Mexico Automotive Review 2016 by Mexico Business Publishing

2016

“When Henry Ford made cheap, reliable cars, people said, ‘Nah, what’s wrong with a horse?’ That was a huge bet he made, and it worked.” Elon Musk, Co-founder & CEO of Tesla Motors

ALL RIGHTS RESERVED © Toguna, S. de R.L. de C.V., 2016. This annual publication contains material protected under International, United States and Mexican Laws and international Treaties. Any unauthorized reprint or use of this material is prohibited. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system without express written permission from Toguna S.A. de C.V. Mexico Automotive Review is a registered trademark. The publisher has made all reasonable efforts to provide accurate information, and the information contained in this publication is derived from sources believed to be true and accurate. However, the information in this publication should not be considered to be complete or definitive, and may contain inaccuracies or typographical errors. The publisher accepts no responsibility regarding the accuracy of information and use of such information is at your own risk. The publisher will not be liable to any party for any direct, indirect, special or other consequential damages arising out of any use of information in this publication. The publisher provides no representations or warranties, express or implied, including any implied warranties of fitness for a particular purpose, merchantability or otherwise in relation to any information provided by the publisher in this publication.

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With 23 light and heavy vehicle manufacturers in the country and an expected US$10 billion total investment in Mexican automotive plants by the end of 2016, the domestic industry appears on track for another strong year, keeping pace with AMIA’s target of 5 million units manufactured locally by 2020. But there are challenges. Mexico mainly produces compact and medium-sized light vehicles so low oil prices that have made larger vehicles more accessible have put the domestic industry in a predicament. Substantial dependence on exports, particularly to the US, coupled with slowing new vehicle sales in the market of its northern neighbor has pushed the country to find new roads, such as Latin America.

As logistics make up a large proportion of production costs, Mexico Automotive Review 2016 discusses how this could either hold manufacturing back or refocus attention on design and engineering endeavors that rely less on logistics and more on talent. Suppliers, OEMs and public institutions highlight the need to develop human talent in Mexico to continue consolidating its competitiveness. Triumphs in automotive manufacturing also have given companies the foundation on which to build R&D facilities and activities. This year’s publication outlines the collaboration between universities and private companies to prepare students, such as the dual education system, and explores private and public efforts to renovate mobility systems. Much-needed town planning updates to move people are as important as the logistics systems that move assembled cars to their new homes. Following contingency legislations to curtail pollution and traffic, electric vehicles and shared mobility have become trending topics.

As Mexico Automotive Review’s top industry contributors evaluate key achievements, they also look toward the future of the automotive industry. Top decision-makers in Mexico provide insights into how the sector can strengthen the country’s economy as the fourth largest exporter of vehicles and contribute to global growth in the automotive industry.

TABLE OF CONTENTS

STATE OF THE INDUSTRY

INNOVATION & TECHNOLOGY

LIGHT VEHICLE MANUFACTURING

DOMESTIC SALES & SERVICES

DIRECT SUPPLIERS

AFTERMARKET & DISTRIBUTION

INDIRECT SUPPLIERS

FLEETS & LOGISTICS

HEAVY VEHICLES

FUELS & MOBILITY

COMPETITIVE MANUFACTURING & EQUIPMENT

DOING BUSINESS IN MEXICO

INDUSTRIAL INFRASTRUCTURE

MEXICO’S AUTOMOTIVE FUTURE

STATE OF THE INDUSTRY

The automotive industry is among the most dynamic in the country, with steady growth and new participants arriving every year. The states in the Bajio region in particular are benefiting as OEMs expand their investments. But the industry’s rise can also be attributed to several private and public institutions working together to position Mexico as one of the world’s most competitive automotive hubs. The industry’s sales goals at the beginning of the year and performance through the first half have been encouraging, although production has lagged. Manufacturers are on track to match their 2015 production of 3.4 million units, but early hopes for another record are fading. Sales, though, are surging. Overall units sold through the end of June are ahead of pace for reaching the year target of 1.5 million.

In this chapter, the state of the automotive industry is analyzed, including the latest figures for vehicle production and sales. It compiles the opinions of authorities and industry experts who are in a position to provide a unique perspective.

CHAPTER 1: STATE OF THE INDUSTRY 8

ANALYSIS: The Year in Review

VIEW FROM THE TOP: Ildefonso Guajardo Villarreal, Minister of Economy

VIEW FROM THE TOP: Carlos Lozano de la Torre, Governor of the State of Aguascalientes

VIEW FROM THE TOP: Airton Cousseau, Nissan Mexicana

VIEW FROM THE TOP: Miguel Márquez Márquez, Governor of the State of Guanajuato

VIEW FROM THE TOP: Fidel Otake, Guanajuato Automotive Cluster (CLAUGTO)

MAP: Light and Heavy Vehicle OEMs in Mexico

VIEW FROM THE TOP: Eduardo Solís, AMIA

VIEW FROM THE TOP: Guido Vildozo, IHS Automotive

EVENT SPOTLIGHT: CIIAM and Expo INA PAACE Automechanika

VIEW FROM THE TOP: Óscar Albin, INA

VIEW FROM THE TOP: Alejandro Díaz de León, Bancomext

VIEW FROM THE TOP: Andrés Lerch, Ernst & Young Mexico

Marcellus Van Eck, Ernst & Young Mexico

VIEW FROM THE TOP: Adrian de la Garza, Banco de México

VIEW FROM THE TOP: Guillermo Prieto, AMDA

VIEW FROM THE TOP: Alex Theissen, ANTP

VIEW FROM THE TOP: Miguel Elizalde Lizárraga, Executive President of ANPACT

VIEW FROM THE TOP: Manuel Montoya, Automotive Cluster of Nuevo Leon (CLAUT)

VIEW FROM THE TOP: Antonio Herrera, Queretaro Automotive Cluster

PLANT SPOTLIGHT: Mazda de Mexico Vehicle Operation (MMVO)

ANALYSIS

THE YEAR IN REVIEW

The auto industry in Mexico continued its run of favorable

Mexico’s automotive industry hinges on the export market,

news in the first half of 2016, with new OEMs coming in,

as 80 percent of vehicles produced primarily target the US,

fresh investments in existing facilities, soaring domestic

followed by Canada, Germany, Colombia and Argentina.

sales and optimism for the future. Production totals

The shift in preference of the biggest consumer in the

suffered a setback as tastes in the US, Mexico’s key export

NAFTA region toward vehicles that are assembled less

market, changed in favor of bigger vehicles following a

frequently in Mexico explains the country sidling over to

drop in oil prices, but the road appears set for greater

Colombia and other Latin-American countries to increase

growth ahead.

exports and reduce dependence on the US market. That being said, overall vehicle demand in Latin America is

As the year progressed, manufacturers were on the move,

also lower, making it harder for the country to counter the

agglomerating predominantly in the Bajio region of Mexico,

negative effects of a shifting North American market.

filling the central-western industrial zone with auto parts and assembly plants. The presence of FCA, Honda, KIA,

Adrian de la Garza, Macrofinancing Analysis Manager

Mazda, Nissan, Toyota and Volkswagen in Mexico pushed

of Banco de México, points out the newly signed Trans-

vehicle production to almost 1.7 million in the first half of

Pacific Partnership (TPP) deal is a potential light on the

2016. The industry is projected to close 2016 with 3.4 million

horizon. “The TPP gives Mexico a window of opportunity

assembled units, matching the record set last year. Figures

to access the biggest market in the world, including 800

and investments from suppliers are boosting expectations

million potential customers in 12 countries that account for

that Mexico could reach AMIA’s target of 5 million units

close to 40 percent of global trade.”

manufactured for 2020. MANUFACTURERS BROADEN BASE There will likely be bumps along the way, as the first

Global conditions have impacted production but companies

half of the year illustrates. Mexico relies heavily on the

are keeping their foot on the accelerator when it comes

US market and is intrinsically linked to its northern

to expansion. Ford is extending its operations, originally

neighbor’s economy and demand for vehicles. Low oil

located mostly in the north of Mexico, south to San Luis

prices have allowed light trucks and SUVs to become

Potosi, supplementing its Cuautitlan plant also in the center

more popular for personal transportation in many

of the country. This investment was announced in 2016 for

markets, primarily the US. “(Light vehicle) sales have

production to start in 2018. Only months earlier, it announced

fallen in the US ... which has been attributed to the drop

a new transmission plant in Guanajuato in collaboration

in oil prices," says Eduardo Solís, Executive President

with Getrag. Ford will shell out US$1.6 billion on its San Luis

of AMIA. "As gasoline and diesel prices go down,

Potosi project. Nissan pulled an extra US$150 million out of

the market fosters a suitable environment for larger

its pockets in A1 to manufacture the new Kicks crossover

vehicles.” Mexico mainly produces compact or medium-

and Volkswagen’s original investment of US$1 billion grew by

sized light vehicles. This dichotomy has led to a drop in

US$100 million in its Puebla plant as preparations for the new

exports and consequently production.

Tiguan continue. KIA started production in 2016 of compact

LIGHT VEHICLESALES, SALES PRODUCTION IN MEXICO (THOUSANDS) LIGHT VEHICLES & EXPORTS (thousand of units) 3,500 3,000 2,500 2,000 1,500 1,000 500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 production

Source: AMIA

exports

sales

2011

2012

2013

2014

2015

vehicles at its plant in Pesqueria, Nuevo Leon and Audi will

AUTOMOTIVE INVESTMENT TIMELINE

launch operations in Q4 2016 producing the Q5, bucking the Year

Investment

1952

DINA Hidalgo

1965

Volkswagen Puebla General Motors State of Mexico

1966

Nissan Morelos

1968

FCA State of Mexico

1969

Freightliner State of Mexico

1970

Ford State of Mexico

1981

General Motors Ramos Arizpe FCA Coahuila

1982

Nissan Aguascalientes

vehicles are now upgrading to a mini SUV and compact car

1983

Ford Chihuahua Diesel

owners can now choose among a variety of small SUVs.”

1984

Cummins San Luis Potosi

1986

GATT – General Agreement of Tariffs and Trade Plant Ford Hermosillo

1992

Planta Scania Queretaro

1994

NAFTA Plant Mercedes Benz Trucks Nuevo Leon Plant Honda Jalisco

1995

WTO – World Trade Organization Plant GM Silao Plant BMW State of Mexico Plant FCA Coahuila

1998

Plant International Nuevo Leon

2000

Plant Volvo State of Mexico FTA: European Union

2001

FTA: Guatemala, Honduras and El Salvador

2003

ACE 55 Mercosur: Automotive

2004

Plant MAN Queretaro Plant Toyota Baja California FTA Uruguay

2005

AAE: Japan

la Garza reiterates the confidence in Mexico implied by

2007

Plant Freightliner Coahuila

ongoing investment. “The macroeconomic environment

2008

Plant GM Silao

has clearly been attractive to renowned multinationals

2009

Plant Ford Chihuahua Plant Isuzu State of Mexico

2011

Pacific Alliance: Chile, Colombia and Peru FTA: Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua Plant Mazda Guanajuato Plant VW Guanajuato

2012

FTA Peru

2014

FTA Panama Plant Honda Guanajuato

2015

TTP

2016

Audi Puebla KIA Nuevo Leon

compact car trend along with Nissan and Volkswagen. Audi and Nissan’s crossover’s production reflects a trend in preferences toward SUVs on a car platform. Toyota cites its SUVs as top sellers together with subcompacts but attributes this result to prices. Hyundai incorporated the Creta, its smallest SUV, to its offering in July 2016, reinforcing the trend. The body-on-frame platform that light trucks and the original SUVs used has evolved alongside the population’s changing needs. “We have seen that the segment evolution pattern has departed from its traditional course,” says Miguel Luz, Marketing and PR Director of Hyundai Motor Mexico. “Customers with subcompact

BRP, previously a Bombardier Group affiliate, ventured from Canada to just south of the US border with a second plant in Ciudad Juarez, Chihuahua to complement its previous operations. Meanwhile, Tier 1s such as Bosch, which invested in its Aguascalientes and Queretaro plants, support the local supply chain and provide the foundations for OEMs to build on. Goodyear is on the cusp of opening its new plant in San Luis Potosi and competing tire supplier Michelin also announced a US$510 million investment for a new plant in Guanajuato. GKN

Driveline

showed

its

confidence

Mexican

engineering abilities, opening a new plant to cater to allwheel drive vehicles. This compliments its Technology Center and exemplifies the industry’s interest in Mexican R&D, further supported by American Axle’s announcement of a Training, Innovation and Technology Development Center in the same state. Banco de México’s Adrián De

in the automotive industry, as new and significant investments have taken place in the last few years while others are expected in the near future.” THE ROAD MOST TAKEN Challenges in infrastructure are the industry’s Achilles heel. Andrés Lerch, Partner, Advisory Services/Performance Improvement at Ernst & Young Mexico, explains: “It is vital to expand the current logistics network with roads and railroads, ports and dry ports. Existing infrastructure is barely enough and many highways are already showing signs of overcapacity.” Logistics costs represent 10-40 percent of a product’s total overhead in Mexico but represents less than 10 percent

20172018 2019

Mercedes Benz & Infiniti Aguascalientes Toyota Guanajuato BMW San Luis Potosi

Source: ProMéxico

of the overall cost of a product in developed countries.

fund initiatives that indulge youth interested in vehicle

This will be either a curse or a blessing. Expensive goods

innovations.

transportation could hold the manufacturing industry back,

remained constant throughout the years but companies

or it could refocus attention on design and engineering

in the automotive sector require perpetual innovation

developments that rely less on logistics and more on talent.

to continue being competitive,” says José Luis Díaz del

Still, logistic advantages remain one of the main attractors

Castillo, Director General of DC Gaskets. Chrysler, GM,

for foreign investors, potentiated by Mexico’s free-trade

Nissan and Delphi all run research and engineering centers

agreements. NAFTA has proven to be one of Mexico’s

in Mexico. These are backed up by CONACYT’s efforts

strongest bets and once the TPP deal is finalized, more

and ITESM’s own R&D centers focused on automotive

companies will take advantage of the country’s connectivity

applications.

“There

are

many

industries

that

have

to target the South Pacific. As production ramps up to a goal of 5 million vehicles by 2020, infrastructure will have

Companies are beginning to demand engineers that can

to be adapted to the industry’s needs.

man R&D centers and to continue attracting investment, agrees sound system manufacturer Harman. “Harman

MORE HANDS ON DECK

has R&D operations in the center of Queretaro, where 50

The industrial sectors rely on several variables that

engineers are creating software and designing products

determine their peaks and troughs, including employment

for the company,” says Alejandro Osiris García Mainou, Vice

and available talent. As the US reports jobs moving

President North America Operations of Harman. Mexico

south to Mexico, Ford’s future move having been the

needs to evolve to a more advanced manufacturing hub

most notable in 2016, the local workforce benefits from

with human capital that is much more than cheap labor.

expanding

for

As automation alternatives progress, the advantages of

technicians and engineers is projected to exceed supply in

relatively low labor costs are diminished and countries

the short term. Suppliers and OEMs alike refer to the need

that used this as an edge must evolve to compete.

employment

opportunities.

Demand

to develop human talent to continue consolidating the manufacturing hub. “The market is behaving strangely as

SHIFTING GEARS, CHANGING ATTITUDES

there is a lack of human capital to cover the large demand

The issue of alternatives to private vehicles is inherent

that resulted from five years of booming industry growth,”

to Mexico, especially in its capital and large cities across

says Eduardo Melón Lagos, Plant Manager of Inaumex.

the country. Infrastructure has stinted the penetration of natural gas-fueled vehicles for public transport and

Automated companies like Inaumex do not need large

electric technology is faltering. Volvo’s Electromobility

volumes of employees but rather staff with specific skillsets.

division

As automation becomes commonplace and Mexico takes on

solutions to the federal government and the mindset

more complex processes, technicians and engineers are in

is shifting, albeit slowly. “The paradigm change we are

high demand and the governing bodies of the most densely

facing since Mexico City’s Mobility Law was published in

populated automotive clusters are rushing to catch up.

2014 placed the individual as a priority in terms of public

Universities, technical institutions and private companies

policy decisions,” says Laura Ballesteros, Undersecretary

are collaborating to create curriculums in local universities

of Planning at SEMOVI. BRT Technology is a focus for the

that prepare students for real world applications and to

town-planning departments of several cities while electric

adapt professionals to the specific engineering assignments

buses and trams have yet to dominate the market. “A Bus

carried out in Mexico. “The German dual-education system

Rapid Transit system can replace 250 cars. Integrated

was the key to CONALEP’s triumph in Irapuato and

transport systems not only reduce pollution but also

now other Abasolo technical schools are interested in

traffic,” Ballesteros says.

has

presented

innovative

mass-transport

replicating this system in their community,” says Gilberto González, Director General of Grupo Marabis, referring to

Contingency legislations to stem pollution in Mexico

the success of preparing technicians in Marabis’ industrial

City slightly boosted electric vehicle sales in early 2016.

park in Abasolo, near Irapuato in the state of Guanajuato.

Schneider Electric, BMW and Nissan among others have

Preparing students for practical careers with a vocational

installed charging stations in various locations. This supports

emphasis is becoming a popular trend.

the commercialization of the Nissan Leaf, Chevrolet Volt and Spark EV, Toyota Prius, Renault Twizy, BMW’s i3 and

INNOVATION TAKES THE STAGE

i8 models and Tesla’s Model S in Mexico. Domestic hybrid

Developing a skilled work force goes hand in hand with

and EV sales saw no more than 0.11 percent of the 230,463

efforts to branch into R&D. The boom in automotive

units sold in the first two months of 2016. From these 255

manufacturing has encouraged companies to install

vehicles, the market sector blossomed in March 2016 to

design and engineering centers, and the government to

632 hybrids and electric cars sold in just one month.

A significant market share for these models is a long way

strategies have evolved around the customer. Mercedes-

off and electric models remain a niche segment. There is

Benz Vans, for example, wants to optimize its service

also the cultural factor to be considered. “We still prefer

efficiency to fleet managers to enhance customer retention

gasoline cars for various reasons and without significant

with specific tools that inform users in real-time about their

incentives that is not likely to change,” says Lerch.

vehicles. Companies have to participate in a new paradigm where the digital market is as strong and important as

FINANCED VEHICLES IN MEXICO FINANCED VEHICLES (jan-jun thousand of units)

traditional physical operations. New entrants to the market

500

to adapt to keep customers happy and incentivize future

have this distinction clear but longstanding players have had repurchase.

400 DRIVING FORWARD 300

200

domestic

economy

automotive

industry

continue

intrinsic

for

flourishing.

the

AMIA

estimates the Mexican market will close 2016 with 1.5 million vehicle sales, showing the remaining room for

100

growth. “The domestic new vehicle market is presenting

2016

2015

2014

2013

2012

2011

2010

2009

2008

more encouraging figures than previous years,” says Solís.

2007

healthy

Source: AMDA

As every month sales to the public have surpassed 2015’s vehicle purchases, domestic demand should reach its true potential of 1.8 million by 2020, according to AMIA. The automotive industry represents 3.2 percent of Mexico’s

CATALYZING DOMESTIC GROWTH

GDP and is the fourth most important export industry. “With

To further elevate domestic sales, financing has been

such impressive growth, the big questions now address the

tagged as key. Car loans facilitated 67 percent of sales

true potential of the domestic market,” says Guillermo Prieto,

in the market, rising 23 percent in the first half of 2016

Executive President of AMDA. One key to encouraging

compared to figures from 2015. Offering the population

new vehicle sales lies in keeping used car imports down,

new alternatives to owning a car outright is taking off

untangling loopholes being used by importers to elude the

but slower than expected. Vehicle ownership remains

legal stipulations for this type of imported product. “We are

stitched into the cultural fabric. “In Mexico, car ownership

working with the authorities to counter the increase we saw

remains a status symbol so leasing struggles to carve

during the first months of 2016,” says AMIA’s Solís.

out its place in the private market,” says Tjahny Bercx, CEO of LeasePlan. This, coupled with a lack of fiscal

Despite the hurdles, high expectations reign as carmakers

benefits for private customers has limited the evolution

place their individual bets on different states and with

of alternatives to ownership such as leasing. Nevertheless,

strong domestic sales foreseen for 2016. The industry

the corporate sector has made good progress on this front

seems primed to close in on AMIA’s objective of 5 million

and companies are transferring their assets to their own

vehicles manufactured by 2020.

operations instead of focusing on vehicle purchases. Financial institutions are stepping in with extended loan periods and lower monthly payments to encourage financial

USED-CAR IMPORTS IN MEXICO (JANUARY-JULY) GRÁFICA DE BARRAS USED-CAR IMPORTS (thousand of units) 20 34.8%

penetration. Mayra González, President and Director General of Nissan Mexicana, highlights financing's importance to the

-1.2%

12.0%

25.8%

-12.8%

-24.3%

MAY

JUN

company’s efforts. “We have ambitious goals for the Mexican market and our financing arm will be a vital factor to make

this happen. We see financing as a growth opportunity that will allow us to explore new markets and reach demographics that have not yet been targeted by Nissan.”

