(Mexico City) “Our customers asked us to come here. GM, which has three vehicle manufacturing plants in the country, told us: if you want to continue to be our supplier, you are going to have to set up in Mexico. »
This ultimatum, Exo-S, whose head office is located in Sherbrooke, could not ignore it. The company specializing in the manufacture of plastic ducts for vehicle ventilation, heating and cooling systems currently has five factories, two in Quebec, two in the United States and one in San Juan del Rio, in the state from Querétaro to Mexico.
Sitting in the interior courtyard of a restaurant in the San Angel district of the Mexican capital, François Ouellet, general manager of Exo-S Mexico, explains that, for the company, it came to establish itself further south 10 years ago had become a necessity to retain its customers and increase their number. The idea was not to move production from Quebec to the South, but simply to increase its presence in neighboring Mexico (vecino) while remaining in La Belle Province.
“As we make plastic parts, we normally have to be physically close to the vehicle manufacturing site. » Major players in the auto industry like GM, Stellantis, Ford, Nissan, Toyota, Volkswagen, Kia, Honda, Mazda, Hyundai, BMW and Audi all have factories in North America’s third-largest country.
The Quebecer, who adopted Mexico 24 years ago, emphasizes that this proximity saves transport costs “which are often more expensive than the part itself”.
“Making a piece of plastic in Quebec and sending it to Mexico makes absolutely no sense because we have to cross the American border, then the Mexican border,” he illustrates while sipping his coffee.
In an ideal world, it is better to be within a radius of 300 to 400 km from car manufacturers, the equivalent of a day’s transport, no more.
And this decision to establish itself on Mexican soil seems to have been the right strategy to adopt for Exo-S. The manufacturer saw its number of employees working at the San Juan del Rio factory increase from 135 to 400. “We increased sales by 10,” adds Mr. Ouellet, without giving more precise figures.
PHOTO PROVIDED BY EXO-S
Based in San Juan del Rio, the Mexico plant has grown from 135 to 400 employees.
According to Stéphanie Allard-Gomez, Quebec’s general delegate in Mexico since 2017, the country has become somewhat of an “unmissable” destination for local businesses that want to get closer to “the value chain.”
“They come to settle here, and that allows them to get closer to other clients who are not necessarily from Quebec. »
In 2023, there were US$36 billion invested in Mexico, it was the largest year of foreign investment since 1995. We are in a context of nearshoring, she adds. We get closer to our customers. We are getting closer to our suppliers.
Stéphanie Allard-Gomez, general delegate of Quebec in Mexico
“For Quebec businesses, this is a great opportunity,” says M.me Allard-Gomez. The Canada–United States–Mexico Agreement (CUSMA) provides for a gradual increase in [la proportion de pièces d’une voiture devant être fabriquées en Amérique du Nord]. We were 62.5% and we move to 75% of the content of a vehicle which must be manufactured in North America to be considered as being manufactured in North America within the framework of the Free Trade Agreement and to be resold with customs exemption. »
Car manufacturers are therefore looking for North American suppliers.
Other challenges
This rush to the South comes with its share of challenges. In addition to specialized labor (see other text), water and land are also starting to become increasingly scarce.
The general delegate of Quebec in Mexico even speaks of water and energy stress caused in particular by the implementation of megaprojects such as the Mayan Train which crosses the Yucatán peninsula and the Dos Bocas refinery. “There are regions where supply is more difficult to maintain. We have to make agreements, she emphasizes. This is one of the challenges that businesses that come to set up here must face. The choice of site is one of the most important elements. »
The spaces available to take up residence are also becoming rarer… and more expensive. “We saw a map of Mexico with the price, per square meter, of industrial spaces. There is a big disparity in costs, it costs more if the land is located on the American border. The price has increased and there are places where there is no more land available. »
Despite everything, Stéphanie Allard-Gomez believes that the favorable opportunities for Quebec businesses are enormous. “The number of Quebec companies that are successful in the Mexican market and that are present in the territory has increased exponentially since the end of the pandemic. We are competitive, we are good, we are not far away. »
Some numbers
475 billion
Amount in US dollars of Mexican exports to the United States in 2023, surpassing those of China for the first time.
41%
This is the increase in foreign direct investments (FDI) during the first half of 2023 compared to the entirety of 2022. It is explained in particular by the relocation of production by Chinese companies to Mexico.
130 million
Number of inhabitants in Mexico
3.8 million
Number of cars produced in Mexico in 2023
Source: Investissement Québec