Last Updated on July 31, 2025
Nearshoring to Mexico has become the darling of supply chain strategies lately. Labor is cost-effective, the border is close, and the IMMEX program offers generous tax incentives. But here’s the thing—moving south of the border isn’t the right call for every business. Before you pack up your operations and head to Monterrey or Matamoros, it’s worth asking: is your company one that should not move to Mexico?
The truth? Some companies just aren’t a good fit for Mexico’s manufacturing ecosystem. Let’s break it down.
Mexico Isn’t a One-Size-Fits-All Solution
Mexico has a strong manufacturing network, but it’s not a universal solution. If your entire business hinges on factors Mexico can’t provide, you’re going to run into headaches.
Take niche labor, for example. If your products require highly specialized, rare skills that aren’t common in Mexico, you may face costly delays. Sure, there’s world-class talent in industries like automotive, aerospace, and electronics, but if you need a small army of engineers with obscure certifications, you may be better off elsewhere.
If You Rely Heavily on Ultra-Niche Labor Skills…
Some industries are just so specialized that the labor pool isn’t deep enough to sustain them in Mexico. Let’s say you’re an advanced R&D lab building next-gen semiconductor tech—there’s a good chance you’ll struggle to find the exact skill sets you need without months (or even years) of training.
This isn’t a knock on Mexico’s workforce; it’s about practicality. Mexico excels in skilled trades, assembly, and engineering-heavy industries, but highly niche operations may face talent gaps.
Matching Your Production Needs with Mexico’s Workforce
Every industry has unique labor requirements, and Mexico offers a diverse talent pool to fit different manufacturing needs.
- Automotive & Aerospace: Skilled engineers and technicians trained in lean manufacturing, Six Sigma, and advanced production techniques.
- Electronics: Precision assembly workers with experience in circuit boards, wiring, and high-tech components.
- Textiles & Apparel: Artisans and skilled operators for the cut-and-sew, dyeing, and finishing processes.
- Medical Devices: Workers trained in cleanroom production and FDA-compliant manufacturing.
One of the biggest advantages is? Mexico’s workforce is highly trained and adaptable. Many manufacturers develop customized training programs to upskill workers based on specific production needs.
Low-Volume, Highly Custom Production Can Be Tricky
Here’s another reality check. Mexico’s industrial infrastructure is built around economies of scale. If you’re only making 50 highly customized units a year, you might struggle with setup costs and lead times.
Why? Because suppliers, logistics partners, and even shelter services are geared toward medium-to-high-volume operations. That’s where the efficiency (and the savings) kick in. If you’re running ultra-low-volume jobs, the math may not work in your favor.
If Your Supply Chain Is Married to Asia
This one’s easy to overlook. Many companies moving to Mexico still depend heavily on Asian suppliers for subcomponents. But if 90% of your raw materials are coming from Shenzhen or Ho Chi Minh City, you may not see the lead time or cost savings you expect (FYI, you will NOT qualify for USMCA.)
Think about the travel time. Shipping a critical component from Asia to Mexico adds the same ocean freight delay you were trying to avoid. If you can localize your supply chain in the Americas, great. If not, be ready for mixed results.
Zero Appetite for Bureaucracy? Think Twice
Mexico offers shelter services that handle most of the red tape, but there’s still some bureaucracy involved—permits, certifications, tax filings, and labor law compliance.
If you expect a completely plug-and-play experience, you may get frustrated. Even with an experienced partner, the first year of operating in Mexico involves a learning curve. The companies that succeed are the ones that can handle a bit of administrative friction without panicking.
Understand IMMEX (Maquiladora Program) – This allows manufacturers to temporarily import raw materials duty-free, provided they’re exported as finished goods. The catch? You must comply with strict reporting and inventory control rules.
Register Your Business Properly – Whether setting up a standalone entity or partnering with a shelter company, legal registration impacts tax obligations and liability.
Keep Up With Trade Agreements – Mexico’s free trade agreements (like USMCA) offer duty-free benefits, but only if you meet origin requirements and documentation standards.
Follow Environmental Standards – Manufacturing in Mexico involves regulations on waste disposal, emissions, and water usage. Skipping compliance can lead to hefty fines.
Hire Legal and Compliance Experts – A local consultant, nearshore manufacturing partner or attorney can save you from misinterpreting regulations and facing legal headaches down the line.