Aftersales services have developed toward personalized

contact to retain Mexican clients who are no exception to

JAN

increased technological dependability around the world.

2015

Both in retail and wholesale operations, sales and service

Source: AMIA

FEB 2016

MAR

APR

VIEW FROM THE TOP

TACKLING CHALLENGES ON DIFFERENT FRONTS ILDEFONSO GUAJARDO VILLARREAL Minister of Economy

Q: What plans does the government have to consolidate

maintaining the competitiveness and growth rate of the

the Mexican automotive industry, which has experienced

sector. In recent years, countries with the highest rates of

major development in the last five years?

competitiveness are those that efficiently adopt and exploit

A: One result of the good use of Mexico’s competitive

innovation and tools for the creation and accumulation

advantages is the increasing capacity of the Mexican

of talented human resources. That is why the Ministry of

automotive

placing

Economy is working on a document for the implementation

the country among the main players worldwide. The

industry

attract

investment,

of a new education/training model of human capital for the

steady stream of investments flowing in is largely due to

industry, with which we will be able to identify the existing

production relocation processes undertaken by global

performance of training as well as its situation and needs.

companies that have recognized these advantages. In this context, in which companies seek to optimize their

By the end of the year, we will have a specific

investments by maximizing the cost-benefit ratio, Mexico

recommendation of a model for the promotion of human

has been highly favored. Premium brands like BMW, Audi

capital specialization required by the industry in the short

and Infiniti are building vehicle-manufacturing plants in our

term, regardless of ongoing efforts in the educational

country and even companies from countries with which we

sector to adjust its technical and professional programs to

do not have a free trade agreement, like South Korea’s KIA,

meet the long-term requirements of the industry.

have decided to install a production plant here. Q: While Mexico offers a competitive advantage given Mexico’s

production

forecasts

are

favorable,

with

the peso-dollar exchange rate, what challenges might the

projections for an average production of 5 million units of

sector face if this situation changes?

light vehicles by 2020. However, such a production increase

A: Mexico offers a range of competitive advantages for

entails a series of challenges that require strengthening

the global automotive industry, which transcend the

the production chain. The federal government is working

favorable exchange rate for Mexican exports. Factors such

closely with the industry to overcome those challenges and

as geographic location, in particular its proximity to the

to adopt measures with medium and long-term impact.

world’s largest vehicle market, competitive labor costs and an extensive network of trade agreements are powerful

Supplier

development

key

strengthening

the

advantages for attracting foreign investment, especially

productive chain and the Ministry of Economy is working

in favor of the automotive sector. However, beyond

on strategies to boost Tier 2 and Tier 3 local suppliers. In

these comparative advantages, Mexico has consolidated

this context, Mexico is coordinating a set of specific actions

its position as one of the main centers of automotive

for this industry to align programs and resources with the

manufacturing and as an exporter of vehicles and auto

development of its supply chain. Although Mexico’s supply

parts because of its wide network of domestic and foreign

capability is solid – due to the presence of the world’s most

suppliers of global reach that belong to the Tier 1 link in the

important Tier 1 companies – the challenge is to develop the

automotive chain, and also because of the creation of a series

lower levels of the chain. To do so, our efforts are focused

of industrial clusters in various regions, which consolidate

on addressing the following areas of opportunity to boost

the production chain for the sector’s competitiveness.

the supply of inputs for which we have insufficient or no existing supply and inputs for which we already have a good

Q: How is the government pushing to build a more

performance in procurement but also growth potential.

sophisticated industry, based on design and engineering rather than on basic production activities?

The availability of sufficient skilled human capital is

A: The local automotive industry is fully consolidated

also crucial to meet the requirements of the industry for

and some companies have become worldwide leaders

in their production processes. Most OEMs and some

impact, coordinating mechanisms between agents and

Tier 1 companies have engineering centers in which they

accountability mechanisms.

collaborate in the development of global projects. As a result, Mexico can tap the full potential of the sector The Ministry of Economy is directing its efforts to overcome

by promoting the development of human capital, research

the growth barriers in the industry, such as insufficient

and technological development, key elements for our

production chains, skilled labor demanded for short-term

country to improve its position in the global context.

growth and technological innovation. By overcoming these barriers, Mexico will continue its transition from

Q: How is the country promoting the development of the

simple

local supply chain and how do you balance the benefits

assembly

processes

higher

value-added

processes, becoming more attractive for investment and

offered to foreign and local investors?

consolidation in the global automotive industry.

A: ProAuto is the specific program we created to identify the needs and opportunities within the local supply

Regarding production chains, we are working in coordination

chain, allocating funds and resources to national Tier 2

with other agencies in the implementation of public policies

and Tier 3 players. The Ministry of Economy, CONACYT,

to promote the development of Tier II and III suppliers.

ProMéxico, Bancomext and NAFIN have specific programs that, considering their objectives and target population,

In human resources, the federal government is working on

can foster the development of suppliers in the automotive

the generation of base human capital that can meet the

sector. The categories of support considered in ProAuto

talent needs of the sector. We are working on identifying

are training and development, technical assistance,

industry needs to create the conditions for ensuring the

innovation and technology, integrated projects, attraction

availability of specialized talent.

of foreign investment and financing.

On innovation, which is one of the cornerstones of the

The maturity of the automotive industry in Mexico places

government’s efforts as it is a catalyst for competitiveness

it in a stage of development where the incentives for the

and

Innovation

establishment of plants or for the development of the

Program of the Ministry of Economy promotes an

most basic activities are no longer needed. Therefore, the

ecosystem in which academia, industry and government

type of incentives granted are temporary and focused on

interact in a coordinated manner for the development of

solving particular issues, such as market failures that can

research that supports innovation, and that follows these

inhibit further development at all levels of the chain, or the

premises: national priority, to increase the competitiveness

lack of funding for certain types of projects, for which the

of our economy, focusing efforts on areas of greatest

development bank provides specific programs.

attracting

investment,

the

National

VIEW FROM THE TOP

CONSOLIDATION AFTER SIX YEARS OF DEVELOPMENT CARLOS LOZANO DE LA TORRE Governor of the State of Aguascalientes

Q: What conditions led to Aguascalientes’ impressive

Automotive Logistics Industrial Park (PILA) was one of

growth and could they be emulated by states struggling

our priorities as a world-class industrial park, along with

in their development process?

road repairs on all routes in the old Industrial City and

A: Each state has different challenges and every

the improvement of public industrial parks. These actions

government is making a significant effort to solve them.

attracted the main infrastructure developers in Mexico.

Aguascalientes created favorable conditions to attract new national and foreign businesses, as well as for the

Q: How has Aguascalientes collaborated with the federal

expansion and growth of those already established. At

government to boost foreign investment?

the beginning of my administration, we set up the Single

A: To attract top added-value international companies, we

Police Command that has brought necessary security

enforced effective cross-institutional cooperation between

to encourage international investment. Security levels in

the different state government offices. This allowed us to

Aguascalientes are among the best in the country. This

provide all the necessary resources to operate without

initiative was the first in Mexico and it has allowed us to

interruption, establishing clear rules in all areas from land use

coordinate all law enforcement efforts at the municipal,

ordinance to culture and entertainment. We decided to work

state and federal levels. The main road accesses to the

hand-in-hand with OEMs and their suppliers abroad through

state are controlled with advanced technology, all of

different events with the goal of letting them see firsthand

which has contributed to the prevention and deterrence

the competitive advantages of investing in Aguascalientes.

of crime.

Eventually, this resulted in a broader supplier base, imports reductions and lower local production costs.

Total investment of nearly US$7 billion; Over 80,000 new jobs generated

We implemented a number of support programs for local SMEs in coordination with the federal government to incorporate them into the production chain, taking advantage of local talent in business and engineering. Despite important investments, we avoided incurring further debt and reduced the existing debt level. Consequently, international ratings firms continue to award us with the highest ratings at a national scale.

Aguascalientes coordinated public colleges and technical

Q: What has total national and foreign investment in

schools to match their academic programs to the local

the state totaled and how has this translated into a high

industries’ demands. We created El Retoño Technological

credit rating for Aguascalientes?

Institute

A: Aguascalientes has landed 145 new national and

Aguascalientes where students not only receive education

international investment projects during this term of

in several languages but also have the opportunity to

office, 75 of which are newly established companies. The

study abroad. We successfully promoted the development

rest are expansions of companies already operating in the

of the Aguascalientes Autonomous University, resulting in

state. This accounted for a total investment of nearly US$7

the construction of the South Campus and its specialized

billion and generated over 80,000 new jobs. This is our

engineering programs. Having developed the state’s

most important accomplishment as it represents 80,000

industrial infrastructure, exporting manufacturers have

fewer problems in Aguascalientes and a secure income for

everything necessary to settle and start operations

families. This number surpasses the combined employment

quickly, contributing to fast and sustainable growth. The

rate of the two preceding administrations by 65 percent.

—

the

first

public

bilingual

university

Investments also led to an increase in manufacturing

A: I believe growth in Aguascalientes will continue to occur

activities of 28.9 percent in 2014, generating the highest

naturally, as we have laid down a solid foundation for this

economic growth in the country for that year at 11.3

to happen. The COMPAS plant that will produce luxury

percent, even higher than China’s 7 percent.

vehicles for Infiniti and Mercedes-Benz is already under construction and is set to bring about many additional

Q: What is Aguascalientes’ current participation in the

benefits to the state’s economy. Earlier this year I was in

national economy and what role has the automotive

Germany visiting suppliers for Daimler, and I have met with

industry played?

a great number of Japanese suppliers. During these visits

With

1.1

percent

the

national

population,

Aguascalientes contributes over 2 percent of Mexico’s

we focus on economic promotion with many companies, not limited to the automotive sector.

exports, according to data from INEGI in December 2014. That same data placed us in third place nationwide in

Approximately 20 percent of the companies that have

terms of exports growth, with an over 25 percent annual

invested in Aguascalientes during my administration were

increase compared to 2013. More than 80 percent of these

not Nissan suppliers when they first came. Some have

exports come from the automotive sector, representing

started negotiations with them and I hope in the future

nearly US$6.75 billion. Equally important is the positive

they can all be OEM suppliers, not only locally but at a

commercial balance in our state, which the Ministry of

national level. The supply chain has a very important role

Finance calculated at a positive US$1.7 billion for 2015.

in the impact of these investment projects, as large and small companies join the value chain generating jobs

The automotive sector in Aguascalientes includes over 200

and strengthening the economic dynamics of the state.

companies generating over 40,000 direct jobs. In the last

It is common for an automotive OEM to generate up to

five and half years, of the aforementioned 145 investment

11 additional jobs for each direct job it creates, hence the

projects, 95 came from the automotive industry. Nissan

importance of maintaining this dynamic.

leads in light vehicle sales and production in Mexico and the automotive industry is one of the best-paying

Development of other industries is equally important,

activities in the state. Furthermore, we have the lowest

especially

personnel rotation in the region, making us even more

technology, software and application design and production,

competitive. We do not suffer from strikes and we have

electronics, food and beverage, biomedical, metallurgy

not seen a strike in the industrial sector in nearly 50 years.

and textile industries. A new trend we are observing and

This, combined with great security, education, health and

promoting is the establishment of new engineering and

other services, helps maintain a stable workforce.

R&D centers at the same companies that already invested in

strategic

sectors

such

information

the state. The quality and efficiency of our engineering is as Q: What projects and strategies should be maintained by

remarkable as our manufacturing capabilities, representing

the next administration to keep fueling this development?

an attractive segment with a high added value.

VIEW FROM THE TOP

THE ULTIMATE DESTINATION FOR ANY OEM AIRTON COUSSEAU Former President and Director General of Nissan Mexicana

Q: How has Nissan’s relationship with Mexico evolved

the Trans-Pacific Partnership (TPP) deal. In terms of

through the years?

infrastructure, Mexico has excellent rail, road and port

A: Nissan CIVAC, the company’s first manufacturing plant

access although that is only sufficient for the current

outside Japan, celebrated its 50th anniversary on May 12,

3.4-million vehicle production. Nissan also decided to

2016. When we suggested bringing the plant to Mexico,

develop further logistics operations in the port of Mazatlan,

specifically to Cuernavaca, it was a controversial decision.

becoming the first automotive company to do this. The

I believe it could not have worked out better. Nissan began

port will receive all our products from Japan.

its connection to Mexico boosted by the magnificent relationship between Mexico and Japan. Nissan’s presence

Education is an important issue in Mexico and although

kept growing, resulting in the construction of the A1 plant

some companies might struggle on this front, Nissan

in Aguascalientes. Governor Carlos Lozano de la Torre was

developed a strong recruitment base in Aguascalientes

the Minister of Economic Development for Aguascalientes

with the support of Governor Lozano de la Torre. Nissan

at the time and a crucial figure in the consolidation of this

employs almost 45 percent of the state’s graduates. We

investment. The inauguration of the A2 plant in 2013 was

also created Nissan University so our teams could receive

a natural next step. This site is now dedicated to export

more specialized training than what was available at

operations for Brazil, Canada and the US, producing the

any institution. There are three times more engineering

Nissan Sentra model. We are particularly proud of Nissan’s

graduates in Mexico than in the US, representing an

collaboration with Daimler for the new COMPAS plant in

immense talent pool for OEMs.

Aguascalientes, which will be the first to tackle the premium manufacturing market, starting with our Infiniti models in

Q: What was Nissan’s contribution to advancing Mexico

2017 and later adding Mercedes-Benz models in 2018.

as an automotive powerhouse? A: Recent growth has fostered the development of a

Alongside Vesta, we developed our Douki Seisan Park

strong supply chain in the country. This sector now

for suppliers in Aguascalientes and we have a 74,000ft

represents the largest gross market for the country with

warehouse specialized in spare-part distribution. Through

US$81.8 billion by the end of 2015 and eight percent of

this center, we can address the needs of any Nissan plant

the manufacturing GDP, according to Deloitte. This means

in the world and cater to importers across the globe. Our

that Nissan and its providers have been responsible for

projects have incentivized new investments from other

approximately 1.5 percent of the country’s GDP.

automakers, promoting the national automotive industry. Nissan is the biggest automotive manufacturer in Mexico,

Q: What is your view of Mexico’s position in the global

having produced more than 820,000 cars by the end

automotive market?

of 2015. Unlike the rest of the market, 37 percent of our

A: The biggest area of opportunity in the country is supply

production stayed in the country last year. This helped us

chain development. The industry would benefit from the

attain a significant market share. Five Nissan models are

government becoming more involved. Nissan has a solid

among the top 10 vehicles sold in the country.

Tier 1 supplier base since many companies accompanied the OEMs to their new plants. Further down the supply

Q: What made Mexico such an ideal location for Nissan?

chain there has been a surprising deficit. Most raw materials

A: One of the main advantages was Mexico’s location in

are imported, including electronics, plastics, steel and

the Americas, next to the largest economy in the world.

chemicals. This represents the largest proportion of total

The country enjoys immediate access to the Atlantic and

cost for car production. Mexico is competitive in terms of

Pacific Oceans, facilitating exports and imports. Mexico is

labor and energy prices among other aspects but these

a signatory to an array of free-trade agreements including

only represent eight percent of a vehicle’s cost. To boost the

country’s competitiveness there must be a government-led

Q: What strategy has Nissan’s employed for the growing

program to support companies that are specialized in raw

electric vehicle market?

material production. The manufacturing segment has been

A: We launched the Leaf in July 2014, when there were

consolidated in line with several investments but Mexico

still doubts about the success of an electric model in the

still has to prove it can reach the 2 million mark in domestic

market. However, at Nissan we do not believe in the future,

sales to continue attracting new companies.

we make it. We cannot be sure what the future will hold for Mexico but electric technology is certainly part of it.

Q: How did Nissan’s Power 88 initiative affect its Mexican

Electric technology is expensive and although we have

operations?

invested in infrastructure, many deficiencies remain. More

A: Achieving eight percent operating profit has been

involvement from the Federal Electricity Commission

our main goal, guaranteeing enough resources to keep

(CFE) has helped but it is not enough to change the

investing in the company. The 8 percent global market

infrastructure radically. Nissan signed an agreement with

share is equally important but depends on the nature

BMW to collaborate on these developments and we

of each market. We have been struggling to satisfy

expect GM and Tesla to contribute to the project. Today,

the overwhelming demand in Mexico so losing a small

more than 150 charging points are available in the country

percentage of participation is natural. We are producing

plus at least one fast-charging station per state. We have

approximately 4,000 units of the Nissan Frontier monthly,

also developed an app to help drivers find the closest

for example, while we have a waiting list of almost 8,000.

charging point, whether it belongs to Nissan or BMW.

We have encouraged our sales department to keep our production sites at full capacity.

Following changes to the No Drive Day vehicle restrictions due to air pollution, demand for the Leaf increased

Q: How has Nissan balanced its image as an affordable

exponentially. It is sad this growth is motivated by an

brand with its foray into the high-end segment with the

unpleasant situation, especially if the general attitude

new Maxima and the 370Z?

toward electric vehicles remains unaltered. The situation

A: While we previously sold three or four 370Z units a year,

is boosting the electric vehicle market, nonetheless, and it

we are now marketing more than 20. This might seem

has fostered opportunities for Nissan to collaborate with

like a small number but it shows the public’s openness to

different regional governments.

our high-performance models. Similarly, the new Nissan Maxima is exceeding sales targets thanks to its high design

Q: What model diversification opportunities exist for

and performance standards. Our signature model Nissan

Nissan’s operations?

GT-R has not yet arrived in Mexico but will probably be a

A: Our plants were designed to support our diverse

priority this year. We want to maintain the rational side of

portfolio. We have been slowing down the production

Nissan while focusing more on emotional factors and new

of new models because of the high demand of our

technology in our vehicles. Besides electric technology,

current lineup. Before inaugurating the A2 plant, we

autonomous features will also become standard in every

sold approximately 1,200 Sentra vehicles in Mexico per

car in a few years. Many of these advances are already

month but now we have exceeded 3,500 units. We need

available in some of our models and they will be the basis

to increase production capacity, even greater than our

for future developments.

current rate of one vehicle produced every 38 seconds.

VIEW FROM THE TOP

TRAINING EXPERTISE PAVES ROAD TO SUCCESS MIGUEL MÁRQUEZ MÁRQUEZ Governor of the State of Guanajuato

Q: What was your vision for the automotive sector in

next to no strikes, offering stability to companies that

Guanajuato as newly elected Governor in 2012?

want to establish facilities in the state.

