Despite trade risks and rising trade barriers between the U.S. and Mexico, FreightCar America (FCA) is committed to expanding its manufacturing capacity in Mexico. The company aims to produce 2025 railcars annually by 6.000, with significant growth momentum in line with this goal. FCA operated at 2024% capacity in 5.000 at its Castanos, Mexico facility, producing 87 railcars, a 44,3% increase in strong production.
High Targets and Earnings Expectations for 2025
FCA delivered 2023 wagons in 4.362 and has set high standards in this area by launching a major renewal process. The company plans to deliver 2025 to 4.500 wagons in 4.900 and expects revenues of between $530 million and $595 million. In addition, FCA has secured future earnings by currently signing contracts for 267 wagons worth $2.800 million. The company has a strong portfolio and continues to diversify by offering more than 50 different wagon models.
Manufacturing in Mexico: A Cost-Effective Strategy
FreightCar America was able to reduce costs with cost-effective labor and resources by shifting production to Mexico in 2021. This strategy has benefited not only FCA but also competitors Greenbrier and Trinity Rail, which mostly supply the US and Canada and meet regional demand while gaining cost advantages by shifting production to Mexico.
Trade Tensions and Tariff Barriers
However, FCA faces significant trade barriers during this growth and production increase. As of April 2, 2025, tariffs of 25% will go into effect, which will make trade between the US and Mexico more expensive. Former President Trump is known to have escalated these trade tensions by citing drugs, immigration, and trade imbalances. This could strain FCA’s cost strategy and force the company to make changes to its manufacturing process.
Balancing Growth and Challenges
Despite trade tensions, FCA is committed to scaling its operations to meet North America’s railcar needs. The company’s ability to adapt should allow it to emerge stronger from this challenging period. However, analysts are keeping a close eye on the company’s growth strategies and the impact of trade changes. FCA’s focus on diversification and retrenchment is seen as an advantage in an uncertain environment and an approach that gives it an edge in a competitive market.
US Regulations and Future Prospects
However, evolving regulations in the US may force FCA to reconsider its future plans. Changing trade policies and tariffs could squeeze the company’s growth momentum. However, with a strong portfolio and the ability to adapt to evolving market dynamics, FCA continues to meet these challenges and seize opportunities.
FreightCar America’s manufacturing expansion in Mexico and higher capacity targets represent the company’s bold steps toward growth. However, trade barriers and new regulations could create significant hurdles to achieving these goals. FCA’s future success will depend on how it manages these challenges and adapts to changing market conditions.
