An auto boom from the desert

Mexico’s auto industry has attracted global multibillion dollar investments. For KIA Motors, a South Korean carmaker, this has led to Maersk Line bringing in equipment for a state-of-the-art plant in the Mexican desert. Now, it is bringing in steel, parts and other input for the 300,000-cars-a-year production machine.

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Mexico's automotive sector is at full throttle 2:55

KIA Motors’ new factory in Monterrey was already taking shape in late 2015. Massive, grey structures were rising from the desert. Mexican and Korean workers, helmet covered heads wrapped in scarves to protect them from the blazing sun, were immersed in finalising the plant they only began building earlier that year. The training of new employees was also well underway.

“We will be providing jobs for 3,300 directly at the plant and roughly 7,000 indirectly when we start production,” Sonja Aymá Garza, a public relations assistant manager with KIA Mexico, explained as she gave a tour of the construction site.

While Mexico has become a global top-5 automotive producer, KIA Motors is one of the newcomers. Garza joined in January of 2015 as employee number 24. By the turn of the year, the employee count had exceeded 1,000. Additional mass hiring and training was in progress, parallel to containers with equipment arriving thick and fast, for the plant to be ready to start production only a few months later.

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Hiring from all over Mexico, KIA Motors will employ 3,300 people at its new facility in Monterrey. In addition to the training facility in Monterrey, new employees have travelled to factories in the U.S., Brazil and Korea to learn the KIA way of auto making.
Kia motors mexico landscape
KIA Motors is one of many global auto giants setting up production facilities In Mexico, where output is expected to reach 5 million vehicles by 2020. During the past four years, Maersk Line has quadrupled the number of containers that it brings into Mexico for its auto makers.

Mexico’s auto industry used to assemble parts produced north of the border and then re-export finished cars back to the U.S. The North American Free Trade Agreement (NAFTA) and the globalisation of the auto industry changed this dramatically. Giants such as VW, Toyota, BMW and KIA have built state-of-the-art factories in Mexico and logistics have become much more complex.

“A car is not produced in just one place anymore, and carmakers will continue to import and export to enable production,” says Mario Veraldo, Managing Director of Maersk Line’s Middle America Cluster.

“The fact that we have been able to take cost out of the global supply chain for the last many years puts us in an important position. We help them become truly global,” he adds.

Key to pushing competitiveness has been the ­continuous introduction of larger vessels on the trades from Asia to Mexico, from the 6,700 TEU Maersk Seletar in 2008 to the recently deployed 13,500 TEU mini Triple-Es.

Mexico produced 3 million vehicles in 2015 and is expected to reach 5 million by 2020. Parallel to this, Maersk Line has quadrupled its business with the global automakers of Mexico, seeing the number of containers rise to just shy of 20,000 (FFE) between 2011 and 2015.

For the KIA Motors project, Maersk Line moved 2,000 containers with equipment, a 35-40 day journey from Seoul. The project had an aggressive timeline, which did see challenges, e.g. in terms of weather and other things that cannot be controlled, putting Maersk Line’s team to the test as it worked to keep the project on track:

“Global business is very demanding from a logistics perspective in terms of cost efficiencies, lean processes and of course compliance under the different countries. In order to succeed, we have to rely on shipping companies to take care of all that, and that's what Maersk Line has brought to the project,” says Customs and Logistics
Manager of KIA Motors Mexico, Hugo Aguilera.

“Maersk Line has been a great partner for the project,” he adds.

With the KIA facilities in Monterrey ready to begin production, Maersk Line and KIA Mexico recently entered into a new agreement that will see Maersk Line, starting in May, transport 3,000 containers (FFE) from South Korea to Monterrey to provide parts and other input to the production machine.