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Automakers Eye Mexico as New Frontier of Production

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March 18, 2015—Several automakers are building plants in Mexico to escape higher taxes and stringent free-trade restrictions found in the U.S. and other countries, according to a report from The Wall Street Journal.

Seven automakers from Europe and Asia have opened assembly plants in Mexico over the past year, where their products are subject to over 40 free-trade agreements, according to the report. Nissan, General Motors, and Ford have also expanded their current plants based in Mexico. In total, the new and expanded plants are estimated to be contributing over $20 billion in new investments in the Mexican automotive industry.

The report estimates that it costs roughly 10 percent less per vehicle for a foreign automaker to ship their product to Europe from a plant in Mexico compared to one in the U.S. due to current tariff structures.

The new boom has made Mexico the seventh-largest producer of cars in the world, and the fourth-largest exporter following Germany, Japan, and South Korea. On average, Mexico is pumping out just over 3 million cars a year, a number estimated to grow to 5 million by 2018.

BMW also recently said it plans to build a new plant in San Luis Potosi, Mexico, to roll out 150,000 vehicles annually by 2019. The German automaker said that Mexico’s free trade agreements currently in place were a deciding factor on where to build its new plant.

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