Mar 14 2014

SALAMANCA, Mexico -- Mexico is on pace to become the world's No. 1 auto exporting country to the United States as early as next year, thanks largely to the addition of 605,000 units of capacity by those three Japanese automakers. Within four months, Nissan, Honda and Mazda have opened assembly plants in what is becoming one of the world's hottest auto hubs.  When three-tiered car haulers packed with Mazda3s pulled out of the dusty rail yard here last month, they did more than mark Mazda Motor Corp.'s return to North American manufacturing after pulling the plug on Michigan production in 2012.They represented the latest volley in a south-of-the-border blitz by Japanese automakers. The explosive Japanese buildup poses a triple threat to the Detroit 3 by:

 

1. Giving the Japanese a launchpad for exports to Latin America and Europe, where Japanese brands are small but growing.

2. Helping the Japanese carve out a larger share of the fast-growing Mexican market, traditionally a preserve of Detroit.

3. Making Japan's manufacturers all the more potent in challenging American and other brands in the United States..

 

Higher margins from Mexico mean Mazda will have more money to spend on marketing or improving content, Carey said. That holds true for other Japanese Used Cars Exporter, too. It's also a power play in the small-car segment, which many forecast to increase.

 

"They can greatly improve the profitability of small cars," said Masatoshi Nishimoto, an analyst at IHS Automotive. "They can reduce incentives and get more flexibility on pricing."Japanese brands are poised for a new assault from south of the border.

 

"Anything that makes Mazda more profitable will help us," said dealer Tom Carey of Ramsey Mazda in Urbandale, Iowa, who attended the Feb. 27 opening ceremony of the Salamanca plant. He is chairman of Mazda's national dealer council.

 

"We have a new profit center," Mazda Chairman Takashi Yamanouchi said of his plant. The upsides are many. Japanese manufacturers can:

 

 

• Reap fatter margins from lower cost manufacturing, largely a function of cheaper labor.
• Improve product availability with a shorter pipeline to dealers
• Mitigate exchange rate losses from yen-based Japanese exports.
• Avoid tariffs on car and truck imports into the United States.

 

Nissan Motor Co. was a fast follower, opening its first plant in 1966. It now has three factories, including a new one in Aguascalientes. Yet in many ways, the Japanese are playing catch-up. Ford, Chrysler and General Motors long ago discovered the pluses of Mexico and have manufactured there since the 1960s. Today, Nissan is Mexico's top-selling brand. Honda Motor Co. arrived in 1995 with relatively small capacity of 63,000 units at its first plant. That plant, its second in that city, opened in November with capacity for 175,000 Sentras. In 2004, Toyota Motor Corp. set up a factory in the Mexican state of Baja California, assembling as many as 57,000 Tacoma compact pickups a year from kits imported from Japan.