Will Texas Benefit from Reshoring Auto Manufacturing?
Mexico may be the big winner as auto manufacturers are moving production from Asia to North America because of slumping sales and increased production costs in China, according to CBRE research. Mexico saw auto production increase 10.2% in 2014 and another 15% in the first four months of 2015. Total production is forecast to exceed 5 million units by the end of the decade. Manufacturers such as Toyota (which already builds trucks in San Antonio), Ford and Goodyear have collectively announced more than $25B of future investment in Northern and Central Mexico. While the reshoring of auto manufacturing will have a much greater impact on the Mexican manufacturing sector, it will have long-term material effect on the US distribution and logistics business and its neighbor to the north, Texas.
CBRE researchers tells us that more than 70% of Mexican auto production is exported to the US; markets that lie along the central transportation networks, especially in Texas and the Midwest, will experience an increase in auto distribution demand. Keep an eye on logistics hubs San Antonio, Dallas, Kansas City and Chicago, where growth from this trend should be strongest. The American South has been a beneficiary of these moves with recent investments being made not only in South Carolina but also Georgia and Texas, all states with relatively low-cost workers and deep connections to population and supply chain hubs. This is expected to have a positive impact on industrial demand in markets that have proximity or easy access to seaports such as Atlanta, Houston and Greenville, SC.