A: Our strategy was based on continuity, with medium and long-term projections. During the last administration,

Our geographical position is also a huge asset. We are

Honda and Mazda announced investments in Guanajuato.

centrally located and were labeled “Mexico’s Diamond” in

Our challenge was to be ready for these companies so

a survey conducted by Fundación Metropoli. The survey

they could start their operations as smoothly as possible.

also showed Central Mexico occupies only 17 percent

We wanted to consolidate Guanajuato as the most

of the national territory but is home to 50 percent of

important automotive cluster in Latin America and we are

the entire population and generates 51 percent of the

sure this industry will be crucial to the state’s development

country’s GDP. Guanajuato has connections to every state,

for many years. We have always been supported by the

making what is arguably the best road infrastructure in the

federal government during these processes but promotion

country the perfect logistics platform for all companies.

and the negotiations were handled regionally. All of these

The tourism industry is closely related to all these

processes are supervised by the Minister of Economic

developments. Many foreigners who move to Mexico have

Development and the Deputy Minister for Investment

found that Guanajuato is an ideal place to live in terms of

Attraction through the Investment Attraction Committee

entertainment and recreational activities.

and backed by our influential investment attraction office, based in Chicago. This team, led by Juan Manuel

Q: What are the main opportunities for attracting more

Fernández, is in charge of promoting Guanajuato all over

investment from foreign players?

the world.

A: Mobility could be improved to promote the use of public transportation, improving the punctuality and

Central Mexico occupies 17 percent of national territory but is home to 50 percent of the population and generates 51 percent of the country’s GDP

overall quality of the services, while connecting the industrial sector with hospitals, schools, the city and the airport. We just opened a new highway and we are halfway through another project, both of which will facilitate an integral mobility system we hope to install. We have set this goal for 2016 and by 2017 we plan to extend this network to Celaya, linking all the industrial parks in Irapuato, Salamanca and Villagran. We are also discussing with our neighboring government the possibilities of

Q: What has made Guanajuato such an attractive state

expanding this project all the way to Queretaro. Finally, an

for foreign direct investment?

opportunity for executive taxis will open doors for many

A: Some of our main advantages are available human

drivers in that segment.

capital, education and our training expertise. In 2014 Guanajuato had the country’s largest number of nationally

The state’s industrial infrastructure has also developed

trained people, totaling 100,000 trainees. Our educational

exponentially. At the beginning of this administration,

offering is wholly directed at the industry, with mechanical,

we projected only seven industrial parks but we are now

electrical and industrial engineers, as well as topics

close to 15. There is a long list of companies interested

covering robotics, nanotechnology, mechatronics and

in establishing facilities in Guanajuato and Toyota and

aeronautics. Our main objective is to prepare our students

Ford will bring another wave of newcomers with them.

for every challenge they might face in the industry.

According to INEGI, we have had almost four times as

Guanajuato also has an excellent labor environment with

much growth as other states, with a 9.4 percent index,

and created thousands of new jobs. But it is important to diversify our market. Guanajuato has welcomed diverse companies, including Ferrero Rocher, Mars, Colgate Palmolive, Procter & Gamble and Nivea, and we will inaugurate a Nestlé plant. Q: How has the government maintained the quality of life of its residents, despite increased costs of living that multiple investments have generated? A: In terms of quality of life, the most important factor is income. I am convinced this will continue to increase because of the inherent competitiveness of our workforce. Given the fierce competition in the region, all companies have to protect their employees and offer incentives to stay or they will go to another employer. To prepare our local workforce, our public universities have become bilingual to adapt to the needs of the industry. Guanajuato works closely with the Mexican Employer’s Confederation (COPARMEX) and several companies to offer the German dual-education system for students simultaneously studying and working in the industry. Japanese companies are now participating in this program contributing to its success. Furthermore, the State Commission for Higher Education Planning and the State Committee for Compulsory Education Planning and Programming have helped us address the needs of every industry in Guanajuato. We also work with a council formed by unions, companies and private education institutions, including ITESM. Over the last three years, we have opened close to 315 technical high schools. Technology is a priority not only for students but for teachers as well. Seven innovation parks also have been opened to start new businesses in public and private academic institutions. Q: How has foreign investment influenced cultural diversity in Guanajuato? A: Our local population has accepted and integrated foreigners extremely well. It is now common to see our Japanese residents in public markets, stadiums and restaurants. In fact, the Japanese government is placing a consulate in Leon, providing all the services that our Japanese residents may need. There is an amazing cultural exchange between our two nations. This does not mean we do not have strong relationships with other cultures and countries but largely thanks to automotive investments, Japan has the strongest influence in the region. We have companies from over 30 different countries and all of them have influenced our local people in their own way, while also integrating Mexican culture into their lifestyle.

VIEW FROM THE TOP

COMPETITIVENESS NOT A SOLO SUCCESS FIDEL OTAKE President of the Guanajuato Automotive Cluster (CLAUGTO)

Q: What are CLAUGTO’s development plans as one of the

industry. Although some of their affiliates have a Mexican

chief automotive clusters in the region?

presence, they lack a deep understanding of the local

A: Studies have evaluated the relationship between

market. This has led to joint ventures between Mexican

companies and academic institutions to restructure

and foreign providers, each offering their own expertise

academic programs and run parallel with industry

and technology.

requirements. Technical institutions and universities are our main targets because they educate large volumes

Q: How much support has the government granted to

improve and develop new human capital specialization

mechanical

and

industrial

engineering

students.

Two additional concerns emerged in the field of human

programs?

resources. Dignified treatment is not a commodity but

A: Both Guanajuato’s Ministry of Education and the

a right. Proper organization has led to union creation,

federal Ministry of Public Education (SEP)’s support

consequently strengthening the relationship between

has been essential. Through a series of programs and

employees and companies. To reduce security concerns,

agreements, we have restructured local and federal

protecting assets became an additional focal point for

academic courses to match the industry’s needs. The

CLAUGTO. We created a special committee to oversee the

development of a dual education system has promoted

security of our clients’ assets alongside the government.

theoretical and technical knowledge, which is especially

With their support, we can ensure protection through the

important in manufacturing activities. After a deep

enactment of legal guidelines.

analysis, the National College of Technical Vocational Education (CONALEP) and polytechnic institutions have

Solidifying the industry’s supply chain is the cluster’s

adopted the dual system. We foresee others will follow,

second priority. OEMs establishing operations in the

as the academic sector’s support has been top-notch all

region are followed by their close providers to guarantee

along. Linking students with companies is yet another

just-in-time supply. After the Tier 1 supply chain is secured,

advantage offered. We help solidify their professional

a wave of Tier 2 and Tier 3 companies make their way to

development through apprenticeships and internships in

local markets. OEMs are legally responsible for a degree

a high-paced and evolving industry.

of local content integration, which makes the participation of Mexican suppliers more urgent. Service providers are

Engineer development is crucial for emerging economies,

equally important for OEMs’ operations, as they are an

serving as a direct indicator that promises abundant

essential piece of the puzzle. From cleaning and cafeteria

manufacturing, innovation and technological activities.

services to security and maintenance services, supply

Under those circumstances, the industry’s goal is attracting

chain consolidation can take many years.

young human talent, promoting sciences and increasing the attractiveness of those fields of study.

Q: What programs have Tier 1 companies initiated to develop and certify the rest of the supply chain?

Technological innovation is as important for CLAUGTO as

A: CLAUGTO plays a key role in this endeavor. Every year,

supply chain development. These processes must always

a supplier forum is organized in which both OEMs and Tier

accompany new company installations. Failing to achieve

1 companies present their needs to the industry. The idea

this can have substantial negative effects. CLAUGTO

is to improve the inclusion of local providers, although

brings together manufacturing enterprises and their

foreign companies play an important part in our forum

product engineering branches with industry research

as well and we take their input into account. International

centers. Process innovation must top our agenda as

clusters have attended our supplier forum looking to

internal innovation will boost our stance in the international

broaden their understanding of Mexico’s automotive

automotive industry.

LIGHT AND HEAVY VEHICLE OEM PLANT LOCATIONS

Source: ProMéxico

VIEW FROM THE TOP

CLOSE LOOPHOLES, BOOST INCENTIVES EDUARDO SOLÍS Executive President of AMIA

Q: How are market trends expected to impact the

throughout central Mexico. The Mexican government,

development of the domestic market?

the General Customs Agency and the Mexican Revenue

A: The market grew in double-digits for the first half of

Service (SAT) are keen to solve these problems,

2016. By the fourth quarter, we expect to reach 1.5 million

supported by measures implemented by the Treasury.

units sold. This would be a record-breaking figure but is

The NAFTA agreement has no effect on used vehicles

still 400,000 vehicles below the country’s true potential.

imports and Mexico has a unilateral trade policy due to

We align our goals with those of other countries with

an import decree that aims to regulate used vehicles

similar economic and demographic indexes such as

entering the country.

Argentina, Chile and Brazil. Thus, to reach the same levels of domestic sales per capita, Mexico needs to expand its

Q: How does the industry plan to support the imminent

rate of vehicles per 1000 people to approximately 18 cars

growth of hybrid and electric models in the market?

from 11.

A: The government needs to implement an incentives program to encourage hybrid and electric vehicle

Q: How will used vehicle imports reflect the evolution of

purchases. This will eventually include green license

the domestic market?

plates. We are discussing the possibility of offering certain

A: Used vehicles imports remain low and we are working

benefits to owners of these types of cars with the federal

with the authorities to counter the increase we saw

and local governments. Regarding electric vehicles, we

during the first months of 2016. The domestic new

started collaborating with the Ministry of Energy and the

vehicle market is presenting more encouraging figures

Federal Electricity Commission (CFE) in 2015 to develop

than previous years. The best strategy to boost vehicle

electric vehicle charging stations for public spaces. Certain

sales will be to target all loopholes that importers are

private sector companies have launched similar initiatives

using to elude the legal requirements for used vehicle

but both the federal and regional authorities must be

imports. Certain vehicles are only allowed to cross to the

actively involved in the process to improve and expand

states that border the US but many end up being used

the existing infrastructure in the country.

GLOBAL LIGHT VEHICLE PRODUCTION (jan-jun million of units) GLOBAL LIGHT VEHICLE PRODUCTION

China 2015

USA

Japan

Germany

South Korea

India

2016

Source: JAMA,SIAM, VDA,AMIA, KAMA,ANFAC, SIAM, AMIA, ANFAC, Automotive News, Data Center Source: CAAM,Source: JAMA, CAAM, VDA, KAMA, Automotive News, Data Center

Mexico

Spain

Canada

charging a vehicle will not elevate users’ bills. Electric-car

DOMESTICSALES SALESIN INMEXICO’S MEXICO’SMAIN MAINEXPORT EXPORT DOMESTIC MARKETS(jan-jun CAPÍTULO 1 MARKETS million of units)

owners can apply for a second power meter specifically

In terms of costs, CFE has already established that

dedicated to the vehicle, while the company that owns the infrastructure of any public charger will be responsible

for electricity costs. There may also be incentives for companies that decide to include these platforms. The

federal government is still evaluating this possibility. 4 Q: How is Mexico advancing in terms of increasing

have created the National Academic Institutions and Research Centers’ Group for the Automotive Industry. The goal of this association is to develop programs that

Mexico

Colombia

out R&D operations in Mexico. To support this influx we

Argetina

suppliers are relocating facilities and staff that can carry

Brazil

projects to advanced engineering operations. OEMs and

Canada

A: Mexico is transitioning from purely manufacturing

Germany

nationwide process?

R&D operations and how is AMIA collaborating in this

Sources: VDA, ANFAVEA, AMIA, ADEFA, ANDEMOS, Automotive 2016 2015 News Data Center Sources: VDA, ANFAVEA, AMIA, ADEFA, ANDEMOS, Automotive News Data Center

promote research, development and innovation, while securing the appropriate human capital, infrastructure and

are highly dependent on the behavior of these two

technology.

markets. Sales have fallen in both countries, particularly in the compact models that Mexico most manufactures,

We also want to foster collaborative research projects

which has been attributed to the global drop in oil prices.

between the public and private sectors, as well as academia. All stakeholders need to be involved in this initiative. Along

As gasoline and diesel prices go down, the market

with the development of specialized human capital, these

fosters a suitable environment for larger vehicles. This is

projects will help Mexico fulfil its potential and reach the

a temporary situation unrelated to infrastructure or the

highest production and innovation levels.

evolution of Mexican industry. The market is expected to recover with time and production figures are likely to

Q: What are the general expectations for the automotive

increase by the end of the year.

industry's production? A: Manufacturing operations are directly related to exports,

New players in the market will support manufacturing

since 83 percent of Mexico’s total production is destined

operations. KIA is now starting up in Nuevo Leon and so is

for the international market. Of that number 86 percent of

Audi in Puebla. Our forecast for vehicles produced in Mexico

vehicles are sent to Canada and the US so our operations

remains at approximately 5 million units by the end of 2020.

VIEW FROM THE TOP

INTERNATIONAL MARKET HAS FAITH IN MEXICO GUIDO VILDOZO Manager of Latin American Light Vehicle Forecasts for IHS Automotive

Q: What trends has IHS perceived emerging in the global

respond to changes in the marketplace, including changes

automotive market?

in technology standards. The industry must ensure that

A: The SUV segment has been growing for the last 30

the infrastructure in Mexico can support advances in

years in the US and the versatility of this type of vehicle

technology to avoid stumbling early on in its development.

has become attractive worldwide. Mexico is moving even

This also requires government support to succeed.

faster than the rest of the world due to its proximity to the US. This was evident in Honda’s decision to switch its

Q: Which incentives and conditions do you expect to

Accord production line for the CR-V at its plant in El Salto,

impede or encourage potential investment?

Jalisco. IHS Automotive forecasts reflect that consumers

A: From 1995 to 2010, the average investment attraction

will continue to favor SUVs and crossovers. One reason

package was between 25 and 35 percent of the company’s

behind investments in local production for the Chevrolet

fiscal obligations. Financial packages communicate the

Trax and Honda’s HR-V is the increasing popularity of

Mexican government’s interest in bringing investments to

smaller SUVs. Manufacturing and sales of models such as

the country.

the Captiva and CR-V are being replaced by crossovers. The federal government must be very cautious of stepping Q: How have authorities responded to new investments

in to fill voids left by state governments. Mexico has to

in terms of customizing conditions for each company’s

ensure it can protect all plant developments nationwide,

future projects?

which is a delicate process. The federal government

A: The government has shown willingness to move toward

faces a difficult balancing act to make sure the episode

tailored projects but in comparison to countries like Brazil

at Pesqueria, Nuevo Leon earlier this year, where KIA had

local legislation is lacking. It may not be necessary to

to renegotiate a previous deal with the local government,

reach such a high level of intricacy in Mexico, however.

is not repeated by other states that are about to see

The government needs to communicate with OEMs and

investments in new car plants. Ford’s desire to introduce

suppliers to understand their needs. Authorities must be

more operations to Mexico shows us the international

aware of gaps in the market and encourage interest in

market continues to have faith in operating in Mexico.

other opportunities to provide for them and importantly, Q: How would you evaluate Mexico’s export situation and

not stall growth.

potential in foreign markets?

1995-2010, the average investment attraction package was 25-35 percent of the company’s fiscal obligations

A: Canada exported marginally more to the US than Mexico in 2015 but if we measure vehicle registrations, more vehicles produced in Mexico were bought in the US than those sent from Canada. This shows how critical Mexican output is for the North American market. The investment strategy that was originally proposed focused on exporting 10 percent of Mexico’s installed capacity to Latin America. The region unfortunately suffered an

Q: How is the industry expected to respond as emissions

unexpected contraction in sales between 2012 and 2015,

regulations become more stringent?

representing a 38.4 percent reduction in exports to

A: Government policy relating to emission is shifting

225,538 units from 366,133.

globally. Requirements for Euro VI standards will soon come into force and the US plans to implement the

This year, IHS Automotive forecasts a further 700,000

54.5mpg

unit drop in demand. Mexico was not prepared for

CAFE

legislation

too.

Private

investments

this change. Low motorization rates in South America

Although there are no government incentives for

suggested that systematic growth was inevitable but

private electric vehicle ownership, the transition toward

this plan has been put on hold for a few years. The

alternative mobility possibilities has already begun.

government has temporarily compensated the drop in

The emergence of Uber is impressive, which created

demand from South America by restricting used-car

a punctual service in several major cities and towns.

imports. This is an excellent strategy since it targets

In due course, countries may follow the California Air

the domestic market where the government exerts

Resources Board’s requirement that 16 percent of all

more influence. The next steps should target increasing

vehicles must be zero-emissions cars by 2025. The

exports to countries with low motorization rates

future of regulations is uncertain globally. Charging

including Africa and Asia.

electric cars at home can be more expensive and many electricity plants continue to run on coal, resulting in

Q: How is Mexico expected to advance in its production

no guaranteed benefit for the ozone layer from the

and sales targets?

introduction of electric vehicles. It is too early to predict

A: Total installed production capacity in Mexico is going

electricity demand resulting from these units but energy

to surpass 5.5 million units by 2020 according to IHS

companies are hurrying to prepare the field.

Automotive forecasts, although OEMs will not work at their full capacity. In terms of local demand, the existing

Q: What does the Mexican automotive industry need to

vehicle park, demographics and population count point

do to continue growing in a sustainable way?

toward Mexico already being a 2 million-unit market.

A: The government urgently needs to implement

The opportunity to sell this number of units exists,

programs that support the industry. ProAuto has been

assuming the government continues to restrict used car

operating for many years but has produced more

imports while supporting the demand for new vehicles

reactive than proactive solutions to industry needs.

via financing alternatives. It is imperative that the government supports the local In 2015, 62 percent of light vehicles purchases relied

market by developing the appropriate skilled labor for

on financing, which increased to 68 percent in the first

the industry to support future growth. Authorities must

quarter of 2016. Dealers expect this number to expand

sponsor investment attraction strategies for Tier 1 and

to 80 percent but IHS is more conservative and expects

2 companies and determine necessary investments in

growth to register no more than two percentage points

R&D to remain competitive.

in the near future. IHS forecasts suggest the Mexican industry could reach 1.8 million units in the next two

Brazil is a good example where companies were

years, and 2 million in five years if financing institutions

encouraged to spend 2 percent of their expenses on

and the government support this goal. Nonetheless, the

R&D. It was specified that if at least 1 percent were

figure could drop to 1.6 million vehicles if used cars were

proven to have been spent on innovation activities, the

to reenter the market.

company would be eligible for certain tax breaks. The Mexican government could imitate this model and offer

Q: How do you expect the governmental limitations

favorable interest rates on loans for R&D operations

on car usage in Mexico to influence the automotive

without affecting the economy.

industry? A: Mexico was probably late to the game implementing

The different trade associations, unions and governments

an emergency restriction on car use and a permanent

must collaborate to achieve technological advances.

limitation on older units. Many larger cities such as

This is something that should be discussed by everyone

Sao Paulo, Buenos Aires, and Santiago employ similar

in the industry as the responsibility extends beyond

regulations and new cars are not exempt. Unless the

AMIA and the OEMs.

public transportation system improves considerably, IHS analysts predict that Mexico City inhabitants will simply buy a second car. People enjoy the privacy and comfort of their own cars and distances are much greater than in comparable cities with usage restrictions. Drivers may purchase either another used car or a new car but the restrictions will likely lead to people acquiring two entry-level models instead of a premium vehicle. This may affect the premium market that has grown impressively in Mexico and air quality.

Mexico’s automotive production capacity will likely reach 5.5 million units by 2020

EVENT SPOTLIGHT

AUTO INDUSTRY COMES TOGETHER TO PROMOTE AND SELL

Two big events on the 2016 calendar gave players in

manufacturing forecasts were also on the table. According

the automotive industry an opportunity to connect and

to Guido Vildozo, Manager of Latin America Light Vehicle

promote their services. The 2016 International Congress of

Sales Forecasts for IHS Automotive, Mexico will produce

the Automotive Industry in Mexico (CIIAM) and Expo INA

4.8 million units by 2020. Óscar Albin, Executive President

PAACE Automechanika, both held in Mexico City, brought

of the organizing authority, and Rogelio Garza Garza,

local and global insiders together to promote Mexico as an

Deputy Minister of Industry and Commerce at the Ministry

important automotive hub and underline the importance

of Economy, ended the Congress with positive remarks

of OEMs and their suppliers to the industry’s development.

about the future of the automotive and auto parts industries in Mexico.

