Transforming Investment: Mexico's Automotive Sector Drives Green Nearshoring and Innovation
By Israel Molina
July 29, 2024
During the second half of the year, Mexico is expected to continue establishing itself as a key region for nearshoring. Data shows that the area has gained ground due to the constant influx of foreign investment, which grew by more than 17% in new projects over the past year, benefiting regions such as Sonora, Coahuila, Mexico City, and Nuevo León, reported Deloitte.
The automotive industry is in the spotlight due to its positioning as the most attractive sector for international investments, representing over 22% of total foreign direct investment (FDI) according to Econosigna, and contributing more than 6 billion pesos to the GDP in the first quarter of 2024.
This ongoing development has not only created new business opportunities throughout the region but also brought socio-environmental requirements from investors worldwide.
According to Adriana Pulido, sustainability specialist and
CEO of ILUNKA, nearshoring will be green or it won’t be, a fact that
international investors are clearer on than ever. In a region as rich and
connected as Mexico, FDI is not only seeking expansion opportunities but also
aiming for long-term, efficient, and large-scale investments.
“Businesses need to be not just profitable but also sustainable to achieve longevity, which is particularly important for a strong industry like the automotive sector in Mexico,” Pulido emphasized.
The ESG expert highlighted that the automotive industry is a pillar not only of development but also of employability and innovation. According to data from Capgemini Research Institute, it is also one of the most advanced industries globally in terms of sustainability. However, it faces risks of decline if issues in Mexico are not adequately addressed, including:
Energy Efficiency: Companies must invest in technologies that reduce energy consumption in their production facilities. This includes using LED lighting, efficient heating and cooling systems, and low-energy machinery. “Energy efficiency is not just an environmental imperative but also a key factor for business competitiveness. Companies need to start adopting low-energy technologies to transform operations in the automotive sector; actions that will not only reduce costs but also lead in sustainability,” added the executive.
New Energy Sources: Integrating alternative energy sources is essential to lessen environmental impacts. Currently, 23% of energy in Mexico comes from renewable sources, and the automotive sector must contribute to reducing negative impacts through new techniques that optimize the use of existing fuels during production.
Water Supply: During the first half of the year, Mexico experienced an unprecedented drought, primarily affecting the northern part of the country where the highest industrial activity is concentrated. In this context, developing strategies to ensure responsible water use in industrial plants to guarantee international production without affecting communities is imperative. “Efficient water management is not only an operational need but also a crucial responsibility for sustainability and economic development. Companies, suppliers, and the government need to implement innovative solutions to ensure responsible water use that not only supports industrial activity but also sustains communities and business expansion,” highlighted Adriana Pulido.
Green Mobility and Logistics: To create green routes, it is
necessary to address the issue at its root by designing more sustainable
regions and cities, where logistics is more efficient given the nature of the
environment, allowing for reduced environmental footprint and improved mobility
strategy design. “Green nearshoring will continue to grow, and the automotive
industry presents an opportunity to achieve this. This will be possible not
only through the promotion of the above but also through the adaptation of new
ESG strategies within companies. It is estimated that this will not only
generate investment in the country’s industrial regions but also help build
sustainable economies through one of Mexico’s key development industries,”
concluded Pulido.