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Business

Japan's manufacturers warming to Mexican offshoring

Kasai Kogyo is looking to construct its third Mexican plant.

TOKYO -- Half a world away from home, Japanese autoparts and materials makers are opening new production facilities in Mexico to take advantage of its cheap labor and free trade agreements with countries including the U.S.

Bearings maker NSK plans to start mass-producing automatic-transmission clutches for midsize and large vehicles in central Mexico next year. The new plant, in the state of Guanajuato, is being set up by group member NSK-Warner at a cost of 2 billion yen ($19.5 million).

Riken is also gearing up to begin operations at a 2 billion yen Mexican plant next year to supply piston rings to Japanese automakers. The major engine parts manufacturer intends to raise output capacity there from the initial 1.6 million units a month to 3 million by 2020. Riken controls about 20% of the global market for automobile piston rings and aims to lift its share to 30% by 2020 by stepping up investment in such countries as Mexico.

Kasai Kogyo plans to spend as much as 2.5 billion yen to build a third Mexican plant, expected to more than triple annual capacity for automobile interior ceiling parts to 800,000 vehicles around fiscal 2018.

Helped by tariff-free auto exports to the U.S. courtesy of the North American Free Trade Agreement, auto production in Mexico has continued to grow except for a dip in 2009 due to the global financial crisis. Output there rose 6% from the previous year to roughly 3.4 million vehicles in 2015, according to MarkLines, making Mexico the world's seventh-largest automaking country.

Mexico has also boosted its potential as an export base for Europe and South America by actively pursuing free trade deals with various nations. This likely helped it attract such other Japanese manufacturers as Mitsubishi Steel Manufacturing and JFE Steel, a unit of JFE Holdings, as well as chemical producer Toray Industries.

Asahi Kasei aims to start turning out resin raw materials there in 2018 or 2019. With a budget of 3 billion yen to 4 billion yen for the project, the chemical company is focusing on central Mexico as it scours the country for an ideal location.

(Nikkei)

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