Mexico is making a comeback as a hub of automobile manufacturing after years of losing production to Asia, as European and Japanese carmakers take on U.S. rivals and move output closer to North America. Hit the jump to read the rest of the story.
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At the same time, rising labor costs make manufacturing in China less attractive.

The Mexican auto industry got a boost on Friday when Honda Motor Co. said it will spend about $800 million on a new plant to make subcompact cars for the North American market.

Honda follows Mazda Motor Corp., which in June announced it will build a $500 million factory. Other companies, including General Motors , Audi and Nissan, also have an eye on Mexico for new investments.

Vehicle production in Mexico increased to a record 2.3 million units in 2010, making it the world’s ninth-biggest source of vehicle output, after production dipped in the first half of the last decade, according to data from international trade group OICA.

After a period when car companies were moving production to China, some are now coming back, said Vivian Olmos, vice president of business development at North American Production Sharing (NAPS), a company that supports manufacturers in Mexico.

Uncertainty over production costs in China, logistical problems and questions over intellectual property protection are prompting car companies to reconsider manufacturing locations.

“For a variety of reasons there are companies that are now seeing that Mexico makes a lot of sense,” said Olmos, noting that labor and other costs in Mexico are more stable.

A 2009 AlixPartners report showed that by 2008, Mexico was more desirable than countries such as China and India as an ideal location for manufacturing when compared with the United States.
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