Traverse City, Michigan - Mexico's auto industry is hotter than a pistol. By 2018, light-vehicle production in that country is expected to approach 4.4 million units, up 26 percent from last year's output, according to a forecast by the Center for Automotive Research.

Over that same period, overall North American production is likely to reach 18.6 million units, up only 7 percent.

"It's a very powerful trend that we are seeing," said Bernard Swiecki, a senior project manager for the Center for Automotive Research during a Tuesday presentation at the CAR Management Briefing Seminars.

Analysts cite low labor costs and favorable trade treaties as Mexico's key advantages. According to Swiecki, lower tariffs from those trade treaties often prove decisive.

For example, an Audi Q5 exported from Mexico to Europe enjoys a $4,500 lower tariff than a similar vehicle exported from the United States. "If a vehicle built in Mexico doesn't leave the NAFTA region, then tariffs aren't an issue," Swiecki said. "But if it leaves the NAFTA region, then trade is a big issue."

Savings from lower labor costs also can be significant. According to CAR's data, an automaker can save $674 in labor costs for a subcompact car built in Mexico vs. the US. Given the low profit margin on small cars, that can be decisive.

So it's no surprise that automakers are devoting so much investment in Mexico. As of now, the odd man out appears to be Canada.

Last year, expenditures by automakers and suppliers in U.S. production totaled $10.5 billion. Investment in Mexico amounted to $7.0 billion, but Canadian investment was only $800 million.

According to Bernard Swiecki and the other CAR panelists, that trend isn't likely to change anytime soon.