By Angelo Young - Just days after German luxury automaker BMW said it would spend $1 billion on a manufacturing plant south of the U.S. border, new data confirms both Mexico’s rising status as a global auto-producing hub and Brazil’s sluggish economy that has led to factory slowdowns and layoffs in the South American economic giant.
Mexico’s proximity to the United States, its lower production costs and its increasingly skilled workforce helped it edge past Brazil, the world’s fourth-largest auto market after China, the U.S. and Japan.
In the first six months of 2014, Mexico made over 30,000 more vehicles than Brazil. Last year, Brazil produced 3.7 million automobiles compared to Mexico’s 2.9 million, according to the countries’ automobile manufacturing groups.
In the past 12 months, BMW (XETRA:BMWG), Daimler (XETRA:DAIGn), Nissan Motor Co., Ltd. (TOKYO:7201) and Volkswagen's Audi AG (XETRA:VOWG) have all announced new investments in Mexico. KIA Motors (KS:000270) announced last week it’s looking to put its next overseas plant there.
Meanwhile, Brazil has seen auto production plummet as rising inflation, higher borrowing costs and growing unemployment have all cut demand for new cars. Inventories are high, which has slowed production. Import restrictions in neighboring Argentina haven't helped weither.
Brazil attempted to curb demand for imported vehicles back in 2012 by instituting a vehicle import tax and quotas against Mexican-produced imports, accordign to IHS Automotive, but they did little to spur domestic production due to other adverse economic factors.