in Mexico do not only provide a cheaper alternative but also provide a highly-skilled workforce to ensure quality.

The best part about manufacturing in Mexico is that you don’t necessarily have to be a big player to make this shift. Even e-commerce stores are choosing to manufacture in Mexico to reduce labor costs.

Managing a workforce in Mexico, however, isn’t for everyone. That’s where we come into play. Javid LLC helps companies across industries manufacture hassle-free in Mexico. We take care of everything from the legalities and the regulations to operations, hiring, and worker pay.

Written by: Tristan Burke



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