There are a number of reasons that manufacturers move to Mexico. Manufacturers move to Mexico to benefit from the availability of manufacturing labor, ease of access to the U.S. market, and comparatively lower cost of production. For many manufacturers, it is less costly to produce goods in Mexico compared to other low-cost manufacturing countries due to the lower cost of getting product to their target markets.
The majority of factories located in Mexico are along the U.S. border. However, this density of facilities in proximity to the United States has driven up both real estate and labor costs compared to other regions in Mexico. Many companies find they can manufacture in Mexico more cost-effectively by moving further south and leveraging the strength of industrial clusters that support key industries.
Hermosillo, Mexico, in particular has become an attractive region for manufacturing in Mexico. This capital of the state of Sonora is close enough to the U.S. to serve as a key economic driver of the massive Arizona-Sonora megaregion. Yet it is far enough south to provide cost savings and proximity to additional assets, such as the deep-water Puerto de Guaymas. Moreover, Hermosillo’s long history in manufacturing provides excellent educational infrastructure and a robust supplier network to support manufacturing in the city.
Three major industries in Hermosillo, Mexico
Hermosillo, Mexico’s history is deeply rooted in automotive manufacturing. In 1986, the Ford Motor Company began operations at its Hermosillo Stamping and Assembly Plant in Hermosillo. Since the 19880s, Hermosillo has become integral to the manufacturing economy in Mexico across a number of sectors. Three additional major manufacturing industries have emerged as a result of Hermosillo’s strength in automobile manufacturing: aerospace, medical devices, and electronics manufacturing.
Why car manufacturers go to Hermosillo, Mexico
The opening of the Ford facility in Hermosillo represented a milestone for Mexico’s automotive industry, as well as Ford’s ventures in Lean manufacturing, the low-inventory and highly flexible mode of production pioneered by Japan’s major automakers.
A study by members of El Colegio de Sonora, El Colegio de la Frontera Norte and the Center for the Integration of Technological Innovation found that by the 1990s the Ford Hermosillo plant had integrated more than 200 local businesses into its supply chain. The Lean manufacturing processes now adopted by the three major Detroit automakers were refined for decades in Hermosillo, building the Sonora automotive industry.
This is one of many reasons Hermosillo, Mexico, has become so important to the American automotive industry. According to the Center for Automotive Research, growth in Mexican automotive production volumes has helped drive up new business for both U.S. and Canadian suppliers. Due to well-integrated North American supply chains and requirements set by the USMCA agreement to include high volumes of North American-produced content in every vehicle, automobiles manufactured in Mexico may include as much as 40% U.S. content. From 2005 to 2014, U.S. exports of automobile parts and components to Mexico more than doubled to $18.4 billion.
What makes Hermosillo, Mexico, a preferred location to build a manufacturing facility
Many manufacturers have found the comparatively low costs of real estate in Mexico compared to other countries make it a cost-effective location for building a manufacturing facility. Greenfield construction offers the advantage of being able to develop a facility completely suited to a manufacturer’s specific needs, as well as offering room for future expansion.
However, a key advantage of Hermosillo’s strong manufacturing sector is that there is ample industrial real estate available to lease to suit most manufacturers needs. And, due to the growth of manufacturing in Hermosillo, new industrial parks continue to open.
For example, the Rio Sonora Manufacturing Community is the newest and most advanced industrial park in Northern Mexico. The manufacturing community provides abundant access to water, reliable power, ample gas supply, and world-class security standards, ensuring a safe and reliable manufacturing experience in Hermosillo. With more than 200 acres of available land, the industrial park also offers manufacturers the ability to customize their manufacturing space while guaranteeing reliable access to key infrastructure. In many ways, it provides the advantage of new construction without the need to address infrastructure that can plague some greenfield developments in Mexico.
Skilled labor to support Hermosillo, Mexico, manufacturing
Another key advantage of manufacturing in Hermosillo, Mexico, is its workforce. The city is home to a population of more than 930,000 people. Manufacturers will find the average worker in Hermosillo, Mexico, earns an hourly wage of around USD $3.18. Turnover is relatively low in this area, for manufacturers that provide competitive wages and benefits.
Moreover, the pervasiveness of the manufacturing sector here has created a strong training and education infrastructure. Sonora is one of the highest-ranking Mexican states for higher education enrollment, due to its numerous post-secondary institutions and relatively high budgetary allotment for education. Many of these schools are tightly connected with local manufacturing industries, meaning that many students receive the extensive training they need for high-tech industries such as medical, aerospace and automotive.
With such a well-educated and skilled workforce, manufacturers can be confident they can succeed in Mexico no matter their industry. Mexico’s low labor costs compared to the U.S., China and Brazil further cement the labor advantages of setting up shop in a city such as Hermosillo.
As many manufacturers know, having the right people in place can help ensure your operational success. That’s why manufacturers have been turning to Tetakawi for support in launching a manufacturing operation in Mexico for more than thirty years.
To discuss the specific advantages manufacturing in Hermosillo, Mexico, might provide for you, contact Tetakawi today.