Mazda Mexico was guest of honor at the 14th CIIAM. The event focused on the evolution of the Mexican industry

Companies from Germany, Brazil, Argentina, Turkey,

and the challenges the country still faces, especially in

South Korea, Taiwan, China and the US filled the Banamex

transforming Mexico’s image into an R&D center rather

Center for the debut Expo INA PAACE Automechanika.

than just a manufacturing base. Representatives from the

The

Ministry of Communications and Transportation (SCT) and

aftermarket provided an opportunity for large auto parts

ProMéxico took the opportunity to highlight opportunities

manufacturers and distributors to show their wares to

in logistics, manufacturing and exports.

clients in the Mexican market. More than 400 participants

country’s

largest

event

for

the

automotive

from around the world offered their products to more than The Congress was an important opportunity for OEMs in

10,000 visitors, ranging from purchasing directors for the

the light and heavy vehicle segments to discuss the needs

leading OEMs in Mexico to managers and operators of the

of the industry and their strategies for local sourcing. Car

country’s service shops.

VIEW FROM THE TOP

MEXICO HOLDS ADVANTAGE IN TPP FOR NOW ÓSCAR ALBIN Executive President of INA

Q: How has the dollar to peso exchange rate affected

elementary and secondary schools. Regarding challenges

manufacturing and sales of auto parts?

in logistics, transport of newly manufactured cars to export

A: The elevated exchange rate presents a convenient

destinations by truck is reaching maximum capacity.

situation in the short and medium term, as manufacturing

This situation will become more complicated once new

costs in pesos are reduced and opportunity arises to sell in

plants start manufacturing their products. Therefore, we

dollars. But these perquisites only last as long as it takes

will need to improve rail infrastructure and expand port

the market to stabilize, which is why the auto parts sector

capacity. Veracruz, Lazaro Cardenas and Manzanillo are

in Mexico does not rely on these interim opportunities. On

being expanded in response.

the other hand, since the manufacturing processes are linked to the domestic aftermarket, this situation presents

Q: How will the TPP agreement affect the auto parts

a serious problem. Approximately 70 percent of the

sector’s foreign trade operations?

resources used to produce Mexican auto parts are imported

A: The TPP allows all of its members to begin trading with

or priced in dollars such as aluminum, copper and other

the US, which means that Mexico loses its exclusivity as this

materials that are produced abroad. Similarly, high dollar

market’s provider. Nonetheless, Mexico has the advantage

prices affect the depreciation costs of all manufacturing

of 20 years of experience trading with the US and can

equipment as well as the acquisition of new machinery. As

negotiate under its own terms to maintain its competitive

a result, all products present a 15-20 percent price increase

edge. Vietnam, Malaysia and any other country wishing to

that no one wants to absorb, leading companies to resort

exploit the US market will have to invest to ensure their

to importing goods.

operations reach minimum local content requirements to trade as a regional manufacturer. Japan and the US had

Q: What is your growth outlook for the industry?

already negotiated a minimum of 30 percent local content,

A: During 2015, the auto parts industry contributed 1 percent

which would be detrimental to Mexico’s operations, so we

of the country’s GDP and represented 8 percent of the

pushed hard to lift this to 45 percent. Ultimately, the TPP

manufacturing sector. This was mainly due to manufacturing

was unavoidable but we have managed to enter with the

and distribution of auto parts valued at US$81.8 billion,

minimum requirements that ensure our advantage as an

US$68.3 billion of which were exported. Of these exports,

auto parts manufacturer with decades of experience. At

90 percent were delivered to the US. By 2017, we expect

the same time, Mexico will start selling cars to Australia,

approximately 4-5 percent growth throughout the country,

Vietnam and New Zealand under much better tax

building on the strength of the US car-manufacturing

conditions.

segment and new plants constructed in Mexico. Q: What sparked the union of PAACE Automechanika and Q: What challenges might newly arriving companies face

ExpoINA?

due to excess human capital demand in certain regions?

A: Other automotive countries like Brazil, Germany and

A: While many young people are willing to enter the

the US have a large expo for the aftermarket segment

automotive

and

but Mexico had fallen behind. While four or five medium-

operators, their skills are not specialized. Most workers

sized events touch on this topic including ExpoINA, most

need six to 18 months of training to be adequately

companies do not have the resources to invest in all of

prepared to enter the sector. This is an industry-wide

them. We started the ExpoINA project to gradually merge

issue, and we are working with the Ministry of Education

several entities to create one large auto parts event. For

to find a solution. The English language is a continued

now, PAACE Automechanika was the best candidate to

area of opportunity as well, although President Enrique

fuse with ExpoINA but one day we hope to unite all the

Peña Nieto has already established it as a priority for

events together into one unmissable exposition.

industry

engineers,

technicians

VIEW FROM THE TOP

A STRONG SUPPLY CHAIN NEEDS FINANCING ALEJANDRO DÍAZ DE LEÓN 32

Director General of Bancomext

Q: How does Bancomext determine which sectors are

A: President Enrique Peña Nieto’s administration has an

priorities for its support?

extremely clear objective to use development banks as a

A: We have a clear mandate to promote export activity in

tool to deepen financial markets and financial penetration

a broad context including goods and services, as well as

in the country. This is even more crucial when considering

activities allowing for potential import substitution. There

some of the effects due to the changes in financial

are also specific niches Bancomext can cover and we

regulation. Capital and liquidity requirements have been

are particularly strong in financing green projects. Being

significantly increased for commercial banks and they have

a development bank owned by the federal government

become less willing to participate in long-term contracts.

helps us take advantage of financing provided by other

This is particularly unfortunate for project financing.

institutions in developed countries. This allows us to

When combining these regulatory effects with Mexico’s

deploy our resources to specific projects that help reduce

need to develop new business, a situation arises wherein

our carbon footprint and improve clean energy generation.

many new projects are in need of financing but there is less appetite from commercial banks to participate in the

Q: How have the administration’s economic reforms

supply chain’s growth, so development banks emerge as

contributed to the country’s development?

the frontrunners in this market.

A: There is no such thing as a quick fix. When evaluating the type of reforms Mexico has implemented it is clear the country

For Bancomext, it makes no difference where an OEM

has undergone two major periods of economic reform. One

or supplier wants to be located but we do try to be as

was carried out in the 1990s with the goal of establishing

helpful as possible in capital expenditure decisions. These

an open economy in trade and financial flows, consolidating

companies must consider a great number of variables

macroeconomic stability and averting the financial crises of

before

the previous decades. The reforms implemented in 2013 and

railroads and ports. Wherever the company chooses to

2014 complement those prior reforms and work more on the

invest, we are more than happy to follow them.

making

decisions

about

logistics,

suppliers,

non-tradeable part of the economy. Q: How can Bancomext help boost technological Q: What role has Bancomext played in the automotive

sophistication in the automotive industry?

sector’s boom and in access to financing for OEMs?

A: Private sector organizations in both the aerospace and

A: OEMs have plentiful and readily available financing

automotive sectors are generally optimistic since they feel

sources but this was not always the case. Bancomext played

there is international recognition regarding the quality of

a key role in the development of the automotive sector.

high-scale manufacturing in Mexico. A decade ago, cars

Some of the support we previously provided matured and

built in Mexico were mainly small low-cost sedans. Today, the

was amortized. Now that we are seeing happier days for

main luxury brands and SUV models are also manufactured

OEMs, we are trying to focus on consolidating the supply

in the country, which illustrates a clear increase in local

chain. As a result, we have implemented different methods

added value. This is crucial for Mexico as a manufacturing

to more actively support smaller suppliers. Mexican

hub, primarily for North America. We have worked with

exports are a strong point but the country also imports

companies in this endeavor, examining how Bancomext

significant quantities of intermediate goods. This offers a

can play a greater role in the investment-attraction process.

clear way to identify how we can expand our activities and

We know companies tend to import capital goods and we

support the supply chain in diversifying further.

have not been as active in trying to examine that part of the equation. However, we believe we can significantly reduce

Q: To what extent do you engage with local governments

costs and improve the terms and financing conditions these

given the many hubs developing across the country?

companies have to meet to increase productivity.

VIEW FROM THE TOP

LOGISTICS IN SPOTLIGHT AS PRODUCTION RISES Andrés Lerch Partner, Advisory Services / Performance Improvement at Ernst & Young Mexico

Marcellus Van Eck German-speaking Business Network of Ernst & Young Mexico

Q: How modern is Mexico in terms of automotive

turnover from one company to another is considerable.

environmental regulations compared to international

Uncertainty fueled by desertion rates and talent exports is

standards?

palpable even within the companies themselves.

MV: Changes to the No Drive Day program in the second quarter of 2016 promoted the growth of the used vehicle

MV: Nonetheless, companies like Audi are now introducing

market. The government now has to mitigate these negative

training centers in Mexico to prepare their workforce before

effects. Several European countries have tackled comparable

starting their operations. Those pioneering in this area

problems to counter any damage caused by fossil fuels by

are finding all the talent they need with surprising ease.

offering incentives to buyers of electric and hybrid vehicles.

These companies are open to working with universities to

Germany has set a goal to switch 15 percent of its vehicle

develop human capital adapted to their specific situations.

park to electric technology by 2020. This is supported by a strong charging infrastructure throughout the country,

Q: How have industry developments boosted or hindered

which is one of the main areas of opportunity in Mexico. The

Mexico’s attractiveness to foreign investors?

domestic economy still needs to grow to give the population

AL: Companies keep investing in Mexico because of

broader access to electric and hybrid vehicles.

advantages including its privileged location and its specialized and qualified labor. Regional incentives are an attractive bonus

AL: Mexico may not be ready for a high percentage of

but only a few states can offer these types of benefits. The

electric vehicles but neither are many other countries. This

success that large OEMs and suppliers have enjoyed in Mexico

is not due to a lack of technology or economic barriers but

has also been a defining factor in this process. Automotive

acceptance of this technology. Culturally, we still prefer

companies have registered stable operations throughout the

gasoline cars for various reasons and without significant

years without any major resistance from unions and their

incentives that is not likely to change.

products have been well received both in the domestic and the international market. There may be problems to address

Q: What does Mexico need to do to be ready for upcoming

in terms of incentives but ultimately very few countries give

production increases?

away land to new investors.

AL: It is vital to expand the logistics network with roads and railroads, ports and dry ports. Existing infrastructure

MV: More than 500 German companies have made the

is barely enough and many highways are already showing

most of Mexico’s competitive advantages as a host

signs of overcapacity. Several investors are worried about

country for their manufacturing and assembly operations.

a lack of human capital to satisfy the production demand

Its proximity to the US and commercial relationships

that exists across the country. If we consider the total

afforded by free-trade agreements top the list. There are

number of engineering graduates minus the number of

concerns in terms of security but a shared expectation for

people leaving for specialized positions abroad, there is a

additional growth in Mexico outshines these uncertainties.

considerable deficit to address.

Volkswagen, has been in Mexico for more than 50 years, which was sufficient encouragement for Audi to invest in

Legitimate interest is evident from universities and

its new plant in San Jose Chiapa, Puebla. The company will

other academic institutions to organize and prepare the

export its products not only to the US but also to a host of

engineers needed by the industry. Nonetheless, companies

international destinations as it benefits from competitive

are becoming desperate to contract teams. Many entities

production and logistics costs. Investment is also flowing

are approaching students in the early stages of their

into human capital development. German companies,

education, training them in anticipation of a permanent

for example, are implementing a similar dual-education

contract after graduating. Competition is fierce and

system to that used in Europe.

VIEW FROM THE TOP

MEXICO WELL-POSITIONED DESPITE GLOBAL WEAKNESS ADRIAN DE LA GARZA 34

Macrofinancing Analysis Manager of Banco de México*

Q: How is the international economic and political picture

private sector has expanded steadily while interest rates

affecting the country’s development?

remain near historic lows and bank portfolios are in good

A: In general, the international economic and political

standing. In spite of the sharp depreciation of the peso, the

landscape this year does not support a stronger global

inflation rate has remained consistently below the central

economic performance in the near term. Aggregate

bank’s target of three percent for over a year now. Several

demand remains weak both in advanced and emerging

factors have contributed to these favorable economic

economies and growth forecasts have been consistently

results, including Banco de Mexico’s prudent and timely

revised downward in several countries. Although there

monetary policy actions, as well as the approval of several

have been some periods of relative stability in financial

crucial and transformative structural reforms, which set

markets, international financial indicators have often

Mexico apart from other emerging countries. The federal

reacted sharply to unimportant news and temporary

government has also acknowledged the need to adjust

shocks, such as minor fluctuations in oil prices. Of course,

to these challenging times, particularly regarding the

bigger events like the Brexit referendum results have also

environment of relatively low oil prices, and has made a

spurred market volatility. The uncertainty surrounding the

series of announcements that seek to strengthen its fiscal

US presidential election and the different policies that may

stance. Mexico’s international reserves also remain close to

be pursued by the eventual winner may also be a factor

historically high levels, just below US$180 billion, and the

that weighs on the minds of economic agents, particularly

International Monetary Fund (IMF) recently renewed and

business leaders who may choose to postpone their

extended the country’s flexible credit line to almost US$90

investment decisions until the path ahead looks clearer.

billion. This constitutes an additional line of defense the government can use, if needed. Mexico is prepared to

Small and open market economies like Mexico, which are

face the challenging international economic and political

tightly integrated into global value chains, are unavoidably

environment expected to persist in the short term.

prone to international economic and political events. Weak global demand has adversely affected international trade,

Q: What impact do you expect from the current dollar to

including that of our exporting sector. The decline in oil

peso exchange rate?

prices in 2014 and 2015 was reflected in a lower value for oil

A: Exchange rate movements are a shock absorption

exports that limited the federal government’s oil revenues.

mechanism that allows countries to adjust more efficiently

Following these events, emerging market currencies

to fluctuations in the macroeconomic environment,

recorded significant depreciations and the Mexican peso

particularly when currencies are allowed to float freely

was no exception. It is important to bear in mind that,

with little government or central bank intervention.

unlike most other currencies in developing economies,

Both currency appreciations and depreciations have

the peso is traded in forex markets 24 hours a day and is

advantages and disadvantages. If the peso were to

ranked first in operating volume among emerging market

appreciate against the dollar as in 2011, it would in principle

currencies and eighth overall. This underscores its ample

be cheaper for Mexican companies to purchase their raw

liquidity and market depth.

materials in dollars. This may benefit Mexican importers but it would become more expensive for companies

Mexico’s authorities have taken prompt action to face

abroad to buy Mexican goods and services, which would

challenges from abroad and the country is well positioned

thus hurt exporters in our country. In that same scenario

to weather these shocks. Amidst weak global demand,

of a stronger peso, it would become more tempting for a

domestic consumption continues to reach record highs.

Mexican family to take their children to the US on vacation,

The labor market has grown stronger, continuing to

and US holidaymakers would visit Cancun or Los Cabos

less due to higher costs. This means that US tourists

would not be spending their dollars on hotels, tours and

as a benchmark by major funds worldwide and has given

meals in Mexico, which could adversely impact Mexican

Mexico the opportunity to attract more investment. More

employment and business revenue.

recently, even amidst global economic and financial turmoil, Mexico passed several key and broad structural

In the case of a peso depreciation such as that experienced

reforms, which have already shown improvements making

in 2015-2016, the aforementioned effects would likely be

the domestic sector more dynamic and competitive. One

reversed. For instance, we have seen significant increases

such structural change was the financial reform. Among

in the number of international tourists visiting our country.

other benefits, it brought about significant modifications

Dollar remittances from abroad, which represent one of

to then-existing regulations to facilitate the expansion

the main sources of income for many families in Mexico,

of financial services to the nonbanking population who

also have grown significantly, both in dollar terms, largely

unfortunately still represent a large sector in the Mexican

thanks to the improvements in the US labor market,

economy. This also means there are significant business

and especially in pesos due to the greater number of

opportunities yet to be exploited.

pesos that one dollar can now buy. These factors may have contributed to supporting domestic consumption

The banking sector is well capitalized and credit to

throughout 2015 and 2016.

enterprises and households has expanded steadily at rates three times that of the economy, which includes auto

One potential negative effect of currency depreciation is a

loans. In the midst of the volatility of international financial

higher inflation rate, since the cost of goods denominated

conditions, Mexico has performed well in comparison to its

domestic

peers, illustrated by the evolution of various international

consumers. These effects have been limited both in

foreign

currency

becomes

higher

for

indicators such as the Emerging Market Bond Index or its

magnitude and in terms of the proportion of goods and

corporate counterpart. Even though Mexico’s public debt-

services affected.

to-GDP rate remains relatively low in comparison with other countries, the federal government has recognized

Q: What opportunities does Mexico have to strengthen

the need to improve its fiscal stance following an increase

its economic position following the approval of the newly

in debt levels in recent years and has announced measures

signed TPP agreement?

to this end.

A: Mexico has signed several trade agreements in the past few decades, which have sought to help Mexican companies broaden their horizons, diversify the set of goods and services offered in our country and reduce prices. An iconic example is NAFTA, which has been a boon to the Mexican economy and has considerably expanded the volume of trade and foreign investment here. The TPP gives Mexico a window of opportunity to access the biggest market in the world, including 800 million potential customers in 12 countries that account for close to 40 percent of global trade. This kind of agreement provides incentives for local companies to improve their production and logistics and become more competitive. The automotive industry in Mexico experienced this after the introduction of NAFTA and the industry performed

Mexico’s international reserves are close to historically high levels at almost US$180 billion

brilliantly thereafter. Mexico has consistently been among the top car manufacturing countries in the last decade and is

This macroeconomic environment has attracted renowned

improving, though there is still significant room for growth.

multinationals in the automotive industry as significant investments have taken place in the last few years and

Mexico possesses competitive advantages that should

others are expected in the near future. Of course the

help build an even stronger macroeconomic framework.

impact of the TPP on the Mexican auto sector will depend

After the global financial crisis, the country promptly

on the final results of ongoing negotiations but even

took action to improve its economic stance. One event

if changes emerge, I am positive that the automotive

that showcased this was the addition of Mexican peso-

industry in Mexico will continue to prosper.

denominated debt to Citigroup’s World Global Bond Index in 2010, shortly after the crisis. This index is used

*All the opinions are the responsibility of the author, and do not necessarily reflect the views of Banco de México.

VIEW FROM THE TOP

A PROMISING FUTURE FOR THE DOMESTIC MARKET GUILLERMO PRIETO Executive President of AMDA

Q: In terms of results and objectives reached, how would

on used vehicle imports, as well as economic growth in

you evaluate the Mexican automotive industry?

Mexico. Five years ago, financing represented 42 percent

A: Car sales surpassed 1.35 million in 2015, representing

of sales, whereas at the end of 2015 the figure was 62

19 percent growth compared to 2014. The market took

percent. Mexico should see financing for up to 80 percent

almost 10 years to recover its expected level of domestic

of its units, allowing the country to sell at least 200,000

sales after the economic crisis of 2008, this despite the

more vehicles annually.

size of Mexico’s economy, its GDP per capita and the high purchasing power of the population. Coordination

Q: Which internal policies could benefit the domestic

between several sectors of the industry was necessary to

market this fiscal year?

achieve this common goal.

A: Eliminating the road tax would be an important step but that must be decided by each state individually.

In 2012, before the new government took office, a

Higher limits for tax deductions, which were adjusted

document was developed called Dialogues with the

last year from MX$135,000 (US$7,941) to MX$175,000

Automotive Industry. This national plan was created by

(US$10,294) should be increased even further to boost

the Ministry of Economy with the intention of aligning

vehicle ownership. Unfortunately, we are still affected by

distributors, manufacturers, logistics fleets and all other

used vehicle imports. The impact of these units on safety,

players in the industry. The Ministry of Finance, the

pollution and the aging of the vehicle park is the result

Mexican Revenue Service (SAT), the Federal Attorney’s

of up to 1 million imported vehicles on the road. Should

Office of Consumers (PROFECO), the Ministry of the

policies continue to minimize the influx of imported units

Environment, the Ministry of Labor, the Ministry of

and fairly reflect the requirements that the US asks of

Public Security and the Ministry of Transportation and

Mexican exports, we could reduce the problems. The

Communications also collaborated in the development of

situation was worsened by 90 percent of the units being

this initiative.

imported under a special legal status.

