Cameron Miranda
Ford Motor Company is an American multinational automaker with a global manufacturing presence, including in Mexico. The company's operations in Mexico date back to the 1920s, and it has had a significant presence in the country since the 1930s as part of the “Big Three” automakers, alongside General Motors and Chrysler. Ford's decision to expand its manufacturing footprint into Mexico is influenced by various factors, including the country's strong transportation logistics, reduced labour costs, and free trade agreements, such as NAFTA. The move has sparked a range of reactions, from criticism to praise, with Ford aiming to balance its Mexican operations with its strong US manufacturing base.
| Characteristics | Values |
|---|---|
| Reason for moving manufacturing to Mexico | Lower costs, solid transportation logistics, greater flexibility, and the chance to increase profits |
| Ford's manufacturing operations in Mexico | Manufacturing plants, engine plant, stamping plants, assembly plants |
| Ford's history in Mexico | Manufacturing cars in the region since the 1920s |
| Models produced in Mexico | Mustang Mach-E electric SUV, Maverick, Bronco Sport, Focus, Lincoln MKZ, Lincoln MKZ Hybrid, Fiesta, Fusion, Fusion Hybrid, four-cylinder and diesel engines |
| Impact of Trump's tariffs | Ford hiked prices on three Mexico-produced models by up to $2,000 |
| Ford's share price impact | Down 1.7% at $10.26 |
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What You'll Learn
Ford's history of manufacturing in Mexico
Ford Motor Company has been manufacturing vehicles in Mexico since 1925, making it the longest-running automotive brand in the country.
Henry Ford built the first auto-manufacturing facility in Mexico, which produced the famous Model T. This was the first time Ford had established a production line outside of the United States. The company's first plant was located in a rented warehouse in the San Lazaro neighbourhood of Mexico City, with a total of 250 employees. Initially, the plant assembled only 50 vehicles, using U.S.-made parts, but Ford soon expanded its operations in Mexico. In 1932, the company built a new assembly plant in the La Villa neighbourhood, with a capacity to produce 100 autos per day.
In the 1950s, 60s and 70s, Ford Motor Company México enjoyed excellent sales, often holding second place in the market. However, it was overtaken by General Motors. During this period, Ford sold various successful Mercury models under a Ford badge, including the Mercury Zephyr (sold as the Ford Elite II) and the Grand Marquis.
In the early 1960s, the Mexican government introduced regulations requiring car companies to assemble vehicles in Mexico using local and imported components, to develop the national car industry and promote employment. In 1962, the government further decreed that, by 1 September 1964, 60% of the production cost of each Mexican-made automobile must consist of Mexican-made parts. This form of production was very different from the Detroit-style tooling for each car model, and it allowed Ford Mexico to develop tools that could be used for several models and in other Ford plants worldwide.
In 1964, Ford opened a plant in Cuautitlán for auto assembly and the manufacture of V8 engines. The company's employment rose from 1,209 in 1960 to 3,291 in 1965, and sales increased to 21,207 in 1969, giving Ford 29% of the market share. In 1970, Ford Mexico produced its 500,000th vehicle.
In 1978, 19% of the 350,000 cars and trucks sold in Mexico were Fords. In the same year, Ford established joint ventures with several companies to produce engine components, including aluminium cylinder heads, glass, and plastic parts. In 1980, Ford produced its millionth vehicle in Mexico. However, the economic crisis of 1982 hit Ford hard, and the company's auto sales slumped. As a result, Ford shifted its focus to manufacturing cars in Mexico for export to the United States.
In the 1990s, Ford continued to invest in its Mexican operations, modernising the Chihuahua plant to manufacture a new four-cylinder passenger-car engine, the Zetec. In 1996, Ford Mexico produced 235,000 vehicles and sold 66,000 cars and trucks in Mexico, regaining 20% of the market share.
Today, Ford remains a significant player in Mexico's automotive industry, which is known for high-quality, low-cost vehicle production. Mexico's strategic location and extensive free trade agreements make it an ideal base for automotive companies aiming to export vehicles worldwide.
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Advantages of manufacturing in Mexico
Mexico has become an increasingly popular choice for manufacturing, with its manufacturing sector growing at its fastest pace in history. The country offers numerous advantages for businesses, particularly those based in the US, looking to nearshore their production. Here are some key benefits of manufacturing in Mexico:
Lower Costs
One of the most significant advantages of manufacturing in Mexico is the lower costs associated with labour, overheads, and taxes. Labour costs in Mexico are highly competitive due to the lower cost of living in the country. Companies can save 40-50% on labour expenses when compared to the US or China, without sacrificing quality or efficiency. Additionally, companies can also save on overhead costs like real estate and utilities. Mexico's IMMEX/Maquiladora program further reduces costs by offering tax savings and duty-free import of raw materials and equipment.
