Continental is preparing to open a new plant to produce components for North America in Aguascalientes, Mexico.
Reuters said the new plant should benefit from the new United States-Mexico-Canada (USMCA) trade deal and US president Joe Biden’s US$1.9 trillion stimulus plan to revive growth after the coronavirus pandemic.
The news agency said the confidence expressed by local executives of the German parts maker echoes growing optimism among analysts that a global recovery will lift Mexico’s economy more than previously expected, despite ongoing weakness in domestic demand.
“We’ve got high (auto) output coming, high volumes for everyone, and that’s what we’re getting ready for,” Ina Seterbakken, manager of the plant still under construction, told Reuters.
Seterbakken said Continental expects business to revive after delays caused by pandemic-related disruptions, noting the facility was a strategic bet given Mexico’s proximity to the United States, the world’s biggest economy.
The new plant, which will employ about 1,000 people, joins a thick belt of automotive factories clustered in central Mexico, whirring with machinery focused chiefly on satisfying export demand that the market access of USMCA provides, Reuters noted.
“If (USMCA) hadn’t been agreed, it would have really changed this country’s economy,” Gustavo Puente, economy minister in the central state of San Luis Potosi, which recently unveiled a separate EUR60m Continental investment, told the news agency.
The automotive industry forms the core of manufacturing output, which makes up almost a fifth of Mexico’s economy.
Buoyed by the prospect of a revival north of the border, Mexico’s government is revising up its 2021 growth forecast to 5.0-5.5%, and finance minister Arturo Herrera told Reuters the US stimulus plan was “very important” to the country.
Drawn to lower-cost Mexico to get a competitive edge, companies are watching nervously to see if the government’s moves to strengthen state control of the electricity market will affect energy-intensive sectors like carmaking, the report said.
“(The electricity sector) is decisive for the Mexican economy to grow steadily, but for this, the state must guarantee the principles of free competition and legal certainty,”” the American Chamber of Commerce (AmCham) in Mexico said last month.