Representing 4 percent of Mexico’s current GDP and

We need to be sure that everything that crosses the

23 percent of manufacturing GDP as the fourth most

border meets the minimum standards that would protect

important exporting industry, not to mention a significant

our air quality and road safety. Environmental concerns

employment generator, the automotive industry is a

are even graver in the cities closest to the Mexican

growth catalyst that authorities have welcomed with open

northern border, which are almost twice as polluted as

arms. With such impressive growth, the big questions now

the rest of the country.

address the true potential of the domestic market. Sales should be between 1.8 million and 2 million units and we

Q: How is AMDA preparing the legislative landscape for

aim to reach those numbers in three to five years.

the automotive industry? A: Companies must comply with the Data Protection Law,

Q: How has the automotive market evolved in terms of

as well as reports regarding money laundering, Public

financing market penetration?

Vehicle Registration (REPUVE), employees’ medical

A: In the distribution sector specifically, the consolidation

and pension contributions and environmental norms.

of close to 40 brands led to 1,900 dealerships offering

All distributors can download the AMDA Legislative

approximately 500 models with up to 2,000 versions.

Compendium and all companies that are considering

The key automotive players have firmly established their

entering the sector can read about the adjustments and

stronghold on domestic industry. These numbers are a

new laws that relate to the industry in a newsletter that

result of increased availability of car loans and controls

we send out every month.

The consolidation of close to 40 brands led to 1,900 dealerships offering approximately 500 models with up to 2,000 versions

We offer multiple training and information sessions across

we have plenty of car transporters in dealerships ready to

the country to educate dealerships about the laws they

distribute the product, infrastructure needs to get up to

must comply with. There is considerable urgency to

speed with automotive sales.

improve data processing and storage across all sectors. Information that dealerships must report to REPUVE,

Hampered by the Fiscal Reform released in 2014, consumer

SAT and the Unit of Financial Intelligence, among others,

confidence dropped in the first quarter of the same year.

could be condensed to make the data more accessible,

The negative index of -0.3 percent inconsumer confidence

facilitating transparency. If we can make processes

during the first half of 2014 was a first for Mexico, inevitably

simpler for companies, they are more likely to comply

reflected in vehicle sales. Unsurprisingly, the first half of

with regulations.

2015 looked positive compared to the previous year but interestingly, double-digit growth continued throughout

Q: What do you predict will be the most important

the rest of the year.

automotive trends? A: Assuming an integrated political plan, we hope to see an

We forecast between 2.2 and 2.4 percent growth in the

improved mobility system in the country. This should lead

Mexican economy for 2016. This is above the growth of many

to more appropriate light and heavy vehicle distribution.

comparable countries, thanks to strong public financing

We need to prepare for the foreseen influx of hybrid and

schemes, stable banking policies and reforms that should

electric vehicles, as well as trends toward vehicle sharing

encourage economic growth. For this reason, Mexico will

and services such as Uber.

easily reach 3 or 4 percent growth by 2020, and thus the ambitious target of 1.8 million automotive units. Growth

More efficient distribution centers must be built in the

now is concentrated in the north of the country but this

near future because stepping up from 1.3 million cars to

ought to be more evenly distributed across states so that

2 million will be no mean feat. Traffic levels at rush hour

the entire population can benefit from the infrastructure

already see commuters at close to a standstill. Although

and job creation coming from the automotive sector.

VIEW FROM THE TOP

AGING VEHICLE PARK TO BE AN ONGOING ISSUE ALEX THEISSEN President of ANTP

Q: From a user’s standpoint, what is your position on the

for this program, this is a good problem to have and we

implementation of the NOM-044 regulating hydrocarbon

can then offer a solution.

emissions? A: Our position is that the availability of ultra-low sulfur

Q: What are the biggest opportunities that ANTP sees in

diesel (ULSD) must be secured before the legislation

logistics and infrastructure?

is established. We came to an agreement with the

A: The country’s infrastructure is facing its biggest

government for the NOM-044 not to be published until it

challenge as a result of the rules that have been traced out

reflected the industry’s reality. Both the government and

so far. NOM-012, which regulates weight and dimensions,

the industry must come to an agreement and I believe this

limits specific connectivity between main and secondary

will be achieved by the end of 2016. The government is

roads. The system is not yet well organized and there is

trying to solve the recurring air quality problem but the

no process in place to obtain the necessary permits. ANTP

aging vehicle park and vehicle costs must be taken into

developed road infrastructure connectivity software in

consideration for the NOM to have a positive effect. If

response to this gap and we presented it to the government

we do not have the right fuel, we cannot implement new

with the help of other automotive associations.

technology. Hence the issues caused by an aging vehicle park will continue to affect the country.

Q: What are ANTP’s main priorities for 2016? A: Our number one priority is always to improve safety.

We are ready to help and create laws that can be upheld.

We will promote this through our National Safety Award,

When countries in Europe and North America move toward

which has grown more than we expected leading us to

new technology advancements, they do so with a vehicle

implement stricter requirements for potential recipients.

park that is not as old as ours. Our transportation is less

The safety-related regulation ISO 39001 uses the same

efficient and legislation must take that into account. Mexico’s

basic criteria as ANTP when distributing approvals, such

fleet averages 17 years of age, compared with seven years

that companies that are granted the National Safety

in the US. Furthermore, although vehicles in the US may be

Award will also receive their ISO 39001 certification after

more expensive, the country’s infrastructure and driver skills

filing an application. The global market is moving toward

allow companies to use their assets for a longer period.

bigger vehicles, provided logistics efficiency improves. If we do not reach high-efficiency standards, production will

Q: What strategies are being implemented to improve the

migrate to other countries. We have found that double-

age of Mexico’s vehicle park?

trailer combination vehicles cover all the necessary

A: The industry’s associations suggested a two-stage

requirements to achieve this.

renovation scheme, which has already been accepted by the government. Instead of purchasing a new vehicle, users

ANTP is also working to certify the industry as a whole.

could upgrade to preowned technology, which would

Companies that do business in the US must acquire US

come from users ahead of the technological curve. After

certifications so it would be logical to introduce similar

selling their used trucks of no more than eight years of age,

regulations in Mexico. Transport associations must work

the larger fleets could apply for an incentive to acquire

together to foster these initiatives and ANTP will continue

a new vehicle. These steps allow the inclusion of new

to work in the National Freight Forum. This is one of the

vehicles and the removal of older models. Unfortunately,

industry’s biggest pursuits. Similarly, we will be working

private fleets are not subject to this program but we are

at this year’s Logistics Summit and at Expo Mexico. At

working to solve this. The industry as a whole can benefit

ANTP, we are interested in road safety, protecting the

from these fleet renewal mechanisms. If the Ministry of

environment,

Finance runs out of funds to cover the market’s demand

competitiveness in Mexico.

improving

infrastructure

and

industry

VIEW FROM THE TOP

SCRAPPING THE PAST TO DRIVE THE FUTURE MIGUEL ELIZALDE LIZÁRRAGA Executive President of ANPACT

Q: How has the exchange rate affected the heavy vehicle

unit made available usually by larger enterprises. As a

market in Mexico?

result, each company can renew their fleet at a different

A: Most heavy duty vehicles are priced in dollars, which

rate based on their economic possibilities, ultimately

has impacted each company differently depending on

energizing the secondary market of heavy duty vehicles.

the commercial strategy that each enterprise employs.

While smaller companies purchase these used vehicles

The situation has become an issue for the entire market.

at a more competitive rate, larger companies receive

Through the scrappage scheme, associations like ANPACT

governmental incentives for passing these older vehicles

expect a minimum incentive of MX$250,000 (US$14,700)

on to be used by companies with limited spending power.

per vehicle. In January 2015, this represented a little over US$18,000 at the exchange rate of MX$13.5 for every

We have yet to complete a behavioral analysis as the chain

dollar, but the figure has dropped to just over US$13,000

program began in December 2015 but we are optimistic.

without the government adjusting the exchange rate.

The Ministry of Finance held a meeting in February 2016 in which the committee discussed different ways to enhance

Trucks and buses are valued in dollars as well as most

the chain program. For now, this plan will only cover

components. Therefore, the peso’s instability does not

trucks registered by the federal government, assuming

benefit anybody within the segment. The current conditions

the program is established at a federal level. There is still a

cause planning instability for transport companies and the

proposal to not only consider federal license plates but all

industry as a whole. If the country manages to stabilize the

state license plates with a federal permit and to improve

exchange rate, transport companies will be able to plan

other areas of the plan that could promote the scrapping

and respond much better to market fluctuations.

of more vehicles.

Q: What are the expectations for the development of the

Q: What other factors should the industry evaluate to find

heavy duty industry in 2016?

ways to boost the renovation of the heavy vehicle park?

A: Compared to ANPACT’s most profitable years in 2007

A: We must closely monitor used vehicle regulations while

and 2008, we saw sales decrease by 30-35 percent in

working toward our environmental goals. Otherwise, more

2015. Although sales have dropped for two years in a row,

used vehicles could be imported from the US since those

the tide is finally turning, although no major improvements

units do not have to comply with the NOM-044 regulation

will be seen before the end of 2016. However, key players

that is applied to new vehicles. To reduce emissions in

in the industry believe that sales will grow very little. This

Mexico, we must extend our focus beyond the 42,000 new

will only change if an external entity boosted the industry.

vehicles sold between January and July of 2016 to the

This could be either better governmental financing or an

more than a million used vehicles with obsolete technology

enhanced scrappage scheme.

being driven every day throughout the country.

Q: How has the scrappage scheme evolved since 2015? A: The scrappage scheme has already destroyed an estimated 40,000 vehicles, proving that the interest in renewing the vehicle park is there. The plan changed in 2016 and we will see the “chain program” come into force. This program allows financially healthy companies to renew their fleet by selling their used vehicles and purchase brand new trucks. In return, smaller companies can purge their aging vehicles and purchase a used

An estimated 40,000 vehicles have been destroyed through the scrappage scheme

VIEW FROM THE TOP

UNITING TOWARD A COMMON GOAL MANUEL MONTOYA Director of the Automotive Cluster of Nuevo Leon (CLAUT)

Q: What opportunities are there that will allow the cluster

We have also pushed to build a center for tests and

to continue growing?

simulations in Nuevo Leon. The Ministry of Economy

A: As KIA is beginning operations in Nuevo Leon our

supported us with a grant of MX$15 million (US$882,000).

responsibility was to ensure a strong supply chain awaited its

On top of the contribution from members of the cluster

arrival. KIA has a 10-year plan to integrate Mexican suppliers

this grant has been spent on software licenses for the

into its permanent chain but the cluster intends to help

varied packages required by OEMs. A group of companies

accelerate this process, especially with Tier 2 companies.

with a special interest made financial contributions to the

We see the greatest opportunities for new companies or

project and we expect they will make extensive use of

existing suppliers in supplying plastic injection, machining

this facility.

and die stamping services. The cluster’s input will primarily involve connecting relevant industry players, helping them

Q: As the first in Mexico, how have you perceived the

improve their manufacturing systems and ensuring they

growth of the other automotive clusters?

have all the necessary equipment to produce quality pieces.

A: Three years ago we began working with the Guanajuato cluster, which has already established an admirable

Q: How have the Nuevo Leon cluster’s members acted to

number of companies and has committees in place that

discourage OEMs from bringing raw material suppliers

led to it being labeled the fastest growing cluster. CLAUT

from their countries of origin?

also supported the novice clusters in the State of Mexico

A: Many foreign companies see the steel sector as deficient in

and San Luis Potosi in 2015, which are in the first stages

Mexico. Until two years ago 100 percent of the steel involved

of consolidation. Our input to the network has been

in vehicle manufacturing was imported. Ternium began to fill

primarily administrative and management advice, as well

that gap in the market with an investment of US$1.1 billion.

as regulations through committees. There are operational

This pushed the company to penetrate the import segment

dynamics that affect us all as an industry, motivating

successfully. A lack of technology was another hurdle that

CLAUT to contribute to the country as a whole.

Ternium solved by orchestrating a joint venture with Nippon Steel. Ternium is now supplying several assembly plants and

Q: What are your expectations for the industry and for new

has access to the entire market. The construction company

projects that will be launched in Nuevo Leon in 2016?

Frisa has also invested heavily in providing a specific type

A: Any growth needs to be achieved through sustainable

of steel for metalwork tooling, which was a previously

effort. The state government has been part of the cluster

non-existent industry in Mexico. International players have

for the full nine years it has been operating and through

since arrived from Canada, Spain and Portugal, while some

two-way communication we ensure both the cluster and

Mexican companies have also started to enter the market.

the government are aware of each other’s needs. The automotive industry is unlikely to see a record-breaking

Q: How has the cluster promoted technology development?

year for growth in 2016, as it is beginning to reach the

A: Since we founded the cluster nine years ago we

point of saturation. There is a limit to the industry’s

have primarily acted toward the goal of evolving from a

capacity to provide for the US market. The integration

manufacturing hub to an engineering and design location.

of engineering, design and R&D facilities by existing

Mexican companies in the cluster have their own R&D

companies in the cluster would secure its sustainable

centers and we also hope to attract the engineering

growth. We are on the right track toward this target. The

divisions of all the non-Mexican players operating in

biggest opportunities are in supplying the new OEMs

Nuevo Leon. Navistar employed 100 engineers, who are

that are being established in the country and their Tier

working in the state’s Technological Innovation Park (PIIT)

2 suppliers. Our target is to unite the states of Mexico

designing projects for the US.

toward a common goal.

VIEW FROM THE TOP

UNITING CLIENTS WITH SUPPLIERS ANTONIO HERRERA President of the Queretaro Automotive Cluster

Q: What are the biggest areas of opportunity for the

Right now, the Queretaro Automotive Cluster has 51

local supply chain in Queretaro?

corporate members and six universities that contribute

A: While all direct suppliers have the technical and design

with training and courses. We offer our services to

abilities to address the needs of OEMs, few Tier 2 and Tier

more than 90 companies in the region. Our target is to

3 companies have developed enough to keep the market

consolidate and attract more members. We will develop

content. All Tier 1 companies need those companies for

a Supplier Committee with a division focused on Tier 2

smaller assemblies, tooling or maintenance but they do

companies alongside a new council focused on logistics

not usually have the production capacity to satisfy large

operations.

orders. SMEs tend to supply low volumes at high prices instead of committing to long-term and more competitive

Q: How could this forum promote the development of

contracts.

tooling specialists in the region? A: There is a clear need in the industry and it is a shame

We created the first Automotive Forum in Queretaro, as

few companies or people specialize in these types of

a way to find solutions to this problem. We unite clients

activities. Every player in the industry is worried about

with suppliers at an event that features exhibitions,

manufacturing parts but few people address the issue

conferences and presentations, as well as courses for

of how to produce and design the tools needed to

smaller companies. We merged different approaches,

manufacture these components. When we heard about

so we could create the perfect environment to highlight

the Queretaro Tooling Institute we immediately planned

the advantages of the local supply chain. Every OEM

how to build an alliance with it. The Institute embraced

has a defined supplier network so we invite them to

us straight away and they even invited me to be Vice

the event to outline what they look for in new suppliers,

President of the association. Its added value is that its

indicating opportunities for cost reduction and their

focus will not be limited to the automotive industry. The

needs for future projects. To date, the automotive

institute will be able to offer its services to all plastic and

industry imports roughly 68 percent of its components.

metal-forming companies in the region.

Any event to consolidate suppliers could have significant repercussions on local sourcing.

Q: What plans does the state have for the Queretaro Automotive University?

Q: How is Queretaro collaborating with other Mexican

A: There has been a change of heart about the creation of

clusters to promote the local supply chain nationally and

a Queretaro Automotive University. Local companies are

internationally?

looking for people who know how to design automotive

A: Our strongest bonds are with the automotive clusters

components, tooling equipment or that have a certain

of Guanajuato (CLAUGTO) and Nuevo Leon (CLAUT).

level of expertise in production lines. Consequently, an

We are boosting our connection with San Luis Potosi

engineer from the Queretaro Automotive University would

as their cluster is still very green. We have helped

be over or even wrongly qualified for those positions. The

them overcome many of the obstacles we once faced.

industry needs more mechanical, electronics, plastics

Similarly, we still need to strengthen our relationship

and chemical engineers, specializing in automotive.

with Aguascalientes and the State of Mexico. Despite

These degrees exist in at least one of the 17 academic

being a small state, we are surrounded by large clients in

institutions in Queretaro. The state is developing a new

Guanajuato, Puebla, Aguascalientes and San Luis Potosi.

strategy involving all universities in the region. They

The lack of an OEM in the state has not been a hindrance,

are creating a network that will direct companies that

and we supply most of them thanks to our privileged

are recruiting to the institutions that produce the best

geographic position.

engineers in each vocational specialty.

PLANT SPOTLIGHT

MAZDA DE MEXICO VEHICLE OPERATION (MMVO) Already

known

for

its

culture,

architecture

and

gastronomy, Guanajuato has added manufacturing to the menu thanks to the booming automotive industry. The state is home to some of the sector’s world-class facilities and with Ford’s and Toyota’s latest investment announcements,

Guanajuato

will

home

six

automotive OEMs. Mazda Motor Corporation is among those who have chosen to produce here. Along with Sumitomo Corporation, the automaker picked Salamanca, Guanajuato, as the ideal location for a plant that now produces the Mazda2, the Mazda3 sedan and hatchback, plus the Yaris-R for Toyota. Led by President and CEO Chiharu Mizutani, the plant is 70 percent owned by Mazda and 30 percent by Sumitomo. Mazda de Mexico Vehicle Operation (MMVO) now supplies more than 50 percent of Mexico’s demand for Mazda vehicles. The joint venture broke ground in October 2011 for what would become a US$770 million investment. By the time the plant was officially inaugurated by President Enrique Peña Nieto in February 2014, it was already manufacturing the Mazda3 and had established an agreement with Toyota for the annual production of 50,000 vehicles. In October 2014, Mazda announced a line expansion that would take the plant’s capacity to a total annual production of 250,000 units, now including the Mazda2 and the Toyota models. Mazda also launched a new shop for motor machining before the end of the year. These new capabilities required a bigger workforce, leading to the creation of 600 more jobs to total 5,200 employees. The plant reached an accumulated production of 100,000 units in December 2014 and acquired ISO 14001:2004 and ISO 9001:2008 certifications. Six months later it doubled its accumulated production and a year later it had produced 300,000 units. During 2015, the plant also incorporated the production of the SKYACTIV 1.5-liter diesel engine. This 4-cylinder greatly

improves

performance

and

optimizes

fuel

efficiency. The Yaris-R, known as Scion iA in the US market, also joined the line. By July 2016, the Salamanca plant had achieved a total of 400,000 accumulated units for all its models.

LIGHT VEHICLE MANUFACTURING

The automotive industry contributes almost 20 percent of the manufacturing sector’s total contribution to GDP and 3 percent of the country’s total. It is no surprise the industry has become engrained in the economic heart of the country. Since NAFTA was enacted in 1994, a total 44,458,064 units have been assembled in the country. Light vehicle manufacturing has registered steady growth, outside a drop of 2 percent in 2013. A considerable number of trade agreements and a prime geographic position have helped make Mexico a hub for OEMs, and their key gateway to northern and southern markets.

This chapter focuses on the business opportunities OEMs have found in Mexico as they set down the foundations for future growth. Also highlighted are the challenges they face and their short-term expectations for a thriving industry.

