Drives and trends of the new geography of the auto industry. A view from Mexico

Type de publication:

Conference Paper


Gerpisa colloquium, Puebla (2016)


In 2013 global auto investment reached a turning point as Mexico became the country receiving the largest flows of FDI to the sector, displacing China as the more attractive jurisdiction to expand production. Termed by auto CEOs the “the new China of Occident, “ over the past few years Mexico has gotten increasing waves of European and Asian auto investment while Detroit 3 have moved all new opening projects from Southern America into this deepest south. Whether or not this trend changes, Mexico will keep being one of the hottest spots in the auto industry worldwide and the strategic entry port to the North American market. Furthermore, this position could become more critical in the near future for the global industry as once the country reaches the frontier of five to six million auto output, which is forecast will happen by 2020 at the latest, the virtuous circle of clustering will evolve exponentially (Wilson 2015; Kynge, 2015; Covarrubias, 2014-15).
Therefore, there is a new geography of the global auto industry and Mexico is one of its key players. How to best account for such new geography? This paper is geared towards explaining the factors that are driving it through analyzing the Mexican case as a prime example. It posits that old and new factors driving the placement of investment now mix resulting in new configurations of markets and technology: from cost/maximization (Losch, 1940) to clustering (Armstrong & Taylor, 2000), to markets & geography at overlapping levels (Krugman, Venables & Fujita, 2001), to serendipity and anarchy (March & Olsen, 1989), to institutions & public policy (OCDE/WEF, 2015-16). In turn, all of this is affected by the socio-technical transition (Geels, 2011-2014; Penna and Geels, 2012-2015) the AI is experiencing towards alternative drivetrain technologies.
The study is based on statistical data analysis of investments, output, sales, employment, wages and R&D in the global and Mexican auto industries, as well as on interviews carried out with plant managers and public and private representatives of the sector.

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