Mexico has left its two amigos in the dust when it comes to the auto industry.

That’s the conclusion of a Scotia­bank report dealing with the 20-year-old NAFTA trade agreement between Canada, U.S. and Mexico, dubbed the “Three Amigos” deal.

BMO economist Carlos Gomes said vehicle production in Mexico has tripled during the life of the deal as the country got almost all new assembly plants, while Canadian production has edged up slightly and American assembly has declined more than 10%.

“Mexico’s auto industry has been the clear winner,” Gomes said.

Labour is cheaper in Mexico — about $8 an hour — but labour makes up less than 10% of total production costs.

Gomes said Mexico has lured nine new auto assembly plants with lucrative incentives and has positioned itself as a platform for global sales by negotiating free trade deals with 40 nations.

He said Mexico started to make inroads producing cheap auto parts to export to the U.S. and Canada but has become the darling of Japanese and European companies.

Mexico is such a success story local companies want to get in on the action. London Automotive and Manufacturing set up a parts plant in Mexico three years ago.

“In order to grow our facility here, we had to have a presence outside of the Great Lakes. We have gotten work here, because of our facility in Mexico,” said company president Greg Ducharme.

He said cheaper labour is a factor, but Mexico also offers infrastructure and incentives while companies wanting to expand in Ontario face higher energy prices and bureaucratic hurdles.

Steve Rodgers of the Auto Parts Manufacturers’ Association said NAFTA has been good for Canada because Canadian plants account for 16% to 18% of production while Canada makes up only 8% to 9% of auto sales.

He said Mexico has done a better job of creating an inviting environment and has no qualms about offering incentives to manufacturers.

“Mexico provides strong incentives because they calculate the payback. In Ontario, we call it welfare,” said Rodgers.

Gomes said Canada will never match Mexico on labour costs, but our plants generally do better on quality and productivity.

Gomes said the Canadian auto industry is strongly tied to the U.S. and needs to refocus on global markets, citing a new $700-­million investment in Ford’s Oakville plant to create a “global platform” that can be sold on the world market.

“The growth is occurring in developing nations so we have to have a presence in exporting to those nations,” Gomes said.

hank.daniszewski@sunmedia.ca

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THE NUMBERS: MEXICAN AUTO INDUSTRY

5: Assembly plants newly opened or planned

15%: Ratio of total national manufacturing; (Canada 10%, U.S. 9%)

1998: Year Mexico overtook Canada in auto parts exports to U.S.

$4,000: Value of Mexican auto parts in U.S. vehicles (Canada $1,500)

40: Countries have free-trade deals with Mexico

60%: European and Japanese companies’ share of Mexican auto production