Mexican Production Facilities Causing Longer Lead Times
Since the North American Free Trade Agreement (NAFTA) was signed in 1994, auto manufacturers have been moving manufacturing facilities to other countries, including Mexico, in pursuit of lower production costs. Ford, Chrysler, Nissan, Toyota, Kia, Audi, and other manufacturers have built facilities in Mexico and are manufacturing many vehicles at this location today:
- In 2015 Mexico exported 2.9 million vehicles, 70% to the U.S market
- Mexico is expected to export 5 million vehicles by 2020.
- Mexico is the world’s seventh largest automotive manufacturer, a significant increase over the past five years.
Unfortunately, the increase in production in Mexico has substantially delayed order-to- delivery (OTD) lead times for U.S. consumers. According to Business Fleet Magazine, Mexico has a shortage of rail cars needed to export the vehicles. Only three main rail lines are available to support the heavy 286,000-pound transport, therefore congested rail lines are only moving at an average speed of 7 miles per hour, causing late deliveries. The Mexican government plans to upgrade rail capacity with a $100-billion spending package.
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