CHAPTER 2: LIGHT VEHICLE MANUFACTURING 48

ANALYSIS: Rising Domestic Sales Counter Falling Exports

VIEW FROM THE TOP: Radek Jelinek, Mercedes-Benz México

VIEW FROM THE TOP: Mayra González, Nissan Mexicana

ANALYSIS: Nissan’s 2016 Journey

VIEW FROM THE TOP: Gabriel López, Ford de México

VIEW FROM THE TOP: Francisco Garza, GM Mexico, Central America and the Caribbean

VIEW FROM THE TOP: Andreas Hinrichs, Volkswagen de México

VIEW FROM THE TOP: Dr. Alexander W. Wehr, BMW Group Mexico, Latin America and the Caribbean

INSIGHT: Success for a Japanese Giant, Honda de México

VIEW FROM THE TOP: Philipp Heldt, Infiniti Mexico and Latin America

VEHICLE SPOTLIGHT: KIA Forte 2017 Hatchback

VIEW FROM THE TOP: Miguel Barbeyto, Mazda de México

VIEW FROM THE TOP: Manuel de la Torre, KIA Motors México

VIEW FROM THE TOP: Tom Sullivan, Toyota Motor Sales de México

INSIGHT: Powering Recreation on Land, Air and Sea, BRP

TECHNOLOGY SPOTLIGHT: PPG’s Envire-Prime EPIC

ANALYSIS

RISING DOMESTIC SALES COUNTER FALLING EXPORTS vehicle

KIA’s facilities in Nuevo Leon and the upcoming opening

manufacturer was untarnished in 2016, but a shift may be

of Audi’s plant in Puebla will add to domestic production

afoot. At the beginning of the 21st century, perceptions

numbers, helping the country counter negative figures in

began to change as the domestic market surpassed 1

previous months.

Mexico’s

reputation

export-oriented,

million units sold in 2004. The global economic downturn 48

of 2008 sent sales figures tumbling to levels not seen since

Only 630,935 of the 3.4 million units produced in Mexico in

1999. Almost eight years later, home demand is again on

2015 were made for domestic consumption. The remaining

the upswing, and in force. After a record 2015 with more

2.7 million were exported, representing a 4.4 percent

than 1.3 million units sold, the industry is eager to make

increase on 2014 export numbers. But between January

history with forecasts expecting 1.5 million units sold in

and July 2016 the country witnessed a reduction of 4.8

2016.

percent in exported units compared to the same period in 2015. More than 80 percent of Mexico’s exports are

The early numbers suggest 2016 is on pace to meet the

destined for the US and Canada. The decrease in oil prices

projected goal. In the first half of the year, the industry sold

has generated a specific interest in larger vehicles including

100,000 units more than in 2015. In July alone, consumers

light trucks and SUVs while Mexico mainly concentrates

picked up 131,764 units, including light vehicles and light

on exporting light vehicles, leading to a significant impact

trucks, representing a 17.9 percent increase over the same

on demand for local production. Regardless of global

month a year ago. By the end of July, 853,620 units had

conditions, OEMs continue to invest in their Mexican

rolled out the door, 132,081 units more than what was

production sites, which is a sign of faith in the country’s

commercialized in 2015.

production future.

Mexican consumption patterns are being positively altered by the emergence of newer technologies. The Toyota

LIGHTVEHICLE VEHICLEPRODUCTION PRODUCTIONIN INMEXICO MEXICO LIGHT (JANUARY-JULY) (thousand of units)(THOUSANDS)

Prius has become an ambassador for hybrid technology in

350

Mexico, with 2,865 units sold in 2016. This has placed the

300

Prius as the second best-selling model in the high-end car segment, surpassing iconic vehicles like the Nissan Altima. The growing preference for hybrid models has its roots in environmental conditions and the subsequent public policy that affected Mexico City in the second quarter of the year.

250 200 150

Increased vehicle offerings, fewer imported used cars and

100

loan accessibility has led to an overall increase in domestic

sales. However, even if the domestic market reached 1.5 million units sold, it would still be 400,000 units away from its true potential of 2 million units. While sales might have been affected by the 2008 economic downturn, production of light vehicles came out almost intact and has experienced constant growth over the past years. In 2015, Mexico became the seventh largest car manufacturer globally. Should global economic trends continue, the end of 2016 could see Mexico crowned as the sixth biggest light vehicle producer. The country also promises an overall production target of more than 5

JAN

FEB

MAR

APR

MAY

JUN

JUL

JUN

JUL

LIGHTVEHICLE VEHICLEEXPORTS EXPORTSIN INMEXICO MEXICO LIGHT (JANUARY-JULY) (thousand of units) 300 250 200 150 100

million units for 2020. In spite of a 3.3 percent reduction in the number of manufactured cars between January and July compared with 2015, AMIA reported an increase of 1.9 percent in light truck production. Industry analysts are still optimistic and forecast at least the same 3.4 million units that were produced in 2015. The inauguration of

50 0

JAN

FEB

MAR

2015 2016 2016 Source: AMIA

APR

2015

MAY

VIEW FROM THE TOP

TRADITION MEETS INNOVATION IN A CHANGING WORLD RADEK JELINEK President and Director General of Mercedes-Benz México 49

Q: How has the transition to Mercedes-Benz’s new

It was a home run for Mercedes. We are now promoting

administration evolved?

our Formula 1 success in advertising campaigns, inviting

A: There is a growing need for digital interaction and we are

drivers Lewis Hamilton and Nico Rosberg to new launches

now working much more closely with our financial services

and featuring them in special videos. It is not only that

branch. My goal is to prepare Mercedes-Benz for the next

we are winning but how we are winning that attracts

10 years. We are working with our distribution network

potential customers. The new team has been amazing

and our entire supply chain to have truly integrated

and we are encouraged to feature the drivers as brand

teams. Mercedes-Benz has been growing, especially in the

ambassadors at our events. Rosberg is a Laureus Sport for

compact division. Our C-Class has been our best-selling line

Good Foundation USA ambassador so his participation in

but we have also seen a significant increase in popularity of

every race is crucial to the foundation. Mercedes-Benz’s

the AMG line and the G-Class. Mexico is a diverse market

racing technology will also contribute to its commercial

and I think the best opportunity lies in its industrialization.

line. Just as some developments originated in Formula 1,

The country’s growth has been considerable and we are

several technologies like our hybrid systems have gone

expecting this to continue in the short term, perhaps even

from our commercial line into the racing field. This specific

taking the country to the top eight industrial regions in the

trend has been criticized but I think it is a step in the right

world. Globally, we invested €5 billion (US$5.6 billion) in

direction. We can no longer put 10-cylinder engines in our

production facilities in 2015, bringing education and wealth

cars and while Formula 1 has to pioneer new technology,

to surrounding areas as a result.

there are few better ways to test hybrid technology.

Q: How does Mercedes-Benz balance its image as a high-

Q: How do you see the brand moving in design and new

end brand with the goal of reaching more customers?

models?

A: We have worked on that dilemma for several years, ever

A: From a design perspective, 2016 will be packed with

since we launched the C-Class in the ´80s and later the

new releases just as exciting as those in 2015. We launched

A-Class. Now we are defining a new idea of luxury. Modern

the new C Coupé in January and the new Smart Fortwo

luxury not only includes shiny and flashy features but also

and Forfour will follow. We also will launch a new GLS,

an adequate balance between work and play, as well as

the GLC Coupé, as well as several roadsters, like the S

safety and comfort for all passengers. People have changed

Cabriolet and the C Cabriolet, later in the year. Our most

and although we still have some traditional customers, most

important release will be the new E-Class in June which will

of our new clients have a more modern mindset. What all

be arguably the best car money can buy. The S-Class will

drivers have in common is the desire to feel connected

also be renovated, featuring amazing and sophisticated

with the brand, having the best car and the best service.

safety technology. This will be the first car whose airbags

Mercedes-Benz offers tradition combined with the highest

inflate before a collision and it will also feature acoustic

level of technology. We completely revolutionized our design

protection in case of an accident.

language when we launched the CLA and the A-Class. The sportiness of these cars allowed us to target a new

Technology and innovation will play a pivotal role in

unexplored market boosted by our quality, our technology

the industry’s development. The market is becoming

development and our strong presence in Formula 1.

increasingly digital so we need to change our own mindset and prepare for some disruptions. We are participating

Q: How have you built on your success at the 2015

in car-sharing services with Car2Go and also have a taxi

Formula 1 Mexico Grand Prix?

application called mytaxi. Mercedes-Benz is preparing

A: Mexico was probably the best Grand Prix of the year. We

for how the world is changing and anticipating what our

won first and second place so everything came together.

customers will need in the future.

VIEW FROM THE TOP

FRESH PERSPECTIVE, NEW IDEAS MAYRA GONZÁLEZ President and Director General of Nissan Mexicana 50

Q: As the new President and Director General of Nissan

following the best standards and offering the proper

in Mexico, what is your strategy to boost the company’s

training to manage points of sale.

presence in this market? A: Nissan has developed a long-term strategy to

To date, we have made an investment of more than

consolidate the brand in the Mexican market. Our

US$130 million to obtain the results we wanted, adding 40

innovative products have gained distinction, both in the

new dealerships throughout the country. Eventually, those

compact and SUV segments, and in the light commercial

efforts made our 25.7 percent market share a reality in

vehicle market with the NP300 pickup leading the

2015. We still have ambitious goals for the Mexican market

segment.

compact-oriented

and our financing arm will be a vital factor to make this

strategy focuses on modifications to the Nissan Sentra

happen. We see financing as a growth opportunity that will

and the Nissan Altima. This will boost their participation

allow us to explore new markets and reach demographics

in the market along with the Nissan Versa, which is the

that have not yet been targeted by Nissan.

This

year,

our

strong

top-selling vehicle in the Mexican market. Innovation has been the core of our growth here and although it is

The domestic market is growing immensely and for our

a small market, we increasingly are participating in the

brand to grow in line with that rate is amazing. Nissan sold

electric vehicle (EV) segment. Presently, eight of every

355,950 vehicles in its 2015 fiscal year, a quantity unseen

10 EVs sold in Mexico are Nissan LEAFs. Our distribution

since the 2008 financial crisis. While other brands focused on

network also has been crucial to Nissan’s success.

surviving, we pushed to keep growing in the market. That is

Nissan’s development strategy is based on strengthening

how we developed this strategic plan and how we managed

its network, finding the right locations for its dealerships,

to consolidate the name of the brand after all these years.

ANALYSIS

NISSAN’S 2016 JOURNEY When

several

factors

come

together

that

boost

top-selling brand in the country, selling 50,000 units more

performance, it equals success. For Nissan Mexicana,

than its closest competitor, GM, during the first seven

its successful 2015 was built on the back of a long-term

months of the year.

strategy

that

included

constant

innovation,

quality

customer service and focus on consolidating the brand

Mexico is dominated by compact vehicle sales so it is no

in the Mexican market. It registered 19 percent growth in

surprise that Nissan also leads this particular segment.

2015. Continuing that success is now the goal, and the first

The Nissan Versa is the top-selling model not only in this

quarter of 2016 showed early promise.

segment but in the entire light vehicle industry. In July 2016, Versa sales almost doubled the units of its trailing

Nissan’s 2015 sales of 347,124 units for the year helped

competitor in the compact segment. Regarding light

the company achieve a 25.7 percent market share. From

vehicle sales throughout the year, Nissan Versa led the

January to July 2016, Nissan sold 214,138 units, or 13.2

market in the first half by more than 9,000 units.

percent more than the 189,136 units sold in the same period in 2015. Should this trend continue, Nissan would

The SUV segment is also dominated by Nissan with the

easily surpass last year’s total. Nissan Mexicana is also the

X-TRAIL model leading the way on a 19.2 percent sales

Q: How did Nissan transform its image from a cost-

TOP SELLING NISSAN CARS (jan-jul 2016)

competitive brand to an innovative company with attractive products? A: We worked hard to match the rational part of our

Versa

brand with the emotional link we wanted to form with

47,669

our customers. It was crucial to develop this link without hurting our reputation for durability, reliability, quality and cost competitiveness that defined Nissan in previous years. We now talk about Nissan with an approach that reflects the experience and excitement of driving one of

Tsuru

our vehicles.

29,323

Q: How is the company balancing its manufacturing goals with marketing? A: The reality is that we do not sell more vehicles because we cannot produce any more vehicles. All our plants are

March

at full capacity and they only stop operations once a week

28,494

for maintenance. We are one of the biggest manufacturers in the country and by 2018 once the COMPAS plant starts operations, we expect to produce more than 1 million vehicles per year. Approximately 37 percent of our entire production will be destined for the domestic market, which no other local-based company is doing at the moment.

Sentra

23,099

One million vehicles is a considerable number given that we export to more than 50 countries. We expect the domestic market to keep growing in the near future. Q: Considering your ground-breaking position, how do you see gender equality evolving in the sector?

Tiida

A: Women need to stop seeing the automotive industry as

11,005

a men’s market. There are definitely more men but it is not an exclusive sector. Source: AMIA

increase in January-July 2016 over the same seven-month

and are expected to help Nissan reaffirm its leadership

period the previous year. Out of Mexico’s 10 most-sold

over this segment.

vehicles, five are produced by Nissan. Nissan has two models among the five most-produced in Nissan also leads Mexico’s vehicle production. From

Mexico. During the first seven months of 2016, the Versa

January to July 2016, the company manufactured a total

registered a production increase of almost 30 percent

of 489,802 units, which translates to 3.6 percent more

compared to the same production period in 2015 and it is

than what was produced in the same period in 2015 and

now ranked as the fourth most exported model in Mexico.

100,000 more than GM. Nissan manufactures 11 different

Between January and July 2016, the Versa registered an

models in its Mexican plants. It began production of the

increase of 22.5 percent of exported units over 2015’s figures.

new Nissan Kicks crossover in August 2016. Nissan Mexicana’s main export destinations are the US and Aguascalientes plant A1 will be responsible for the Kicks’

Canada, sending them more than 230,000 units between

global production and will have an integration of local

January and July 2016. It is the OEM that exports the

components of almost 90 percent. The Nissan Kicks

largest number of light vehicles in the Mexican industry and

will be first introduced in the domestic market and

the second largest exporter when combining light vehicles

South America, progressively moving into more than 80

and trucks. A company with a Japanese origin, Nissan has

countries. The Kicks will participate in the SUV segment

become the Mexican face of the automotive industry.

VIEW FROM THE TOP

INVESTMENT IN NEW MODELS TO REFRESH IMAGE GABRIEL LÓPEZ President and Director General of Ford de México 52

Q: What does Ford expect from its new investments in

overheads and efficiency of plants. There is little room for

Mexico?

improvement in Mexico as it is home to some of our most

A: Ford is expanding its diesel engine production capacity

efficient and highest-quality plants in the world.

in Chihuahua. In Hermosillo, Sonora we are completing projects to launch our 2017 models, which will give our

Q: What role does platform integration play in the

image and mechanics a significant boost. Every plant

company’s global vision?

has a continuous investment plan that involves capacity,

A: The industry is under a lot of pressure to comply with

production and quality. We made three investments in

regulations. It is probably one of the most regulated

2016, including our new engine plant in Chihuahua, the

industries in the world because international authorities

new transmissions plant in Irapuato, Guanajuato and

and

the new vehicle assembly facility in San Luis Potosi. The

sectors for climate change. The industry is responsible

construction of the projects in Chihuahua and Irapuato are

for 30 percent of total air pollution. Electricity generation

complete and we are installing the equipment. We plan to

stands out as a polluter because 50 percent of the energy

begin volume production in 2018, leaving time for dry runs.

generated in Mexico and the US is from fossil fuels.

environmental

organizations

blame

automotive

Burning carbon produces high levels of carbon dioxide yet Q: How is Ford increasing production in 2016?

it is subject to fewer regulations.

A: The second half of the year will not vary greatly from the first. Our production in Mexico is destined for the US

Regulations are already stringent and they will only

market, which is seeing a shift in preference because of

become stricter. Regions like China and Europe are

lower oil prices. Large vehicle demand has grown while

implementing aggressive limits on emissions that will be

the appetite for smaller units has shrunk significantly.

enforced over the next decade. This will increase costs due

Mexico’s car exports to the US, which are mainly in the

to the investment in research and development needed to

compact segment, have dropped. The industry here does

comply. Margins tend to be low to ensure competitiveness

not expect change in the short to medium term since

and certain automotive companies are concerned about

oil prices are expected to remain low for the next 12-24

being able to raise enough capital to adapt to these rules.

months. New production plants could offer better balance

Consequently, they seek associations to reduce costs and

in the current market by focusing on market demands.

develop their technology and installations with varying degrees of success. Ford plans to remain independent as

Q: How is Ford planning to strengthen its position in the

the company enjoys competitive advantages that keep it

Mexican market?

ahead of the industry.

A: Our objective is to satisfy the market as efficiently as possible. The Mexican market grew 18 percent more than

Q: Where are the most outstanding market opportunities

in the first half of 2015 but it does not come close to the

to promote innovation and add value to products?

US in price. Mexican market prices are dramatically lower.

A: Every area needs attention but regulations are so

Depending on the model, the difference in unit price can

aggressive that further development is difficult. In 2015 and

be US$3,000-10,000.

the first quarter of 2016, the North American automotive industry sold cars with an average fuel consumption

The dollar exchange rate volatility has created problems

of approximately 26mpg. Regulatory requirements for

worldwide. Most currencies have dropped in value to the

2025 will be 54mpg. Technological changes need to be

dollar, creating economic uncertainty. The automotive

so significant they hardly seem attainable. However, as

industry is always trying to improve competitiveness

technology improves consumption will shift toward hybrid

through incentives and projects developed to improve

cars and more efficient internal combustion engines.

VIEW FROM THE TOP

SEIZING OPPORTUNITY IN A RISING MARKET FRANCISCO GARZA Vice President of Sales, Service and Marketing of GM Mexico, Central America and the Caribbean 53

Q: How has GM tailored its marketing approach to the

affecting the domestic automotive industry. In 2015, the

local market?

number of used cars imported to Mexico was reduced by

A: Offering quality vehicles is not enough to differentiate

almost 70 percent and we saw an additional 20 percent

ourselves from our competitors. Aftersales service is vital. The

reduction in the first half of 2016. The second factor is the

Customer Experienced service is one of our global strategies,

growth of financing options broadening the possibilities

with the goal of improving our customer satisfaction metrics

of acquiring new vehicles. New car loans have grown by

on service and sales. It focuses on increasing customer

almost 30 percent compared to 2015, while GM Financial

loyalty and understanding changing consumer dynamics.

is experiencing growth rates over 50 percent.

Given the daunting market conditions in Mexico, wherein 45 brands are positioning themselves in the automotive

Domestic vehicle demand has also stabilized. The market

industry, we consider our growth to be a success. New

should demand approximately 1,800,000 units and in 2016

generations of products in our portfolio have had positive

sales should reach almost 1,600,000 commercialized units,

customer feedback. Chevrolet Spark, for example, integrates

demonstrating the remaining potential in the industry. GM

technological innovations such as phone projection, boosting

attained 18.1 percent growth in sales volume by the end

the vehicle’s connectivity. We are also presenting new

of 2015, resulting in a market share of 18.5 percent for

generations of Chevrolet Malibu and Chevrolet Camaro. The

the year. Combined with our continued expectations for

product portfolio from Chevrolet, GMC, Lincoln and Cadillac

industry growth and our planned commercial and portfolio

provides us with competitive market participation.

strategies, we forecast a market share increase of at least 0.1 percent resulting in approximately 15,000 more untis.

Q: What is GM’s strategy for commercializing its electric vehicles?

Q: How is GM projecting a modern image versus the

A: GM has a responsible stance toward the commercialization

arrival of new car brands in the country?

of new mobility technology. In the case of electric vehicles

A: Since 2011, our dealers have invested in modernizing

such as Chevrolet Volt we provide our clients with two

their facilities, updating their workshops and implementing

charging stations, a portable station and another fixed

digital

at their homes. We have selected specific dealers in the

increasingly connected in the digital era we are shifting

most important cities of the country, prompting higher

our strategy toward mobile devices. Every year, our

demand for our electric vehicles than expected. Our clients

investment in digital media increases. OnStar is an example

adopt the technology we propose and there has to be a

of innovation from GM. This service is state-of-the-art

joint effort between GM and the authorities, such as the

technology that works by pushing a button in the rear-

Federal Electricity Commission (CFE) or the Ministry of

view mirror, allowing the customer to receive personalized

Environment and Natural Resources (SEMARNAT), the

emergency, security, navigation and connectivity service.

platforms.

