Home » Home » Is Mexico the next big bike supplier to the US? Mercurio invests $25M in new factory

Is Mexico the next big bike supplier to the US? Mercurio invests $25M in new factory

SAN LUIS POTOSÍ, Mexico (BRAIN) — As the Trump administration upends global trade policy with China with punitive tariffs on bicycles, parts and accessories, Mexico’s Grupo Mercurio is eyeing the U.S. market.

Advertisement

Grupo Mercurio, the country’s largest bicycle manufacturer and distributor of parts and accessories, opened a new factory in August — a $25 million investment with plans to add more capacity and develop a bonded “maquiladora” export service by 2022.

Pat Cunnane, a long-time friend of Mercurio’s owner, was on hand for the ribbon cutting. “It was a big deal. The governor of the state was there, the mayor, and Mexico’s commerce secretary. They had two days of dealer meetings, food trucks, a demo track — it was a real festival,” said Cunnane, the former CEO of ASE.

Mercurio has distributed ASI’s Fuji bicycles for years, he added. “As a company, it’s very successful and quite stable — it’s like a rock,” said Cunnane, who has worked with the company since the 1980s. 

Windsor, its distribution arm, sells and services Shimano parts, distributes Cannondale bicycles, Continental tires, and a host of other products.

The new factory, built in the San Luis Potosí industrial zone (SLP), will boost the company’s production to more than 550,000 bikes annually with a mix of steel and aluminum frames. The factory will have the capacity — on a seasonally adjusted basis — to produce upwards of 3,000 bikes a day. 

“We see great potential to better compete in the U.S. bicycle market in cost, quality and lead times” — Jacobo Martinez Zacarias

And by 2020 Mercurio executives say the plant could produce 800,000 bikes a year. In 2018, Mercurio manufactured 400,000 bikes for domestic consumption and another 100,000 for export with 75% of its production sold in Mexico.

Jacobo Martinez Zacarias, the company’s chief commercial officer, in an exchange of emails with BRAIN, said the 1.4 million square-foot facility is consolidating five factories and two distribution centers in SLP’s industrial park. It currently has facilities in San Juan de Río, Puebla, and Mérida, as well as SLP.

By 2021 Grupo hopes to add an additional 162,000 square feet of factory space to augment its R&D facilities and machinery upgrades. It’s also analyzing the use of robotics, Zacarias said.

More importantly, he added, the company wants to develop domestic component suppliers with “… incentives to create a Cluster Project initiative for the cycling industry, taking advantage of our central location and mature infrastructure to export to markets north (U.S. and Canada), south (Central and South America) and to Europe.” 

Grupo Mercurio, as well as other Mexican manufacturers, view the upheaval in U.S. trade relations with China as an opportunity to develop new sales in the U.S.

Twenty years ago, Mexico was exporting thousands of low-end units into the U.S., only to be displaced by Chinese production.

“We see great potential to better compete in the U.S. bicycle market in cost, quality and lead times. The new U.S. tariffs, which include up to 36 percent duties for bicycles made in China, is enough to accelerate the domestic integration channels for components, already in development, due to continuous industry encouragement and recent government mandates,” Zacarias said. 

The U.S. import more than 15 million bikes each year, with almost 95 percent coming from China, makes Mexico a potentially attractive supplier, he said.

Twenty years ago, Mexico was exporting thousands of low-end units into the U.S., only to be displaced by Chinese production. Last year, the U.S. imported less than $500,000 worth of cycling-related goods, including bicycles, from Mexico.

Besides bicycle and parts manufacturing as well as producing industrial tricycles, the company fabricates steel tubing including bicycle tubing. It also assembles motorcycles, distributes parts and accessories, and makes parts for the RV market. 

The 55-year-old company began making 16 bicycles a day in 1964. It now generates well over $100 million in revenue and employs about 1,000 people full time with temporary employees surging during peak production, Zacarias said. Mexicans buy about three million bicycles a year as well as parts and accessories — about a $250 million market.

Still, Mexican manufacturers, including Mercurio, will need to meet the Rule of Origin (ROO) requirements for the U.S. and Canada under the new United States-Mexico-Canada Agreement (USMCA) as it currently must under NAFTA. Under the rule, products must contain 60% locally manufactured content to enter duty free. (Mexico ratified the new trade agreement in June, but the U.S. and Canada have yet to do so.)

Zacarias said the company’s move to centralize production will increase operational control and result in logistical savings. “(The) target is to eventually offer product with up to 80% nationalized content level through a clustered domestic supply environment; this with the idea of being a major supplier for the U.S. as well as Mexico,” he said in an email.

Another reason for Mercurio to expand internationally is projected slow growth in Mexico. The company estimates the bicycle market will grow in single digits for the foreseeable future, although bike-share programs and new e-bike categories could upend that estimate.

Mercurio is also developing products for Europe after partnering with a company in Querétaro, another central Mexican city that’s home to companies such as Bombardier Aerospace, Samsung, GE, Michelin, and a number of automotive makers.

San Luis Potosí, with its central location in Mexico, has long been a hub of industrial manufacturing with U.S. companies like GM, Cummins and others employing thousands there. The city, which sits at an elevation of 6,100 feet, has a pleasant climate year-round. And the city, founded by Franciscan missionaries in 1538, is a UNESCO World Heritage Site. 

Mercurio’s nearest port of entry into the U.S. is Laredo, Texas, about 453 miles or a nine-hour drive north depending upon traffic. Companies can also ship products out of several ports on the Gulf of Mexico — Altamira and Veracruz — with the Port of Manzanillo along the Pacific coast. 

Still, experts say Mexico has long had visions of being a key U.S. supplier. “Perhaps times are changing and with Section 301 tariffs there may be some opportunities for mass and mid-market merchants,” one industry expert said.         

Photo below shows: Left to right Luis Larriva: CEO Bicicletas Mercurio; Xavier Nava: San Luis Potosi City Mayor; Juan Manuel Carreras: San Luis Potosi governor; Javier Noyola: Mercurio Group President; Cesar Ramos: Coorporate Director Bicicletas Mercurio.           

About bikerepair_admin

Share a little biographical information here to fill out your profile as the author. Just fill the "Biographical Info" form in the User Profile section in your Dashboard. Also... use your email that connect with Gravatar, so your pict will appear in the left.
DIYBikeRepair

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Scroll To Top
The owner of this website is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon properties including, but not limited to, amazon.com, endless.com, myhabit.com, smallparts.com, or amazonwireless.com.
Home Privacy Policy Terms Of Use Anti Spam Policy Art for Arts Sake: Lowrider Bikes Affiliate Disclosure Amazon Affiliate Disclaimer DMCA Earnings Disclaimer