Chasing the Lowest Possible Labor Cost
If your only reason for moving to Mexico is to slash labor costs to the bone, you may be disappointed. Yes, labor in Mexico is more affordable than in the U.S. or Canada, but it’s not bargain-basement cheap like some parts of Asia.
If you’re comparing only hourly wages, you’re missing the bigger picture. Mexico offers proximity, quality, and trade advantages, but companies looking for the absolute lowest costs without regard to anything else may not be happy with the outcome.
Companies with No Long-Term Commitment
Setting up manufacturing in Mexico is an investment. If you’re looking for a six-month stopgap solution, you’re better off using a contract manufacturer in your current region.
Mexico rewards companies that commit. Build a presence, invest in the workforce, and develop supplier relationships, and you’ll see real benefits. But short-term, fly-by-night operations? They usually don’t work out.
The Six Types of Mexico Shelter Companies
Are you aware that there are six types of shelter companies, each with advantages and disadvantages?
Contract Manufacturing Shelter
A Contract Manufacturing Shelter is ideal for companies that want to manufacture in Mexico without setting up a legal entity. You'll partner with a local contract manufacturer, who produces your products to your specifications. This type of shelter company is appropriate for businesses that want to test the Mexican market or need temporary manufacturing capacity.
Joint Venture Shelter
A Joint Venture Shelter involves partnering with a local Mexican company to create its own legal entity. This type of shelter company is suitable for businesses that want to share risks and rewards with a local partner. This is done by leveraging their expertise and knowledge of the Mexican market.
Wholly Owned Subsidiary Shelter
A Wholly Owned Subsidiary Shelter allows you to establish a fully owned Mexican subsidiary, giving you complete control over your operations. This type of shelter company is ideal for businesses that want to integrate Mexican operations into their global strategy.
Free Trade Zone Shelter
A Free Trade Zone Shelter operates within a designated free trade zone in Mexico, offering duty-free imports and exports, as well as other tax benefits. This type of shelter company is suitable for businesses that import and export goods regularly.
IMMEX Shelter
An IMMEX shelter is a special program that allows you to temporarily import goods and materials duty-free, as long as they're re-exported or transformed into a final product. This type of shelter company is ideal for businesses that need to import goods for assembly or manufacturing. IMMEX shelters are better suited for companies that wish to manufacture in Mexico long-term and partner with a company like NovaLink.
Service-Based Shelter
A Service-Based shelter provides administrative and operational support, such as human resources, accounting, and logistics, allowing you to focus on your core business activities. This type of shelter company is suitable for businesses that want to outsource non-core functions and streamline their operations.
Conclusion: Be Honest About Your Fit
Moving production to Mexico can be a smart, strategic move—but it’s not a magic bullet. The companies that thrive are the ones that do their homework and approach the process with a long-term mindset. If you check off several of the points above, you may be one of the businesses that should not move to Mexico—at least not yet.
On the flip side, if you see ways to adapt your supply chain and operations, Mexico can be a powerful growth engine. The key is being honest about where your company stands today.
FAQs What Type of Company Should Not Move to Mexico
1. Is Mexico still cheaper than Asia for manufacturing?
In many cases, yes—but not always. Labor costs are competitive, but if your products rely heavily on Asian-sourced components, the cost advantage can shrink.
2. Can I move my entire R&D operation to Mexico?
It depends on your industry. Mexico has strong engineering talent, but ultra-specialized R&D operations may face hiring challenges.
3. What’s the minimum production volume that makes sense in Mexico?
There’s no hard rule, but medium-to-high-volume runs usually see the most benefit. Extremely low-volume, custom jobs can struggle to break even.
4. Do shelter services remove all bureaucracy?
Not entirely. They help with permits and compliance, but you’ll still need to understand the basics and make company-level decisions.
5. How long does it take to see ROI after moving to Mexico?
Most companies start seeing real savings after the first year, once operations stabilize and supply chain relationships are in place.
About NovaLink
As a manufacturer in Mexico, NovaLink employs a unique approach that transcends the traditional model of shelter production. More than just the location of your manufacturing, we would like to become a partner in your manufacturing in Mexico. You will be able to relocate or initiate manufacturing for your company in Mexico in a low-cost labor environment with very little delay or up-front costs. Find out how we can help you by handling the manufacturing process.
There are NovaLink facilities in the border cities of Brownsville, Texas, Matamoros, Mexico, and Saltillo, Mexico.