Having

seen

that

customers

are

Ministry of Economy and the Treasury to structure a longterm plan regarding electric and hybrid vehicles.

Q: What is GM’s next opportunity to innovate? A: The millennial generation represents an important

Q: What are GM’s growth expectations for the end of

percentage of global consumers who have different

2016 and for the next five years?

consumption habits and needs to previous generations.

A: The acceleration of the Mexican market is encouraging

They have closer relationships with technology and

and GM is seeing double-digit growth. This development

we need to appeal to them, while anticipating future

can be explained firstly by the decrease in used car

consumption trends. There are two different generations

imports from the US. The federal government made

of consumers and we need to consider both when

waves eliminating this condition, which was negatively

designing products and services.

VIEW FROM THE TOP

VOLUME MODELS DEBUT INNOVATIONS ANDREAS HINRICHS CEO of Volkswagen de México 54

Q: How has the Tiguan Long Wheel Base (LWB) production

Q: How is Volkswagen collaborating with suppliers to

changed

achieve its connectivity goals?

Volkswagen’s

priorities

ensure

healthy

operations going forward?

A: Volkswagen was recognized by the Center of Automotive

A: To ensure efficiency and competitive costs, we work

Management as the “most innovative high-volume brand”

with Volkswagen Group of America to define the best

and as brand leader in conventional drive systems and car

routes and vehicle delivery points. Recently, we integrated

connectivity. The focus was on the Tiguan, Touran and

new railroad equipment called Automax, which is a wider

Sharan. The jury of AutomotiveINNOVATIONS justified the

and more secure container for the vehicles. We are also

award in the most innovative high-volume brand category

supporting outbound planning for Audi Mexico and intend

by the fact that during the period of analysis, Volkswagen

to use the port of Lazaro Cardenas to export vehicles to

came up with 89 new elements as well as the most high-

the American West Coast instead of by train.

quality innovations, including 15 debuts. The innovations rated highly were Park Assist, the City Emergency Braking

The Tiguan LWB will be the second model to be

function and the Traffic Jam Assist. The Volkswagen

produced in the Puebla plant on the Modular Transverse

Group is continuing the digitalization of its brands. Our

Matrix platform. We gained enough expertise with the

focus is always on our customers for whom comfort,

Golf VII to face the challenge of producing a second SUV

safety and energy efficiency are crucial. Volkswagen

based on this platform. After reaching 11 million vehicles

has also nominated 55 strategic suppliers for 61 fields of

in May 2016, the plant is producing 1,900 vehicles a day

competence under its Future Automotive Supply Tracks

and preparing for a successful start to production of

(FAST) initiative. The goal is to implement technological

the Tiguan LWB next year. The construction of the body

innovations even faster than before.

shop concluded at the end of 2015 and equipment and machinery installation is nearing completion. The first test

Q: What design changes shape the brand’s recent models?

body was built on June 10, 2016 to check the calibration

A: To quote Klaus Bischoff Head of Volkswagen Design:

of body shop equipment and processes. Our priority for

“We have formulated characteristics in our design criteria

next year is to ensure a successful start to production for

that follow a clearly defined set of values representative of

this new model.

the brand. This includes the translation of brand values into design values, which we then put into practice. The issue of

Q: How has Volkswagen’s Think Blue. strategy developed

formal sustainability is also synonymous with the Volkswagen

and impacted new projects?

Design. It means the aspiration to provide timelessness

A: With Think Blue. Factory., Volkswagen launched the first

and iconic quality, which we document in every one of our

holistic environmental program in automobile production.

vehicles. We also set extremely high design precision, both

Since its introduction, resources have been used more

on the exterior and inside, which the customer experiences

efficiently and emissions reduced in all Volkswagen

as quality in every dimension. This aspiration extends through

factories around the world. From 2010 to 2015, our

to the interface design and its operating philosophy or the

environmental impact has been reduced worldwide by 25.3

digital user interfaces in the vehicle, which have an extremely

percent per vehicle or component produced. Volkswagen

high level of aesthetic quality at Volkswagen.”

de México has contributed to this goal by lowering its main environmental indicators. Those limited were energy

The Volkswagen Group is planning a broad-based initiative

consumption, CO2 emissions, waste production, water

in electric and hybrid models. It intends to launch more than

consumption and solvent emissions. We generated 6.29

30 battery-powered electric vehicles over the next 10 years.

kilograms of waste per unit manufactured in 2010. In 2015,

The company estimates such vehicles could then account

the waste generated was almost zero.

for around a quarter of the global car market.

VIEW FROM THE TOP

PREPARING NOW FOR THE NEXT 100 YEARS DR. ALEXANDER W. WEHR President and CEO of BMW Group Mexico, Latin America and the Caribbean 55

Q: How will the recent change in administration impact

i8, encompassing BMW’s “the Next 100 Years” strategy.

BMW’s operations in Mexico?

However, we cannot simply place an electric car on the

A: The company’s priority in the region is to consolidate

street. It takes everyone’s contribution including industry

all Latin American sales operations in Mexico City. The

suppliers, customers and the government. OEMs need

rationale behind this is linked to the political and economic

the authorities to provide more incentives for consumers

stability offered by the country. This strategic approach

and to share responsibility with manufacturers. We

will allow BMW to profit from opportunities that exist on

signed an agreement with Nissan intended to promote

the continent, balancing growing business opportunities

the development of charging-station infrastructure and

with recessive markets. Operations in Mexico are growing

we have installed 150 charging stations for drivers to use

almost 20 percent every year, while our presence in

nationwide. The promotion of our urban mobility vision,

countries such as Chile or Colombia slumped by almost

electric connectivity infrastructure and autonomous driving

the same percentage. Concentrating all operations in

could have a positive impact on the city’s development.

Mexico City will align our processes more efficiently. Q: Which factors drove the company to invest in a new Q: What are the most important factors that have made

plant in San Luis Potosi?

BMW successful here?

A: Mexico is a privileged country for the automotive

A: We have a modern and advanced distribution network,

industry. Its free-trade agreements with the US, Europe and

with 38 BMW dealers throughout the country. All our models

Latin America are complemented by a skilled workforce

are rated among the first in their specific segments. BMW

and supply networks. The combination of all three factors

Group’s increased market share is related to the appeal of

is the strongest argument Mexico has to claim its place

our vehicles and the completeness of our portfolio. We are

as one of the main car manufacturers in the world. We

known for offering a broad variety of concepts, ranging from

have a productive relationship with the government of

sedans and coupe vehicles to cabriolets, SUVs and sports

San Luis Potosi and the federal authorities. Together, we

activity vehicles (SAVs). Also, we are the only manufacturer

are developing the infrastructure needed to encourage

in the premium market that offers 100 percent electrified

industry growth, contributing to San Luis Potosi’s welfare.

vehicles and highly advanced connectivity technology. We are even looking beyond to autonomous driving.

BMW has set very high expectations for our plant in San Luis Potosi. This facility will start producing our BMW 3

Q: What strategy is BMW using to commercialize

Series in early 2019. It will be one of the biggest and our

environmentally friendly vehicles?

most advanced plant in terms of technology, sustainability

A: BMW Group is the leading supplier of products and

and efficiency. Solar installations will produce most of the

services for sustainable individual mobility. We are the

electricity required to operate and the plant will recycle

first manufacturer to launch a specific sub-brand for

water to minimize consumption. We have also set up a

sustainable electric vehicles. The BMW i concept refers

Training Center in San Luis Potosi. By the end of 2016 we

to an environmentally friendly value chain including R&D,

will have trained around 100 apprentices on functional

vehicle production and the services we offer in conjunction

manufacturing technologies. The center will also work on

with the car. We have expanded the BMW i3 range by

integrating the Mexican and German labor culture. BMW

offering a version with significantly increased battery

finds innovation and dynamism in the Mexican market

capacity. The new battery of 94 A/h has more than 30 A/h

that reflect our own mission. Our clear commitment to

than the previous model, increasing the vehicle’s range to

Mexico is summarized in our “Comprometidos con México”

300km from 190km. In addition to the BMW i3, we also

(Committed to Mexico) plan. We appreciate the country’s

offer sustainable electric sports cars such as the BMW

potential as the leading market in Latin America.

INSIGHT

SUCCESS FOR A JAPANESE GIANT Japanese auto dynamo Honda surpassed its Mexico production target in 2015 by leaps and bounds and is looking for more this year. The production of 203,657 units last year, topping its 165,000-unit target, was the result of demand for Honda products around the world. The use of the newest technologies, the particular focus the company places on customer satisfaction and aftersales services 57

have landed the carmaker a leading place in the global market. In 2015, the company rejuvenated its product line with a more aggressive, modern and technological portfolio, which payed off with new customers. Honda hopes that will translate to sales this year. Mexico plays a key role in Honda’s expansion strategy. The company’s plant in Guadalajara, Jalisco will be modified to replace production of the CR-V with the new HR-V model beginning in 2017. The update will be done according to a carefully planned schedule that will not interrupt current daily production. Production of the HR-V model in Guadalajara will help the company meet global demand for

For its premium brand Acura, Honda is also presenting

the vehicle. Honda’s Celaya, Guanajuato facility will keep

the new MDX 2017, which will come complete with the

its current production, including the Fit and HR-V models.

brand’s luxury and technology features. “The renewals in

The overwhelming demand for these particular vehicles

the Japanese manufacturer’s product portfolio are a vivid

and the efficiency of their production in Mexico makes it

expression of the company’s passion for creating vehicles

almost impossible for Honda to move manufacturing to a

that markets everywhere will appreciate,” Shimizu says.

different location. President of Honda de México Hiroshi Shimizu says export destinations such as the US and

Though Honda is mostly known in Mexico for its

Europe see value in its products manufactured in Mexico.

vehicles,

“The Hecho en México (Made in Mexico) brand is highly

including

appreciated by Honda’s customers,” he says.

And now that Formula 1 is back in Mexico, fans will

has

several

motorcycles,

successful

business

generators

and

lines,

engines.

recognize Honda’s presence as a one of the sport’s main In 2015, the company’s domestic sales grew 22.2 percent

engine manufacturers. The company has focused on

but for Shimizu the percentage is just an addition to Honda’s

implementing technological advances in its Formula 1

multiple strengths. “We are not interested in numbers such

engines. All technology used on the track is developed

as 22.2 percent, which is only a result,” Shimizu says. “We

by Honda’s engineers and they have worked intensively

are always thinking about our customers first.”

to compete with the best in the world.

Still, the company expects its newly invigorated product line to build on 2015’s sales result. There are high expectations

for

Honda’s

portfolio,

particularly

the

introduction of the latest Civic Coupe to the Mexican market. Honda expects the car’s unique and strong features, as well as its equipment and dynamics, to captivate Mexican consumers. “The Civic Coupe is a model that will not disappoint, especially not brand fans, since it reflects Honda’s renewed image,” says Shimizu. The new Civic Coupe is not the only introduction Honda has for Mexico. The addition of the HR-V in 2015 and a facelift for the Pilot, Accord and the new Civic sedan will provide a wide array of options for fans of the brand.

During the first half of 2016, Honda produced 152,587 units, 43.5 percent more than in the same period of 2015

VIEW FROM THE TOP

NEW MODELS PUT JAPANESE LUXURY ON THE ROAD PHILIPP HELDT Managing Director of Infiniti Mexico and Latin America 58

Q: What has driven Infiniti’s considerable growth and

We will add the Infiniti QX30 to our lineup in the

how are you planning to build on that?

second half of 2016. This is a milestone as this model

A: We secured more than 23 consecutive months of

has no predecessor. The Infiniti QX30 will broaden

record sales up to February 2016 after marking our fourth

our offerings to new customers around the world and

year of operations in Mexico. Overall year on year growth

allow us to compete in the compact premium segment,

in 2015 was 23 percent,, well above the average of the

which has shown significant growth. This model will

premium segment.

showcase a new 2.0L 208hp turbo engine coupled with a new gearbox, featuring completely state-of-the-art

US$1 billion investment in COMPAS plant will generate 4,000 jobs and produce 230,000 vehicles a year

technology and sculpted design. We will also launch the new Infiniti Q60 in the second half of 2016, our flagship coupé with a 2+2 layout created with a daring design, expressive proportions and exhilarating performance. This will be an inspirational model for us and a halo vehicle for the Infiniti brand. The Infiniti Q60 will include our new high-performance 3.0L V6 twin-turbo engine and our innovative drivetrain technologies. These deliver a powerful driving experience with direct injection and a

We released the new Q70 sedan in April 2015 for

potential output of 400hp.

the business class segment and the vehicle has been successful despite limited growth rates in this segment

Q: What are your expectations for the new plant in

in Mexico. We also debuted the renewed QX60 in a new

Aguascalientes?

hybrid version for which we have great expectations,

A: To manufacture all these cars we had to increase our

given that this has been Infiniti’s best-selling SUV and

manufacturing footprint. We expanded out of Japan

second

crossover

opening an assembly plant and an engine factory in the

provides flexible and accessible seating for up to seven

most-sold

vehicle.

The

premium

US, a manufacturing branch in China to supply the rapid-

passengers, delivering superior comfort and luxury

developing market in that country and the QX30 is going

standards with a refreshed exterior design and new

to be manufactured in the UK.

safety technology. The latest announcement is our new COMPAS plant Globally 2016 will be a vital year for Infiniti, mainly

in Mexico, an investment of US$1 billion and a true

because of the number of vehicles we are planning to

statement of our commitment to the country and the

introduce. Most of the new models were presented at

brand’s development. It will generate close to 4,000

the North American International Auto Show (NAIAS)

jobs and the plant is expected to produce close to

in January 2016 and will arrive in Mexico throughout

230,000 vehicles a year. Construction has started in

the year. Our portfolio will include a new version of the

Aguascalientes and we plan to use Nissan’s experience

Infiniti Q50 with a V6 3.0L engine of 400hp. This sports

to fuel our new operations, scheduled for 2017. As a

vehicle offers a more engaging and dynamic drive than

joint venture between the Renault-Nissan Alliance and

ever, enhanced by next-generation ride and handling.

Daimler, we plan to bring the best of both worlds to our

This model integrates second generation Direct Adaptive

new manufacturing operations.

Steering (DAS) and there is an improvement in fuel efficiency of up to 6.7 percent, a best-in-class power-to-

Q: How has Infiniti embraced the input of clients in the

efficiency ratio.

design processes?

A: We had a strong technology transfer program, so the lessons

80 percent of the market in the premium segment but we

we learned from Formula 1 trickled down to our passenger

see opportunities to reach the remaining 20 percent.

vehicles, especially the Infiniti Q50. This model featured some industry-first technologies like DAS. The world’s first

The Chihuahua dealership features our “2.0 global

digital steering system offers advanced levels of steering feel

standard,” which gives the impression of being in a high-

and feedback, providing extensive customization options.

end hotel rather than a vehicle dealership. Combined

We have evolved from being title sponsors for one of the

with our customer hospitality this gives us an extra edge

teams to becoming a technical partner in the newly formed

over our competitors and creates the best atmosphere in

Renault Sport F1 team. Our CEO, Carlos Ghosn, presented

which to buy a car. Our aftersales facilities are top-of-the-

our new car in Paris in February along with the drivers who

line, offering personalized and professional service with

will be competing in 2016. Through this partnership, Infiniti

strict follow-up for each premium client.

will supply all the energy recovery technology related to our successful hybrid technology.

Q: As the brand introduces the new QX60, how do you see hybrid models impacting Infiniti’s presence in

Design is integral as we want to be an alternative in the

Mexico?

premium segment. Infiniti strives for the best technology

A: Hybrid models have been a success story for Infiniti

and performance. We have developed intuitive user-

in Mexico. One of our core technological assets is hybrid

oriented solutions. Safety has also been a priority in our

innovation and we have already launched two models

design process, highlighting our Infiniti Safety Shield as

in the country with a truly unique design proposal that

one of our main innovations.

is supported by our extended experience using this technology. The prices we have established for our

Q: How is Infiniti improving the company's sales and

hybrid models have been extremely attractive for the

aftersales services having expanded its distribution

segment and customers are considering the numerous

network in Mexico?

advantages in terms of fuel economy, performance and

A: Four years ago, we began operations with five

tax advantages depending on the state.

dealerships. Two are in Mexico City in Polanco and Pedregal, one in Interlomas, State of Mexico, and one each in the

The Q50 has seen months where 30 percent of our sales

cities of Monterrey and Guadalajara. Then we expanded to

have been hybrid versions. Even though it was only

Merida, Leon and Puebla and finally adding one more in

introduced in 2015, the QX60 is doing fantastic and we

Chihuahua in 2015. Our nine Infiniti Centers cover almost

are almost always sold out on our hybrid versions.

VEHICLE SPOTLIGHT

KIA FORTE 2017 HATCHBACK KIA’s 2017 Forte Hatchback gives Mexico’s compact vehicle category an upgrade. Its sporty design, elegant interiors and safety features make the new KIA offering a strong contender in an extremely competitive segment. Unlike its sedan version, the Hatchback provides a more fun and adventurous look to appeal to those tired of driving a regular sedan. The 17 inch aluminum rims, the electric sunroof and the rear spoiler with LED brake lights will impress even the most demanding customers. With HID xenon headlights and fog lights, the Forte 2017 Hatchback is a go-to-car for every occasion. Technology that makes driving more enjoyable and safe is a signature of KIA’s vehicles. The car features a tactile screen that measures 7 inches and includes Android connectivity in addition to its supervision cluster which is managed through a 3.5 inch LCD screen. The push-button start and KIA’s smart key system add to the car’s high-tech attributes. As KIA makes driving more fun, the inclusion of normal, ECO and sport drive modes offer even more options for the driver to test out its 4-cylinder engine, which reaches 150hp at 6200rpm. KIA spared no effort ensuring the vehicle's safety features covered every eventuality. The vehicle has a rear vision camera as well as rear, front and parking sensors. These simplify maneuvering into even the tightest of spaces or the blindest reverse turns. It has six airbags located on the front and sides and curtain airbags. Disc brakes on all four wheels and an ABS brake system add to the safety characteristics. Moreover, the Hatchback’s Hillstart Assist System (HAC), Electric Stability Control (ESC) and Vehicle Stability Management systems ensure the Forte will pull off even on a steep incline. The driver's comfort is always important regardless of the journey’s distance so KIA has introduced an option for customers to include an electric driver’s seat with memory function and lumbar support. The anti-reflective interior mirror diminishes distractions during night driving and the double-zone air conditioning adds to passenger and driver comfort. The KIA Forte 2017 Hatchback is an excellent option for anyone looking for an upgrade within the hatchback segment.

VIEW FROM THE TOP

NOT A PROCESS BUT A WAY OF THINKING MIGUEL BARBEYTO Senior Director of Mazda de México 62

Q: What level of development and acceptance has Mazda

capacity of 250,000 units. The Mazda Vehicle Operation

experienced in the Mexican market?

produces the Mazda2 and Mazda3 hatchback and sedan

A: Since Mazda arrived in Mexico in 2005, the brand has

models as well as a Toyota model. Our domestic production

shown consistent and solid growth year after year. The

is part of a global manufacturing strategy that follows

company has developed a reputation for manufacturing

worldwide market demands.

vehicles with innovative designs and the latest technology that provides its customers with a great driving experience,

Q: How has Mazda has worked to improve the efficiency

in line with its Celebrate Driving motto. The 6th generation

and performance of its vehicles?

of Mazda’s vehicles with SKYACTIV technology and KODO

design language includes the Mazda, Mazda3, Mazda6,

technology that strikes a perfect balance between

Mazda MX-5, Mazda CX-3, Mazda CX-5 and the newly

our

launched Mazda CX-9, which is the brand’s flagship vehicle.

environmental and safety performance. We approached

SKYACTIV Celebrate

Mazda’s

Driving

innovative

philosophy

new-generation and

exceptional

car development with the goal of connecting drivers with Our strategy to appeal to Mexican consumers centers on

their vehicles. This is part of our Jinba-Ittai approach. We

our Celebrate Driving approach. The strategy is directed

believe the car must feel like an extension of the driver, just

not only at a younger demographic but to anyone who

as there is a connection between a rider and its horse. We

enjoys driving and the road. This marketing strategy,

want to create that strong bond.

combined with our tailored financial services, has allowed us to increase our market share. Mazda Financial is the

Our SKYACTIV technology also boosts the performance

result of a successful strategic alliance between Mazda

of gasoline and diesel cars. For example, the SKYACTIV-G

and Scotiabank that began in 2014. Our goal was to reach

gasoline engine has attained a new level of fuel efficiency,

a sales volume of 38,500 units by the end of the year. The

power and performance thanks to its compression ratio

strategy and the financial options helped us surpass our

of 14:1, which is comparable to a racing car. Our models

target by selling almost 41,000 units. Our performance

with SKYACTIV technology have been favorably accepted

in the market led us to offer competitive financing

by critics and specialized publications. The Mazda MX-5

programs to potential clients, allowing them to purchase

received both 2016 World Car of the Year and World Car

a new Mazda.

