Auto industry $ 23 billion investment in Mexico can face growling at ports

Posted on 5/27/2015 4:05:43 PM

Automakers Nissan Motor Co. Mazda Motor Corp. are producing a record number of vehicles in Mexico bound for overseas consumers.

But some executives are concerned that the hum of the factory will slow in the coming years as exports bogged down by congestion at the ports of the nation.

The government has focused on 70 billion pesos ($ 4.6 billion) for the port infrastructure through 2018, which includes the construction of four new terminals in Veracruz. Some automakers are skeptical that the target is met or will be sufficient to handle the more than 5 million vehicles annually by Mexico expects to produce 2020 - an increase of 56 percent from 2014 production of the country.

In the last two and a half years, automakers like Toyota Motor Corp. and Daimler AG have invested or committed $ 22.6 billion to auto plants and parts thereof, according to the government. That success story, which made the sector a major source of foreign money into the country, may be at risk if the government does not accelerate plans infrastructure improvements.

"So far, Mexico has managed to attract more investments," said Carlos Serrano, chief economist at BBVA Bancomer SA, Mexico's largest bank by outstanding loans. "But it will not come a time when if the infrastructure does not improve, it is going to be continuous advancement of Mexico at risk."

Docks bottlenecks

For Nissan, the bottlenecks in the springs could delay a quarter of its maritime shipments planned in the US, Europe and the Middle East in five years, said Horacio Saldivar, head of local purchases of the company. In 2014, Mexico became the world's largest exporter of Nissan vehicles, according to the website of the automaker.

"After 2020 we may have capacity limits" in the port of Veracruz and the Pacific port of Lazaro Cardenas, Saldivar said in a telephone interview. That could be true even after the completion of existing expansion plans. "We must work with governments on how to expand."

President Enrique Peña Nieto has made investment in the country's infrastructure a priority.

His administration is pushing operational capacity at ports by 50 percent through 2018 and does not anticipate any bottlenecks in the spring as new plants come online, Guillermo Ruiz de Teresa, coordinator of ports and communications ministry Transport, said in a telephone interview.

"We are on time" to meet the capacity requirements for the automotive industry growth, Ruiz told reporters on May 13 "I have spoken with almost all automobile producers, ensuring the space in ports for they can grow. "

'Capacity problems'

While the operational capacity of the port of Veracruz has stagnated in the last three years, will more than triple by 2024, Ruiz said.

Mazda, Nissan and Honda Motor Co. are experiencing huge leaps in the number of vehicles exported from Mexico. Nissan sent a record 538 972 cars last year, 20 percent more than in 2013, according to data the company and the trade association of the AMIA.

Mazda, a $ 770 million factory opened in early 2014 is destined to become the largest facility overseas for the Japanese producer, exported 16,017 vehicles in April, triple the amount a year earlier. Honda sent 14,880 cars and light trucks out of the country last month, more than double the number a year ago.

More investment

"The question is only going to be greater as more and more investment going to Mexico over the next five years," said Bill Rinna, a senior manager for LMC Automotive forecast near Detroit Americans.

"If this is a concern for Nissan, which has been producing and exporting vehicles in Mexico several years ago, it should be a concern for all other manufacturers that have been configured and shop there."

Toyota in April said it will invest about $ 1 billion in its first car factory in Mexico, with the ability to gather about 200,000 Corolla compact cars a year.

Mazda increased its confidence in the port of Veracruz after facing "capacity problems" Railways of Mexico, according to Keishi Egawa, CEO of the local unit of the automaker. He hopes that the country will expand its railways, as well as boosting port infrastructure.

"Right now is fine, but we are concerned about the capacity of the port of Veracruz in the coming years," Egawa said in an interview.

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