The new low-cost hubs for building cars
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China is no longer tops among the cheapest places to make vehicles — today Morocco, Romania and Mexico are the auto industry's emerging low-cost production centers, according to a new labor-cost analysis by Oliver Wyman.
Why it matters: Amid all the disruption in the auto industry — geopolitical tensions, economic headwinds and rising competition — automakers must reconsider where it makes sense to produce future vehicles.
The big picture: In normal times, it's a balancing act between productivity and costs. Whenever possible, carmakers prefer to build cars in the region where they're sold.
- And certainly, President Trump's supersized tariffs are pressuring companies that sell cars in America to build more factories here.
- But the decision for companies is not always so simple for a variety of reasons — tooling up for local production of a niche model, for example, often doesn't make economic sense.
Driving the news: Oliver Wyman examined the labor cost per vehicle for 250 vehicle assembly plants worldwide.
- Since labor typically represents 65% to 70% of the cost of production, the metric is a useful proxy for understanding the global competitiveness of a plant, manufacturer or even a country.
Premium European car companies such as Mercedes-Benz, BMW, Audi and Jaguar Land Rover had the highest labor cost per vehicle, averaging $2,232.
Electric vehicle companies had the next-highest labor costs, averaging $1,660 per vehicle; Their non-union wages are offset by generally low production volumes.
Mainstream car manufacturers have an average labor cost of $880 per vehicle, thanks to their sprawling manufacturing networks, older factories and lower depreciation rates.
Chinese car companies have achieved significant efficiencies, with labor costs averaging $585 per vehicle, thanks to newer factories, low wages and fewer model variations.
