Mexico and the Industrial Reorganization of North America

Mexico is the world’s seventh-largest producer of passenger vehicles. Each year it manufactures more than 3.5 million vehicles, nearly 90% of which are exported, primarily to the United States. The sector employs more than one million people, generates over 20% of the country’s manufacturing GDP, and operates in at least 14 states. Beyond reflecting the weight of the automotive industry in the Mexican economy, these figures reveal the strategic position the country has acquired within one of the most complex industrial ecosystems in the world.

As we analyze in the article “Mexico's role in transforming the North American automotive industry” (Technology in Society, 2026), co-authored with Jerry Haar of Florida International University, this positioning is the result of decades of productive integration, technological innovation, and trade openness. In recent years, however, the sector has entered a new phase of transformation shaped by challenges such as the transition to electric vehicles, the development of autonomous technologies, the reorganization of global supply chains, and rising geopolitical tensions. In this process, Mexico has consolidated itself as a central player in the industrial reconfiguration of North America.

Over the past year, however, certain risks have also emerged, particularly from U.S. industrial policies—such as incentives for the production of electric vehicles and batteries included in the Inflation Reduction Act—which seek to attract investment to U.S. territory. Although these policies promote regional integration under the USMCA framework, they may also create pressures to relocate higher value-added activities to the United States. For Mexico, the challenge is to take advantage of the nearshoring wave without remaining confined to the most labor-intensive stages of the automotive value chain, but instead advancing toward segments with greater technological content, such as automotive software development, battery manufacturing, and advanced engineering.

From trade integration to a manufacturing hub

The North American automotive industry has historically been one of the pillars of global industrial development. Throughout the twentieth century, innovations such as mass production, the rise of large automotive conglomerates, and the expansion of consumer markets consolidated the region as one of the sector’s centers of gravity. For Mexico, however, the real turning point came in the 1990s with the entry into force of the North American Free Trade Agreement (NAFTA) in 1994. This agreement enabled tariff-free access to the markets of the United States and Canada, triggering a wave of foreign direct investment in Mexico’s automotive sector.

Since then, global companies such as Volkswagen, Nissan, Toyota, General Motors, and Ford have expanded their operations in the country, transforming Mexico into an export-oriented manufacturing platform that combines competitive costs with growing industrial specialization. This integrated production system means that auto parts and components often cross the borders of Mexico, the United States, and Canada several times before final assembly. This level of productive interdependence illustrates the regional nature of the industry and explains why technological and economic transformations in the sector have immediate effects across North America.

Mexico’s structural advantages

One of the factors driving Mexico’s rise as an automotive hub is its combination of structural advantages: competitive labor costs, a specialized workforce, and a consolidated network of industrial infrastructure. States such as Guanajuato, Puebla, Aguascalientes, and Nuevo León have become major hubs for global manufacturers and specialized suppliers.

These conditions are reinforced by geographic proximity to the world’s largest automotive market. While transporting vehicles or components from Asia can take several weeks, shipments from Mexico to the United States typically take between two and five days. This proximity allows companies to implement more agile and efficient production systems, such as the just-in-time models that dominate contemporary automotive manufacturing.

Another decisive factor is Mexico’s extensive network of trade agreements with more than 40 countries, which makes the country a global export platform. This openness, strengthened by the USMCA, has allowed Mexico’s automotive industry to integrate deeply into global value chains.

Technological innovation and energy transition

Globalization also transformed the sector. Japanese and European manufacturers gained ground in the North American market thanks to their focus on efficiency, quality, and reliability. This competitive pressure forced U.S. manufacturers to rethink their strategies, increasing investment in R&D, modernizing production systems, and adopting more efficient manufacturing models. Today, however, productive efficiency is no longer the only factor shaping competitiveness. Electrification, autonomous vehicles, and digitalization are redefining the future of the industry.

The production of electric vehicles, in particular, has become one of the main drivers of transformation. Driven by public policies, fiscal incentives, and changes in consumer preferences, manufacturers are investing billions of dollars in new plants, battery technologies, and electric mobility platforms.

In Mexico, this transition is already visible in plants that have reconfigured their operations to adapt to the new technological era. One example is BMW’s plant in San Luis Potosí, which has announced that beginning in 2027 it will start producing a new generation of electric vehicles. Meanwhile, factories such as General Motors in Ramos Arizpe and Ford in Cuautitlán have recently adjusted their production lines to manufacture fully electric models, such as the Blazer EV and the Mustang Mach-E, illustrating the speed with which electrification is being incorporated into the region’s industry.

However, this technological transition is also marked by growing global competition, particularly from China. The Asian giant has become the world’s largest automotive producer, with more than 31 million vehicles manufactured annually and a components industry valued in the hundreds of billions of dollars. Moreover, the rapid development of Chinese electric vehicles—supported by significant government subsidies—represents one of the greatest competitive challenges for Western manufacturers.

Nearshoring and supply chain resilience

Against this backdrop, supply chains are being reorganized. After decades of global expansion, many companies are reconsidering the relocation of their production operations. For the North American automotive industry, nearshoring has reinforced Mexico’s role as a preferred destination for new manufacturing investments.

Recent studies indicate that a significant share of manufacturing companies are evaluating the relocation or expansion of operations to North America. Mexican industrial parks have received hundreds of new companies in recent years, and this trend is expected to continue in the short term. At the same time, the expansion of Chinese manufacturers such as BYD reflects the growing presence of Asian firms in the region, alongside moves by companies such as Leapmotor, in partnership with Stellantis, to enter the Latin American market—signaling an increasingly competitive technological and industrial landscape.

This process extends beyond vehicle assembly. Increasingly, investments are directed toward the production of strategic components, including electronic systems, advanced auto parts, and batteries for electric vehicles. Regional integration under the USMCA—which requires that at least 75% of a vehicle’s content be produced in North America—also encourages this process of productive relocation.

Mexico in the future of the industry

Supply chain resilience has therefore become a strategic priority. For automotive companies, this involves diversifying suppliers, strengthening regional production networks, and using digital tools to monitor logistical and operational risks. In this new context, Mexico offers a particularly attractive combination of competitive advantages: in addition to its proximity to the U.S. market and its trade agreements, the country has a highly integrated automotive supply chain, a specialized workforce, and relatively competitive energy costs.

The future of the North American automotive industry will depend largely on the ability of companies and governments to adapt to these transformations. The transition to electric vehicles, the adoption of autonomous technologies, and the strengthening of regional supply chains will require new investments, continuous innovation, and close collaboration among the public sector, industry, and academia.

In the coming years, the North American automotive industry appears to be moving toward a new equilibrium based on three pillars: technological innovation, environmental sustainability, and productive resilience. In this scenario, Mexico participates not only as a manufacturing platform but also as one of the key actors shaping the future of the region’s automotive sector. At the same time, this transition also involves adjustments within the industry itself. Some companies are reorganizing their production footprint: Nissan recently announced the closure of its historic Plant 1 in Civac, Morelos, as part of a global restructuring process, a decision that reflects how the sector’s technological transformation is also redefining the region’s industrial geography.

Beyond the automotive sector, this industrial reorganization offers clues about broader transformations in the global economy. Productive relocation, the strengthening of regional supply chains, and the search for greater resilience can also be observed in industries such as electronics, semiconductors, medical devices, and clean energy. In all these sectors, proximity to markets, institutional stability, and the availability of specialized talent are becoming as important as production costs. In this sense, the experience of the automotive industry may anticipate a broader trend: the consolidation of North America as an increasingly integrated productive space in which Mexico plays a growing role in the region’s industrial reconfiguration.