Skilled Workforce
Mexico boasts a large, well-educated, and skilled workforce. The country has a strong emphasis on education, particularly in engineering and technology. Mexico produces over 100,000 engineering graduates annually, providing a talented pool of operational workers and managers for manufacturing companies. Regions with extensive manufacturing histories, such as Monterrey, have workers with specialised skill sets gained through vocational schools and on-the-job training.
Trade Agreements
Mexico has a network of trade agreements in place, including the USMCA (formerly NAFTA), that facilitate trade and reduce costs. These agreements promote efficient customs procedures, reduce tariffs, and support fair markets and economic growth. Mexico's aggressive pursuit of trade agreements makes it an attractive destination for companies looking to minimise costs and enhance their manufacturing operations.
Strategic Location
Mexico's proximity to the US and Canada is a significant advantage, offering reduced shipping times and lower transportation costs. The close geographical proximity enables easier communication, collaboration, and management oversight. Mexico also has some of the world's most active border crossings and international transportation options, making it ideal for companies looking to optimise their supply chains.
Infrastructure
Mexico has advanced infrastructure and access to domestic and international markets. The Mexican government has committed to improving infrastructure and security, ensuring reliable operations for manufacturers. The country's electrical grid is generally as reliable as that of the United States, and energy reforms have been implemented to increase competitiveness.
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Criticism of Ford's Mexican operations
Ford Motor Company's decision to expand its operations in Mexico has been met with criticism from various quarters, including former politicians, competing manufacturers, and consumers. One of the main points of contention is the impact of Ford's move on jobs and wages in the United States. By moving production to Mexico, where wages are significantly lower than in the US, Ford can reduce labor costs and increase overall profits. In 2014, for example, US workers earned around $30 per hour, while Mexican workers received around $5 per hour for the same work.
Another criticism of Ford's Mexican operations is the potential negative impact on the environment. With Ford's focus on light vehicles in Mexico, there are concerns about increased emissions and the company's reliance on foreign parts, which may not meet the same environmental standards as those produced in the US. Ford's CEO, Jim Farley, has acknowledged the company's dependence on foreign parts, which are subject to tariffs and may not be as readily available as domestically sourced components.
In addition, Ford's expansion in Mexico has been criticised for potentially contributing to a race to the bottom in terms of labor standards and wages. By taking advantage of the lower wages in Mexico, Ford may put pressure on wages in the US and other countries where it operates. This could lead to a downward spiral in labor standards and wages as companies seek to reduce costs and remain competitive.
The move by Ford has also been criticised for potentially undermining the company's commitment to electric vehicles (EVs). With Mexico's focus on producing light vehicles, there are concerns that Ford may be prioritising profits over the transition to EVs, which are seen as the future of the automotive industry. This is especially pertinent given the massive spikes in EV adoption in high-growth markets like China and India.
Finally, Ford's Mexican operations have faced criticism for the potential impact on the company's supply chain and production process. With production spread across multiple countries, any disruptions or delays in one country can have a ripple effect on the entire supply chain, affecting the company's ability to meet demand and maintain efficiency. This criticism was realised in 2025, when Ford's Mexican operations were impacted by US President Donald Trump's tariffs, causing the company to hike prices on Mexico-produced models.
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Impact of Trump's tariffs on Ford's Mexican-made vehicles
The Trump administration's 25% tariff on vehicles imported from Mexico has had a significant impact on Ford's Mexican-made vehicles. In response to the tariffs, Ford has hiked prices on several of its Mexican-produced models, including the Mustang Mach-E electric SUV, Maverick pickup, and Bronco Sport. The price increases range from $2,000 on some models to a projected additional $2.5 billion in costs for Ford in 2025, although the company expects to reduce this burden by around $1 billion. Despite this, Ford is in a better position to weather the tariffs compared to some competitors due to its strong US manufacturing base, with 79% of its US-sold vehicles assembled domestically.
The impact of the tariffs on Ford's Mexican-made vehicles is part of a broader trend affecting the automotive industry. A significant number of vehicles on American roads are built in Mexico, and the tariffs have the potential to greatly impact vehicle prices and demand in the US market. This could lead to the discontinuation of certain models and disrupt supply chains, affecting vehicles assembled in the US and potentially resulting in job losses for American workers.
