China has been an attractive option for manufacturers due to the cost-effective investment strategies available. The government trade data at the start of 2019 indicates that more manufacturers have opted for Mexico as a manufacturing option over China.
From industrialization, advancements in technology, intellectual property to environmental considerations, there are many reasons for this changing trend.
Here are the top reasons why you should choose Mexico over China for manufacturing:
1. Geographical location
There are many benefits of geographical location, particularly for US companies. The managers of the US companies can easily plan a visit to Mexico without spending much time travelling. You can comfortably travel to Mexico as you won’t need much planning.
Moreover, the time zone in Mexico likely aligns with your time zone. So, you won’t have to face problems in communication.
Mexico has a history of 60 years in the manufacturing department. This duration over time has formed a highly experienced and skilled labour force, and many of whom are partly bilingual. Mexico’s workforce is also relatively younger than China’s workforce.
When issues regarding quality arise, it is more comfortable to ask for repair or replacement in Mexico. The distance and the communication barriers make the quality concerns challenging.
3. Labour costs
For years, China had lower wages than Mexico. But now, the manufacturing labour costs in Mexico are 20% less than in China. Thus, Mexico offers more efficacy at a lower price than China.
The gap in worker productivity is even wider for both. The steadier wages in Mexico provide a straightforward prediction of labour costs, but this is not China’s scenario. In addition to this, working with a devoted shelter company in Mexico, like Tacna, can reduce your operation’s costs even more.
4. Trade agreements
According to the North American Free Trade Agreement (NAFTA), Mexico can transport goods throughout the United States and Canada. Moreover, Mexico has 12 multilateral trade agreements that allow it to export finished products to 44 countries. This places Mexico on the list of the most open countries for international trade.
Mexico and the US have a friendly trade relationship as well. In contrast, the China and US relationship is often affected by the political reasons that impact trade.
5. Shipping costs and time
Both the distance and continuously changing oil prices make shipping to China more expensive than Mexico. As per Investing Daily, the shipping costs for a 40-foot container to China are $7,000. But, for Mexico, it will only cost $2,800.
Moreover, you save a lot of time importing finished products from the manufacturing unit to your destination in the US. It takes about 24-48 hours to get your finished products from Mexico. In comparison, the same products will take around three weeks to ship from China.
6. Intellectual property
Mexico holds a good reputation when it comes to protecting intellectual property rights. On the contrary, China mostly has problems, and the courts are slow to implement or understand property rights.
Due to all these reasons, manufacturers are considering Mexico a better place for investing than China.