Exploring the Challenges of Nearshoring in the Mexican Automotive Industry: Perspectives from Human Resources

The automotive industry is in constant evolution, and the phenomenon of nearshoring has emerged as a key factor redefining supply chain dynamics.

This shift towards geographic proximity presents a series of challenges and opportunities for key players, especially within the automotive supply chain, including Tier 1 and Tier 2 companies.

To better understand how this change is affecting the human resources departments within these organizations, I met with prominent HR directors in the industry. Their perspectives allow us to better understand the challenges and strategies emerging in this context.

The Impact of Nearshoring on the Automotive Industry

Nearshoring, which involves relocating a company’s production or services to a nearby country instead of a distant one, is reshaping how companies operate. This shift offers benefits like lower transportation costs, faster delivery times, and more flexible supply chain management. However, it also introduces challenges, particularly in managing human resources.

Nearshoring benefits extend far beyond economics. It impacts Mexican society by stimulating economic growth, creating job opportunities, and facilitating knowledge transfer. These changes promote professional development and expand training programs for the local workforce.

The World Bank has lowered its 2024 economic growth forecast for Mexico to 2.3%. This revision stems from concerns about the availability of critical resources such as water and energy.

Carlos García, President of the American Chamber of Commerce of Mexico (AmCham), stresses the importance of nearshoring for Mexico’s economy. He points out AmCham’s efforts to attract key U.S. investments, especially in strategic sectors like semiconductors, medical devices, and agribusiness. García cites Mexico’s strategic location, well-developed infrastructure, large talent pool, and history of successful regional cooperation, which position the country as an important player in North America. According to the Ministry of Economy, Mexico achieved a historic high in foreign direct investment during the first quarter of 2024, with substantial reinvestment from U.S. companies solidifying its position as the main investor in Mexico.

AmCham’s “Nearshoring 360°” report also provides insights into economic opportunities and emerging best practices in nearshoring, placing emphasis on infrastructure development, talent, and innovation as factors attracting investment to the country.

Challenges in Talent Management

Companies embracing nearshoring face a serious hurdle: managing talent effectively. It’s important to have the right people with the right skills in the right places. Carlos Villarreal, who used to be Regional HR Director at Aptiv, points out that finding good employees has gotten tougher. Job seekers have more choices now, and they care about things like flexible work, reasonable hours, and relocation costs. This competition often pushes companies to raise salaries just to keep their current staff, making the whole talent puzzle even trickier.

Germán Ordaz, HR Director at Flex-N-Gate, believes a strong company culture goes a long way in keeping good employees. When people feel like they belong, are appreciated, and share the company’s values, they’re less likely to jump ship to competitors. Ordaz also thinks that understanding local values and actively shaping the company’s culture can really help keep employees happy and on board.

Organizational Culture and Communication

Maintaining a unified organizational culture and effective communication across geographically dispersed teams is another challenge posed by nearshoring. Carlos Villarreal emphasizes the need for strong organizational communication strategies. This includes developing communication campaigns, providing regular updates from senior management, conducting on-site meetings, and implementing action plans based on feedback. A comprehensive compliance policy, including anti-harassment measures and clear reporting lines, is also crucial to ensuring a cohesive and ethical work environment. 

Germán Ordaz adds that a strong organizational culture that resonates with local values is essential for employee retention. Companies must adapt their culture to reflect regional differences while maintaining the core values that unify the organization. This balance helps employees feel connected to the company, regardless of their location.

Leadership Development and Training

Developing and retaining leadership talent across multiple locations is an important aspect of successful nearshoring. Carlos Villarreal suggests implementing managerial leadership programs for Plant Managers and involving senior management directly in operations. Brainstorming workshops and leadership deployment campaigns are effective strategies for promoting leadership development. A dedicated team for communication and organizational development, equipped with the necessary training resources, is also vital for consistent professional development.

Investing in training and development should be viewed as an investment rather than an expense. This approach not only enhances leadership capabilities but also ensures that all employees are aligned with the company’s global vision and strategy.

Additional Perspectives from Industry Leaders

Mauricio Alejandro Sánchez, VP Global at SMP Automotive, emphasizes that nearshoring capitalizes on low production costs and proximity to consumption markets but depends on geopolitical, financial, environmental, and public security decisions, which can be challenging for Mexico. He believes that Mexico has significant growth potential if it redefines its energy strategy and accommodates national and foreign investment to boost clean energy generation projects. Addressing security and rule of law issues in certain regions is also necessary.

