Several foreign automakers are considering moving more manufacturing operations from their plants located in other regions of the world to North America following the recent trade agreement between the United States, Canada and Mexico, according to a report by the Wall Street Journal (subscription required).

A few days after the United States and Canada reached an agreement to replace the North American Free Trade Agreement (NAFTA), executives of some foreign auto companies said they were contemplating changes in their supply chains and their auto parts manufacturing operations with which they would go to the United States, Canada and Mexico.

BMW AG CEO Harad Kruger told recently told reporters that the German automaker already manufactures numerous parts in the region, but that the new trade agreement will accelerate the change in investments.

The new rules will be gradually implemented over the next two to five years, more or less the time it takes to design a partially or fully revised car model. Perhaps the automakers consider moving production of transmissions first, because they make up about 30% of the value of the vehicle and could help them meet the strictest content levels, said manufacturing advisors.

Carlos Ghosn, director of the Renault-Nissan-Mitsubishi alliance, said the new North American trade agreement would encourage the auto group to invest in both the United States and Mexico, but did not provide details. Honda and Volkswagen reported through separate releases that they are still analyzing the potential impact of the agreement on their local operations.

Some analysts believe that the new restrictions could affect American competitiveness over time, raising manufacturing costs and retail prices of cars sold in the United States. Currently, many automakers use North America––especially Mexico and the United States––as export centers to foreign markets, but that could change due to the new commercial policies.

MexicoNow

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