The $770 million facility opening today will shield Hiroshima, Japan-based Mazda from exchange-rate swings between the yen and the U.S. dollar, consultant IHS Automotive says. Mazda will also be able to cut shipping costs to the U.S. and benefit from Mexico’s web of trade deals covering more than 40 countries.
Mazda joins a rush by Japanese automakers to expand in Mexico following plant openings by Nissan Motor Co. in November and Honda Motor Co. last week. Toyota Motor Corp. (7203) has contracted to have 50,000 cars built each year at the Mazda plant in Salamanca, with Mazda2 and Mazda3 small cars making up the rest of the factory’s annual capacity of 230,000 vehicles.
“Without this plant, it would be very difficult for Mazda to maintain their position in the U.S. market,” IHS Automotive Managing Director Michael Robinet said in a telephone interview from Southfield, Michigan. “They are a mass-market vehicle manufacturer and to be competitive in the U.S. market, you have to be building in North America.”
While the plant has already begun producing cars, Mazda is holding an official opening ceremony today with Mexican President Enrique Pena Nieto.
Mazda’s U.S. sales of more than 280,000 vehicles ranked fifth among Japanese automakers in 2013, according to data compiled by Bloomberg. A venture that made Mazda6 sedans in Flat Rock, Michigan, with Ford Motor Co. ended in 2012.
Producing vehicles in North America for sales in the region will insulate Mazda against fluctuations in Japan’s currency, according to Sean McAlinden, chief economist of the Center for Automotive Research in Ann Arbor, Michigan.
The yen gained 13 percent against the dollar in the decade ended in December, even as Prime Minister Shinzo Abe’s monetary easing weighed on the currency in 2013. The exchange rate was 102.38 yen to the dollar on Feb. 26. Mexico’s peso weakened 20 percent against the greenback in the same 10-year period, lowering manufacturing costs.
“Three years ago the yen was about 75 to the dollar and on every car they shipped here from Japan, they were losing money - - a lot of money,” McAlinden said by phone. “In Mexico, the currency is roughly benchmarked to the U.S. dollar, which makes it look a lot safer to the Japanese.”
Automakers have committed $9.6 billion to Mexico since the start of 2011, with investments by General Motors Co. (GM), Ford Motor Co. (F) and Volkswagen AG as well as Japanese automakers, according to the Center for Automotive Research.
Nissan, Mexico’s largest automaker by production and domestic sales, opened a $2 billion factory in November. Honda opened a plant last week in Celaya, Mexico, about 45 kilometers (28 miles) from Salamanca.
“It underscores the importance of North America,” Jeremy Barnes, a spokesman for Mazda, said in regard to the company’s plant in Mexico.
Toyota will also expand its Mexican manufacturing base under its plan to begin making small cars in Salamanca based on the Mazda 2 platform next year. The Toyota City, Japan-based automaker has a plant near the California border that produces Tacoma pickup trucks.
“Adding on to the Mazda site reduces Toyota’s fixed costs,” Jeff Liker, a University of Michigan engineering professor, said by phone. “It’s an inexpensive way to increase volume down there if they’re sharing the fixed costs with Mazda.”
Javier Moreno, a spokesman for Toyota in New York, was not immediately able to comment.
Toyota’s output in Mexico rose 15 percent last year to 63,724, or 2.2 percent of national production of 2.93 million, according to the Mexican Automobile Industry Association trade group. Toyota, the world’s largest automaker, sold 60,740 light vehicles for a 5.7 percent market share, trailing Nissan’s 25 percent, GM at 19 percent and Volkswagen’s 15 percent.
“It’s very interesting that Toyota is trying this out in case they decide one day to build a large plant here,” Ricardo Haneine, an auto consultant with A.T. Kearney Inc., said by phone from Mexico City. “They’ll learn more about Mexico from a manufacturing perspective.”
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