Jacobo Valencia, Senior HR Manager at ZKW, points out that companies without a clear talent acquisition strategy may struggle. Those with proactive strategies, such as internal development and company branding, can attract the right talent and grow. He notes that dynamic locations in Mexico, such as the northeastern and northwestern states, will see the most significant impacts from nearshoring.

Xavier Galindo, Human Resources Director at BorgWarner and President of the HR Administrators Association of Southeast Coahuila, comments that growth is occurring at a very accelerated pace. This has created serious mobility issues as they need to attract talent from more distant locations. In Saltillo, Ramos Arizpe, and Monterrey, traffic has increased by 30%, leading to the development of multiple mobility strategies such as employee transportation, flexible work schemes, home offices, and carpooling.

Specialized talent is becoming increasingly scarce due to the rapid opening of new plants. There is little time for training, so they are seeking experienced and skilled individuals. The competition for talent is becoming more mercenary with the offering of bonuses. Galindo considers that, combined with nearshoring, 80% of people resign due to issues with their direct boss. Therefore, leadership development strategies are needed to prevent talent drain.

Galindo’s main challenges have focused on developing strategies that allow employees to achieve work-life balance, competitive salaries, effective communication strategies, and a culture of well-being.

Ivan Iglecias, Human Resources Director at Yanfeng, commented that due to the arrival of more companies and the expansion of existing ones, Nearshoring has sparked a war for talent retention and attraction. One of the major challenges with this phenomenon is the search for innovative talent retention strategies. It’s no longer sufficient to invest solely in leadership strategies, given the well-known saying that “employees don’t quit companies, they quit their immediate boss.” In light of this, there’s now an “obligation” to innovate with benefits, education, and both lateral and vertical promotions.

Iglecias notes that new generations are seeking new experiences and short-term growth. The alarming gap between supply and demand is fueling an incessant battle over salaries and benefits. Nevertheless, based on his experience, he believes that companies willing to strike a balance between retaining experienced key personnel and nurturing newly graduated employees will emerge victorious. Resilience in understanding generational differences and their distinct needs will undoubtedly break taboos and assure employees that they’re in the right company for their needs.

Today, talent retention is about confirming to employees that the company is committed to investing the necessary resources for their professional and personal well-being and growth.

The Road Ahead: HR’s Role in Nearshoring

Nearshoring is rapidly redefining the dynamics of the automotive industry, offering both challenges and strategic opportunities. Effective human resource management emerges as a fundamental pillar for success in this new paradigm, facing challenges such as talent acquisition and retention, a unified organizational culture, and leadership training in a geographically dispersed environment.

Collaboration between companies and HR leaders will be essential to navigate these challenges and seize growth opportunities. Agile adaptation to labor market dynamics and the implementation of innovative strategies in recruitment, leadership development, culture, and organizational communication will be crucial to maintaining competitiveness and cohesion within the sector.

As the industry continues to evolve in the context of nearshoring, it is essential for organizations to invest in flexible policies, identification of their high-potential employees, professional development programs, and the creation of inclusive and motivating work environments. This will enable companies not only to survive but to thrive in this new era of geographic proximity and industrial transformation.

How Stanton Chase Can Help

At Stanton Chase, we understand the complex challenges facing the automotive industry in the context of nearshoring. Our expertise in executive talent search and leadership allows us to offer tailored solutions to help your company overcome these challenges and thrive in a competitive and constantly changing environment.

We offer specialized services, including:

• Executive Talent Search: Identifying and attracting the most qualified leaders who align with your company’s global vision and strategy, ensuring they have the necessary skills to drive your organization to success.
• Leadership Evaluation and Development: Enabling the identification of leadership styles, high-potential talent, and strategies for talent development.

At Stanton Chase, we are committed to your success. Contact us to discover how we can be your strategic partner in talent and leadership management, helping your company capitalize on the opportunities of nearshoring and face challenges with confidence and effectiveness.

About the Commentators

• Carlos Villarreal is the former Regional HR Director at Aptiv. 
• Germán Ordaz is HR Director at Flex-N-Gate. 
• Mauricio Alejandro Sánchez is VP Global at SMP Automotive. 
• Jacobo Valencia is Senior HR Manager at ZKW. 
• Xavier Galindo is Human Resources Director at BorgWarner and President of the HR Administrators Association of Southeast Coahuila.
• Ivan Iglecias is Human Resources Director at Yanfeng.

About the Author

Ángeles Rico is a Consultant at Stanton Chase Mexico City with over 25 years of experience in executive recruitment. She specializes in industrial sectors including manufacturing, automotive, and logistics. Ángeles holds a psychology degree and a master’s in administration with a focus on human resources. Her expertise in executive search, combined with her warm professionalism, has established her as a trusted partner for both clients and candidates in the industry.