After the enactment of NAFTA (North American Free Trade Agreement) in 1994, Mexican auto exports to the United States more than quadrupled between 1993 and 2013. Estimates reveal that Mexico is likely to take the top spot from Canada in 2015 with 1.9 million cars exported to the US. Japan has controlled one of the top rankings since the 1970s with Honda, Toyota and Mazda, but Mexico was able to surpass Japan making passenger vehicles and light trucks. However, interestingly enough, Mexico has seen much of this success due to producing cars like the Nissan Sentra and Honda Fit. More Japanese based auto firms are building production facilities in Mexico, due to the cheap labor and the benefits of NAFTA. It will be interesting to see if Mexico's auto industry continues to grow the way that it has been, or if it will level off as wages increase.
http://www.bloomberg.com/news/2014-01-31/mexico-surpassing-japan-as-no-2-auto-exporter-to-u-s-.html
1 comment:
As I was reading this article summary, I started thinking about the role of arbitrageurs in the market system. Japanese automakers became attracted to Mexico because of its cheaper production costs. As auto firms make cars in Mexico and sell them in America, they gain higher profit from the cost difference in two geographical points. Also, as a result, automakers keep car prices in America from soaring.
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