In-depth Analysis of the Automobile Production Chain in Mexico

Case Study: Automotive Industry

The Chamber of Automobile Industries was producing a report on the economic and environmental costs of private transport in the state of Jalisco. In order to achieve this, the representation of the complete panorama of all the dynamics related to this setting was crucial, including what the economic spillover of the automotive manufacturing industry meant for the country. With this in mind, they employed Latin American Capital to research, contextualize and quantify the footprint of this sector and map its productive chain nationwide.

In order to evaluate the general impact of the automotive industry on the country, the client was aware that all the details that emerged from this productive activity had to be thought through, as well as the economic spillover that it produced in associated links. However, there was an evident lack of information and concrete data regarding the mapping of productive chains in the national context. Therefore, LAC was the trusted strategically that would enable the client to delve into the different sources of information and make connections in the data to generate an objective and comprehensive vision of the industry.

To map and analyze the automotive industry, it was necessary to set a specific objective, but one that would cover the full economic impact of each link in the industry. Therefore, the proposal was made to carry out an in-depth analysis of the production chain that involves all the manufacturing links in the making of an automobile in Mexico. Based on this, the methodology was designed to contextualize a wide variety of sources with no clear relationships, which resulted in a system that harmonized the data obtained from available official resources such as the Mexican Business Information System (SIEM), the North American Industrial Classification System (SCIAN) and the exploration of arguments through Big Data in databases such as the INEGI Economic Censuses, in order to segment the problem into human and economic units. In total, 61,439 records were developed and analyzed in order to map the production chain of the automotive industry.

  • The production chain of the automotive industry is organized into 44 economic activities. 10 activities are part of the main links, which represent 23% of the total, and 34 are support activities, which represent the remaining 77%.
  • The 44 economic activities were distributed in 6 links that make up the automotive production chain. The evaluation framework was established using this segmentation to contrast the variables of interest.
  • 50% of the industry’s revenue comes from sales to distributors, while the remaining 50% is from the general public.
  • In Jalisco, it is estimated that there are 2,923 economic units within the production chain, which represent 14% of the national total.
  • During the evaluated period, the production chain of the automotive industry generated a total of 54,856 jobs in Jalisco.
  • The labor wages that the production chain generated amounted to a total of $3,777,171,000.00 pesos, distributed as follows: 49% for production, sales, and service employees; 31% for administrative employees; 13% for employer contributions and social security schemes; 5% for other social benefits; and 2% for profit sharing.

The automotive industry is clearly one of the economic driving forces of the country, which is reflected in its contribution to the GDP (20% of the manufacturing index and 4% of the national total). This situation is also visible at the state level, where employment statistics, profits, and the importance of economic units, demonstrate the leading role of the automotive industry, not only at the productive or economic level but also in society. The trend in production showed a significant increase and not only was the country already one of the main exporters in the automobile industry but there were also various manufacturing developments under construction throughout Mexico. In addition, clusters (a group of interrelated companies that work in the same industrial sector) were identified and recommendations were made to strengthen their competitive presence so that they could strategically collaborate with each other and obtain common benefits. Additionally, the suggestion was made to create new clusters and unify corridors that would make this industry (which is dispersed across several states) into a single united force. In this way, the foundations would be laid for Mexico to position itself as a more industrialized developing country and not just a manufacturing one, avoiding direct competition with emerging nations that are distinguished by the low costs of their labor, while Mexico would seek to be distinguished by technological advances and its expertise in the industry. Lastly, the opportunity to diversify towards benefits associated with the automotive industry was identified, to develop and consolidate other highly complex production activities, such as the aerospace sector for example.

If your organization would benefit from industrial or sector investigations, with a LAC investigation and analysis you can: 

  • Evaluate the level of impact that highly relevant competitive dynamics have on your industry.
  • Disaggregate value chains to make specific analyzes with your variables of interest.
  • Geographic interpretation analysis to define areas of interest (clusters and industrial corridors).
  • Obtain detailed information about competitors and consumers, identify the key factors in their interaction, market trends, comparison of goods or services, whether they are secondary or substitute.
  • Contextualize the macroeconomic environment and identify factors that can influence the current competitive synergy.
  • Design competitive advantages for the productive chains of your industry, which enable you to stand out even in an increasingly competitive global environment.
  • Identify the intelligence, knowledge, and distinctive tools in your entity in order to take advantage of competitive opportunities in related or similar industries.

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