Nearshoring and Energy: The Challenge for the manufacturing industry of the future
Nearshoring is transforming the manufacturing industry in Mexico, offering a shorter and more efficient production chain. However, it also poses key challenges, such as energy costs.
In recent years, nearshoring in Mexico has become a key strategy for companies seeking to optimize their supply chains in North America and Latin America. This approach, which consists of relocating the production of goods to countries close to the main consumer markets, has consolidated Mexico as a key destination for global manufacturing. However, the rise of nearshoring brings a key challenge: energy costs and the need for a reliable and sustainable supply.
The manufacturing of the future must be more agile in logistics and more efficient in its energy consumption. Throughout this article, we will explore how nearshoring is transforming the energy landscape in Mexico and how companies must adapt to face these challenges.
What is nearshoring, and why is it growing in Mexico?
Nearshoring refers to relocating manufacturing operations to countries closer to destination markets, thereby reducing logistics costs, delivery time, and the risk of interruptions. Although it is a widespread corporate strategy, in the particular case of Mexico, nearshoring has been driven in recent decades by factors such as the USMCA (Treaty between Mexico, the United States, and Canada), geographical proximity to the United States, and skilled labor at competitive costs.
In 2023, Mexico positioned itself as one of the leading destinations for foreign direct investment, receiving more than 32 billion dollars, of which 53% was concentrated in border areas, many of which have consolidated as manufacturing hubs in North America. In fact, according to the "World Investment Report 2024", Mexico is the ninth country with the highest foreign investment worldwide.
Energy costs in manufacturing: A key challenge
One of the main challenges of nearshoring in Mexico is the increase in manufacturing energy costs. The country's energy capacity remains limited in areas with concentrated industrial activity. According to recent studies, the current energy infrastructure could be insufficient to supply the large industrial operations that require a reliable electricity supply.
The increase in energy demand has put pressure on the country's electricity grid. To maintain competitiveness, manufacturing companies relocating to Mexico must adopt efficient and sustainable energy solutions. In this sense, investment in renewable energies is a key strategy to reduce energy costs and ensure a stable supply in the long term.
Efficiency and cost: The necessary balance for the manufacturing of the future
Nearshoring seeks to reduce the distance between production and consumer markets, improve operational efficiency, and reduce costs. A KPMG study among manufacturing leaders in different sectors revealed that 48% of the companies consulted identify logistics and service efficiency as one of the significant challenges, and 74% are already implementing strategies to reduce costs.
In this context, optimizing energy use in the manufacturing industry is essential. Companies must adopt technologies that optimize energy consumption and make the production chain more agile and efficient. That implies the adoption of automation, digitalization, and clean energies to ensure that the increase in production does not lead to an exponential rise in energy costs, which would reduce the profitability of nearshoring in Mexico.
Renewable energy: key to sustainable production
Nearshoring requires companies to comply with increasingly strict environmental standards. The need to reduce the carbon footprint and comply with social responsibility commitments has driven investment in renewable energies. The KPMG report indicates that 52% of companies plan to invest in clean energies in the next three years, and 40% are committed to reducing their emissions.
Mexico has enormous potential in solar and wind energy, positioning it as a key destination for its development. By integrating renewable energies, companies reduce their environmental impact and decrease their dependence on fossil fuels, which tend to have volatile prices. Therefore, the transition to cleaner energies responds to regulatory requirements and represents a competitive advantage by offering more stable and amortized energy costs in the long term.
Nearshoring and Energy: Challenges and Opportunities
The rise of nearshoring has highlighted the key relationship between energy infrastructure and manufacturing success. Mexico has attracted global investment thanks to its strategic location and the USMCA. To sustain this trend, it must strengthen its energy network.
A reliable and sustainable energy supply will be a key factor for Mexico to continue attracting investment in the framework of nearshoring. Mexico projects to achieve energy self-sufficiency in diesel and jet fuel by the end of 2024, which is a step in the right direction. However, it will be crucial to increase the generation of renewable energies to supply the growing industrial demand.
Investment in solar and wind energy will allow cleaner production and strengthen Mexico's ability to remain competitive against other emerging economies. In a global market where sustainability gains relevance, companies that settle in Mexico and adopt renewable energies will be better positioned to meet environmental standards and reduce costs.
Enel Energía: Ready to grow together with nearshoring in Mexico
In this context of transformation, Enel Energía México we are a key ally for companies that seek to take advantage of nearshoring and successfully face future energy challenges. We offer tailor-made solutions so that manufacturing companies grow competitively and sustainably, reducing costs and optimizing operational efficiency.
Related content: Energy: A Challenge for the Automotive Industry in Mexico
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