In addition to Ford, other automakers have also warned of price increases due to the tariffs. Porsche, for example, has stated that it would need to boost selling costs if the tariffs remain in place, while Volkswagen's Audi brand has also suggested potential price hikes. The tariffs have caused uncertainty across the auto sector, with major carmakers pulling forecasts, shifting production, and idling plants.
Beyond the direct impact on vehicle prices, there are also potential consequences for Ford's business operations and investment decisions. In 2017, Ford canceled plans to invest $1.6 billion in a new plant in Mexico due to the pro-business climate fostered by the Trump administration, instead choosing to invest $700 million in Michigan and create 700 new jobs. The tariffs and broader policy context may continue to influence Ford's strategic choices regarding manufacturing locations and supply chain management.
The Trump administration's tariffs on Mexican-made vehicles have had a notable impact on Ford, leading to price increases for certain models and additional costs for the company. The effects extend beyond Ford to the wider automotive industry and highlight the complex dynamics between trade policies, manufacturing bases, and market competition.
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Ford's joint ventures in Mexico
Ford Motor Company has a long history of vehicle production in Mexico, with a presence in the country since 1925. The company has invested heavily in its four-car factories in Mexico, including a $2.5 billion investment in a new plant within its existing engine factory in Chihuahua. Ford Mexico will become a global hub for Ford's smaller vehicles and low-fuel-consumption models, exporting powertrain units to regions including South America and Asia.
Ford's first plant in Mexico was located in a rented warehouse in the San Lázaro neighbourhood of Mexico City. It had a total of 250 employees but assembled only 50 vehicles, using U.S.-made parts. Many of these were Model As, which replaced the Model T in 1928. In 1932, the company built a new assembly plant in the La Villa neighbourhood, which had a capacity of 100 autos per day. During World War II, Ford's Mexican subsidiary turned a profit each year, ranging from $112,000 in 1939 to $851,000 in 1945.
In 1986, Ford opened the Hermosillo stamping and assembly plant as a joint venture with Mazda. This facility has produced several iconic vehicles, including the Chevrolet Silverado and the GMC Sierra made in Silao. In 2014, Mazda launched a car manufacturing factory in Salamanca, Guanajuato, Mexico, as part of a joint venture with Sumitomo Corp. This facility produced the Mazda2 hatchback and sedan, later adding the Mazda3 and Mazda2-based Toyota Yaris to its lineup. Today, Mazda makes the compact CX-30 crossover in this plant.
In addition to its joint ventures, Ford Mexico held a minority interest in three joint-venture companies in 1997: Nemak (aluminium casting), Vitroflex (glass), and Climate Systems Mexicana (air conditioning, refrigerant lines, and couplings). Ford has also shifted production of certain vehicles to and from Mexico in recent years. In 2010, Ford moved F-series truck production from Cuautitlán to the US, bringing Fiesta production to Mexico. In 2018, Ford shifted output of F-650 and F-750 medium-duty pickup trucks from a joint venture plant with truckmaker Navistar in Escobedo, Mexico, to Avon Lake, Ohio.
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Frequently asked questions
There are several reasons for Ford's decision to move its plant to Mexico. Firstly, Mexico offers solid transportation logistics, making it easier for Ford to distribute its goods globally with minimal impact on profits. Secondly, Mexico's lower wages allow Ford to take advantage of reduced labour costs, increasing overall profits. Thirdly, Ford can benefit from free trade agreements like NAFTA, which allows for easier shipping to markets in South America, Canada, and the United States. Lastly, Ford aims to keep pace with competitors, many of whom have already moved to Mexico.
Ford has a history of manufacturing vehicles in Mexico since the 1920s. Currently, Ford produces the Lincoln MKZ and Lincoln MKZ Hybrid in Mexico, as well as the Fiesta, Fusion, Fusion Hybrid, and Ford's four-cylinder and diesel engines. Ford also manufactures the Ford Focus in Mexico, although it initially planned to invest in a new plant for this model. Additionally, Ford imports one of its most affordable and popular vehicles, the Maverick, from Mexico.
Ford's decision to move to Mexico has been met with a mix of criticism and praise. Critics argue that the move results in job losses for Americans and express a preference for supporting the American economy. However, Ford retains a strong presence in the United States, with significant investments in its plants and job creation. The move to Mexico is seen as a serious step forward for the company, offering benefits that can be passed on to customers over time.
Ford is one of the "Big Three" American automakers, including General Motors and Chrysler, that have been operating in Mexico since the 1930s. Other automakers with a presence in Mexico include Volkswagen, Nissan, Toyota, Hyundai, Mazda, and more. Ford's move to Mexico is part of a broader trend of automotive manufacturers expanding their operations in the country to take advantage of its favourable conditions.
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