Japan-based car component company Kaga Electronics has announced the construction of its new plant in Mexico.

The company will invest approximately Y5bn ($34m) in this assembly plant, as it intends to seize growing demand from businesses that are relocating to North America to ward off political tensions between US and China, reported Nikkei Asia.

Mexico has been drawing the attention of companies as an alternative industrial destination to boost their production capacity in the North American market. 

Kaga president Ryoichi Kado said: “Consumption in the North American market will continue to be strong, and Japanese manufacturers, our key clients, are expanding their presence in Mexico.”

This new facility, which specifically will manufacture electronic parts for cars and air conditioning units, is expected to open in April next year.

Kaga acquired a land parcel for its existing facility in the central state of San Luis Potosi in the country.

The factory will help the company in developing its contract electronics manufacturing operations.

Once the new factory is built, the existing factory will be shut down and its operations will be transferred to the new plant.

The plant will encompass 20,000m², which is approximately double the size of the current facility and will employ approximately 2,000 employees, approximately four times the existing count.

With this development, Kaga intends to increase its annual income from Mexico by nearly seven times to Y50bn by April 2029.

The site is expected to become the company’s largest foreign production unit in terms of sales.

In 2017, Kaga opened its first facility in Mexico, where it assembles car lighting parts, among other components.