Design of the Year. Most importantly, our vehicles are being well received by drivers, which is our main motivation.

We have experienced constant growth in the local market for product sales of products and services. Our network of

Q: How has Mexico participated in Mazda’s continuous

54 dealerships helps us reach clients across the country and

innovation process?

is fundamental to providing our customers with the best

A: Mazda’s DNA rests on challenging convention and the

experience in sales and aftersales. That helps to establish

same is true for the company in Mexico. This is reflected

bonds and allows the customer to feel the essence of our

in all our areas of business, from the R&D department to

Celebrate Driving initiative.

manufacturing, and to our sales and aftersales departments. For the time being, we are focusing on innovating customer

Q: What are the capacities of Mazda’s manufacturing site

service around the world. For 2016 and 2017 the company

in Guanajuato?

will focus on sustaining its sales and aftersales business

A: In the two years since we opened our first plant in

to a profitable level and maintaining solid bonds with our

Guanajuato in 2014, our manufacturing operations have

customers. That involves finding new ways to improve our

been in line with our expectations. The facility in Salamanca

customer service. As we say at Mazda, innovation is not a

employs 5,200 people and has an annual manufacturing

process, it is a way of thinking.

VIEW FROM THE TOP

NEWCOMER KIA RAMPS UP MANUEL DE LA TORRE General Counsel and Institutional Relations Director of KIA Motors México 63

Q: As KIA enters the Mexican market, what are your

are several infrastructure aspects and services that KIA

expectations for the new manufacturing plant in Pesqueria,

lacks but are necessary for the plant. We need a railway for

Nuevo Leon?

component transport and to export assembled cars, as well

A: The plant in Pesqueria is already operating but not at full

as northern and southern highways to increase mobility in

capacity, producing only 100,000 units annually, which is

the zone. The construction of an additional electricity line

our first-year target. It will be completed when the pending

and a substation would prevent blackouts and pipelines for

infrastructure is provided. With the collaboration of the state

industrial water, waste water and potable water as well as

government, we are certain these issues will be resolved

a water treatment installation are needed. The removal of a

in the near future. We will then be able to operate at full

high-pressure gas pipeline that crosses the construction site

capacity, producing 300,000 units per year and hiring over

is also pending as it poses a risk of explosion.

14,000 workers by 2017, of which more than 90 percent will be Mexicans working directly for us or for our suppliers.

We have reached a satisfactory agreement for both parties. KIA will now contribute to the construction of the necessary

This plant will be the core base for exports to Latin America

infrastructure and the state will provide the land needed to

and North America. Overall it will prepare units for export

build proper railways for KIA’s exports.

to about 80 countries. The official opening of the plant is scheduled for September 2016 and we are looking forward

Q: What are your production plans for electric and hybrid

to contributing to Mexico’s export competitiveness and its

models in Mexico?

economic development.

A: The Pesqueria plant makes the compact Forte model from KIA’s sedan and hatchback series. It is possible new models

Q: What challenges did the company face while constructing

will be incorporated into the production line, depending

this new facility and how did it overcome them?

on our performance and the market. KIA will also launch

A: Building the plant was not easy. Torrential rain at the

two hybrids in Mexico in the near future, one based on the

beginning of 2015 and a lack of industrial infrastructure

Optima sedan and a completely redesigned Niro.

were difficulties that had to be overcome to make it a reality. Despite these issues, we persevered and have reached a point at which we can start the mass production of vehicles. The dollar to peso exchange rate could result in higher import costs for KIA, especially in steel, which Hyundai Steel imports

10,000 tons of cold-rolled steel plates are needed for KIA's 2016 production

to produce cold-rolled steel plates for our production. KIA needs 10,000 tons of cold-rolled steel plates to produce the

Q: What distinguishes the plant's technological layout ?

planned units for 2016. Ternium, a local supplier, provides our

A: Our plant has better technology than those in Korea

plant with these plates and could supply 30 percent of KIA’s

because it is new and the company invested in the latest

requirements. Nevertheless, Hyundai Steel has requested an

equipment. We have extensive quality-analysis equipment,

increase in the steel import quota.

including an emissions analyzer, which is unlike anything in Latin America. Even some US plants do not have one.

Q: What was lacking in Pesquería and how has KIA

It comes from Japan and enables us to analyze vehicle

collaborated with the government to develop the region?

emissions to comply with standardization for different

A: The full production capacity of the plant will be

markets. We also have an environmental chamber to

compromised without the remaining infrastructure that has

measure vehicles in different weather conditions, built

been the basis of a dispute with the state government. There

specifically for this plant.

VIEW FROM THE TOP

JAPAN, MEXICO ENJOY SHARED SUCCESS TOM SULLIVAN President and Director General of Toyota Motor Sales de México 64

Q: What strategy has Toyota employed to boost the

automotive portfolio they can access has made them more

popularity of its vehicles here?

quality-oriented. Customers look for specific features on

A: In our 14 years in Mexico, we have significantly increased

the vehicles they buy. Most drivers want cars with fog

our market share and are now the fifth best-selling company

lights, alloy wheels, chrome finishes and LED headlights.

in the country. Our position among market leaders is the

They are also demanding technology-integrated vehicles

result of our five-axis strategy. This focuses on providing

with quality sound systems, Bluetooth or improved

the right product, at the right price to the right market.

connectivity. Overall, focus on total cost of ownership has

It considers the strategic actions our management must

increased as buyers consider maintenance costs, insurance

follow to turn Mexico into a profitable country, as well as

and resale value, as well as all the irregular expenses the

understanding and appreciating all people involved in

vehicle will incur through its useful lifetime.

Toyota Motor Sales de México. Our strategy places high importance on empathy and understanding between the

Mexico is mostly a compact vehicle oriented market but

working needs of both the brand and the dealer, as well as

our subcompact vehicles and SUVs are top sellers in

on the implementation of the brand’s philosophy.

their segment, mostly because of their entry price. The segment’s evolutionary pattern has departed from its

Toyota reached a new record with 84,779 vehicles sold

traditional course. Subcompact drivers do not move to

in Mexico in 2015, almost 22 percent more than in 2014.

compact vehicles and then to an SUV. Customers with

When the company made its debut in 2002, we presented

subcompact vehicles are now upgrading to mini-SUVs and

a portfolio with only four models: the Corolla, 4Runner,

compact car owners can now choose among a variety of

Matrix and our iconic Camry. Today, we have a strong

small SUVs.

portfolio of products and services integrated by 16 models that appeal to every segment of the Mexican market. Our

Q: What strategies are you following to promote the

most popular models in 2015 were the Corolla, RAV4, Yaris

advantages of hybrid vehicles in Mexico?

Sedan and our Hilux pickup and we expect similar trends

A: We are excited to see that Mexico is open to new

for 2016. We also have seen a renewed interest in hybrid

technologies. Consumers are looking for vehicles that have

vehicles. During the first half of 2016, one of our most

maximum efficiency and are environmentally friendly. For

successful models was the Prius, selling 2,103 units.

the time being, our only hybrid vehicle in the country is the Prius, which is one of our most successful models. Since

Since Toyota introduced hybrid technology in 1997, its vehicles have helped reduce 67 million tons of CO2

its launch in 2010 until June 2016, we have sold 5,284 units in Mexico. In June alone we sold 902 units. This shows how open and receptive the Mexican market is to hybrid technology and our strategy is to spur this growth in the coming years. The development of hybrid cars is a priority for us. Our prowess in hybrid vehicle technology converted Toyota into the top-selling hybrid carmaker in the world. We have sold more than 9 million hybrid vehicles worldwide

Q: How is Toyota adapting to meet the most common

since we first introduced them to the market in 1997,

demands of the market?

with the Prius accounting for 3.5 million units. Toyota

A: Mexico is a price-sensitive market in which customers

hybrid vehicles have helped reduce 67 million tons of CO2

look for the best value for money but the diverse

emissions, which reflects our company’s commitment to

the environment and our contribution to building a better

A: Toyota’s plant in Baja California produces 50,000

world.

Tacoma models and 200,000 pickup boxes per year. Baja California is not the only state where we have made

Q: How do you maintain the same quality standard

important investments. We have just announced a project

throughout your entire distribution network?

for a new plant in Celaya, Guanajuato for the assembly

A: Aftersales service is essential to our business strategy.

of the Corolla 2020. We chose Guanajuato because

All Toyota dealers in Mexico have the infrastructure,

of its reputation regarding quality and productivity.

availability of spare parts and technical capacity to

The state has an excellent manufacturing platform, as

perform maintenance services for any of our models. We

well as a qualified workforce and participates in the

also provide an effective appointment system. When our

most important automotive clusters in North America.

customers take their vehicles in for service, an advisor is

Guanajuato is home to a diverse supplier base, which

already waiting for them and we make sure spare parts,

will lower our logistics costs. The production system we

technicians and necessary equipment are on hand to meet

will implement in our facilities will rely on the Just-In-

the delivery schedule. Our maintenance operations are

Time manufacturing concept, hence the importance of a

cost-effective and all Toyota dealers have kept the same

strong local supply.

prices for services since 2015. Toyota Motor Manufacturing de Guanajuato (TMMGT) will Our dealers work under the Toyota Production System

be the first plant designed from scratch with the Toyota

and Toyota’s principles. This way, we assure that all our

New Global Architecture

collaborators including dealer associates, technicians,

means it will focus on achieving growth through more

managers or service advisors perform their activities to

efficient vehicle production, while taking advantage of

high standards.

the existing infrastructure in the region. This plant will

production technology. This

generate approximately 2,000 jobs and will have the Toyota’s dealer network has increased its efficiency with

capacity to produce close to 200,000 units per year

the implementation of a Standard Operation Process. The

beginning in 2019. TMMGT represents Toyota’s largest

Toyota Motor Sales (TSM) certification has also become

investment in Mexico and its 15th manufacturing facility

a competitive advantage for our dealers. It reflects an

in North America. Even though we have yet to decide

organized, high-quality operation that is constantly

on the exact percentages of production allocation, it is

adapting to the customers’ needs. The TSM approach

possible that the majority will be for exports. This plant

encompasses the Fix It Right concept that targets higher

reaffirms our commitment to our local team, dealers,

quality repair services to increase customer satisfaction.

partners, suppliers and customers and we look forward to shared future success. Mexico is a key piece for our

Q: How have Toyota’s manufacturing operations evolved

global strategy and we are pleased to be witnesses to the

after more than 10 years in the country?

country’s consolidation and development.

INSIGHT

POWERING RECREATION ON LAND, AIR AND SEA

The motto of Bombardier Recreational Products (BRP)

recreational vehicles and engines. Its product portfolio

is simple: “Moving people with passion and innovation.”

is divided into all-terrain vehicles and seasonal products

Its innovations have fueled the company’s growth with

such as snowmobiles and watercraft. BRP’s Rotax line

manufacturing plants now in five different countries, a

focuses on engines for its vehicles and for aircraft and

direct distribution network in 20 countries and a reach

motorcycles. Its products are sold for both public and

of 107 countries through indirect distributors. Mexico is a

military use.

significant player in that success. In Mexico, BRP has three plants involved in exports to The country’s competitive economy and openness to

over 100 countries, one in Queretaro and two in Ciudad

international trade are two factors that make it a key

Juarez, Chihuahua. The Queretaro site manufactures the

contributor to BRP’s international expansion, says BRP

Sea-Doo watercraft and Rotax engines used in all BRP’s

President and CEO José Boisjoli. “Through a combination

vehicles. This site required a US$100 million investment

of Mexico’s outward trade strategy and BRP’s exports

for construction and operations, coming on line in 2013.

business model, we can find new markets for our

Before that, BRP invested US$35 million to move its all-

products while increasing our volumes and creating

terrain production to Ciudad Juarez in 2005, beginning

more jobs,” he says.

operations at its first plant in 2007 and specializing in the assembly of the Can-Am all-terrain and side-by-side

Originally a division of airplane and train manufacturing

vehicles. The plant now employs 500 people.

powerhouse Bombardier Inc., BRP was spun off in 2003 to become an independent brand. The company

The company inaugurated Juarez 2 in April 2016. It will

specializes

provide employment to 900 people and will be the

the

design

and

manufacturing

main platform for the production of the new DEFENDER

to attract more suppliers, Boisjoli says. Staffing, on the

model, created specifically because of requests from

other hand, has been easier since “Mexican people are

clients according to Laurent Autier, Commercial Director

passionate and excellent workers,” he adds.

for Mexico and Central America of BRP. Juarez 2 is a state-of-the-art facility that will receive a Leadership in

For BRP, the bottom line comes down to innovation. “Our

Energy & Environmental Design certification, allowing it

story is about creating new vehicles that move people

to eliminate waste production. “In this new facility, BRP

both physically and emotionally,” says Boisjoli. At an

will also produce and assemble different components

Orlando, Florida event for global dealers in mid-August,

for several vehicles as part of our strategy to remain

the company unveiled three vehicles for 2017 including

competitive,” says Autier.

the Can-Am Maverick X3, the Sea-Doo Spark TRIXX PWC and the Can-Am Spyder F3 limited, according to BRP’s

Although the US and Canada are BRP’s main markets,

website. The company is expecting these products to

Mexico is the third most important region for the

add to its earnings. In June, BRP raised its guidance for

company, especially for the commercialization of all-

fiscal year 2017, saying in its fiscal Q1 earnings statement

terrain and side-by-side vehicles. According to Autier,

that it expects total revenues to climb 4-8 percent, year

the company has 25 distributors in Mexico operating in

on year, while seeing a 2-8 percent rise in net income for

35 locations. Its five-year objective for the country is to

the same period.

have a network of 55 dealerships. BRP sells over 4,000 units per year and expects to close 2016 with sales of

To help reach those targets, BRP has four development

over 5,000 units. By 2020 the company expects to sell

centers. The enterprise has invested more than US$165

10,000 units annually.

million since 2011 in research and development projects and these efforts have led it to register 1,500 patents.

The biggest hurdle for the company is increasing

Mexico could play a bigger role in R&D as the company

production in both Ciudad Juarez and Queretaro.

expects that by having a bigger presence here, the

Ironically, the growth of the automotive industry has not

country will eventually also host BRP's R&D activities,

helped BRP as it has made it harder for the company

concludes Boisjoli.

TECHNOLOGY SPOTLIGHT

PPG’S ENVIRE-PRIME EPIC Strict

environmental

requirements

are

fostering

The PSA Group launched Envire-Prime EPIC at its plant

innovation on all fronts, calling for reduced weight,

in Mangualde, Portugal in October 2014. After seeing

emissions and energy consumption. Any improvement in

improvement in its operations, the company decided to

paint supports companies pushing to reach sustainability

implement this solution at its largest European plant in Vigo,

targets as it is one of the most delicate processes in

Spain in August 2015. The e-coat went through stringent

automotive production.

tests and analyses, including a vehicle with Enviro-Prime EPIC e-coat undergoing 60 testing cycles. This confirmed

With its new patented Envire-Prime EPIC e-coat solution,

the e-coat’s performance in appearance, mapping and

PPG hopes to provide the most efficient option to OEMs.

bacteria sensitivity, thin-film pretreatment compatibility,

The company says its metal-free catalyst technology offers

film-build distribution and throwpower. The results also

superior smoothness, corrosion resistance and excellent

highlighted a 10 percent reduction in the amount of e-coat

thin-film pretreatment performance. Envire-Prime EPIC is

required compared to PSA’s previous technologies.

available in both high- and hyper-throwpower versions. This helps OEMs cope with the cost volatility of other coatings

“Enviro-Prime EPIC e-coat is setting the tone for increased

that use metals such as bismuth, which is in short supply.

market expectations because of its outstanding appearance

“Enviro-Prime EPIC e-coat fulfills our expectations for

and low thicknesses,” adds Luis Aragon, PPG Global Account

corrosion resistance, adhesion and general performance,”

Director, automotive OEM coatings. “Its proprietary organic

explains Rodolphe Anquetil, head of the anticorrosion

catalyst ensures sustainability by providing low-temperature

department for PSA Peugeot Citroen. “It provides us with

cure capability without a negative environmental impact.

best-in-class appearance. We consider our conversion to

Overall, it provides an excellent combination of premium

Enviro-Prime EPIC e-coat a success.”

performance at an optimized cost per vehicle.”

DIRECT SUPPLIERS

As OEMs march into the country, they need a wide support base of suppliers. New assembly plants generate a trickle-down effect that permeates the entire supply chain. Investments generated by foreign Tier 1 companies might not rival OEMs in magnitude but they are central to the development of the industry. Bosch, for example, annually invests US$90 million in its manufacturing sites in Mexico. Ternium has unloaded US$2.5 billion in the past seven years. Guided by the hand of the auto parts industry, direct suppliers provide the solid foundation needed for development.

In this chapter, industry leaders present their insights into the operations of Tier 1 companies. The investments and growth expectations, led by the OEMs that are newly establishing or re-investing, are among the topics in focus.

CHAPTER 3: DIRECT SUPPLIERS 72

ANALYSIS: More Work Needed to Keep Shine on Auto Parts

VIEW FROM THE TOP: René Schlegel, Robert Bosch México

VIEW FROM THE TOP: Mario Rodríguez, Arbomex

VIEW FROM THE TOP: José Canales, MACIMEX

VIEW FROM THE TOP: Fidel Otake, GKN Driveline México

VIEW FROM THE TOP: Antonio Herrera, TREMEC

VIEW FROM THE TOP: Gonzalo Esparza, Tachi-S México

VIEW FROM THE TOP: Manuel Guevara, Brose

PLANT SPOTLIGHT: Seeräuber Automotive de México

VIEW FROM THE TOP: Patricio Gil, Blackhawk de México

VIEW FROM THE TOP: Erwin Polo Feldmann, Gestamp Mexico

VIEW FROM THE TOP: Máximo Vedoya, Ternium México

VIEW FROM THE TOP: Martín Rosales, Goodyear México

TECHNOLOGY SPOTLIGHT: CIDETEQ Weathering Tests

VIEW FROM THE TOP: Humberto Gómez, Yokohama Tire Mexico

VIEW FROM THE TOP: Hisashi Mori, Akebono Brake México

VIEW FROM THE TOP: Ramiro Delgado, SA Automotive

VIEW FROM THE TOP: Eduardo Melón, Inaumex

INSIGHT: Miguel Tovar, Euroglas

INSIGHT: Luis Aguila, Eagle Plastic and Manufacturing de México

VIEW FROM THE TOP: Vicente Cárdenas, Parker Hannifin Corporation, Racor Division

TECHNOLOGY SPOTLIGHT: Yokohama BluEarth-A EDITION AE50 CHELSEA FC

ANALYSIS

MORE WORK NEEDED TO KEEP SHINE ON AUTO PARTS

After a 6.2 percent drop in the first half of 2016, vehicle

isolated efforts, most of this material is imported.

production is starting to pick up with investments

Germany, China, Sweden and France are Mexico’s main

pouring in. As new OEMs arrive suppliers follow suit,

automotive steel providers, according to INA, and even

enriching the local supply chain. According to INEGI,

with Ternium’s latest investment in Pesqueria, Nuevo

the auto parts production market represented US$81.8

Leon, it is unlikely the country will significantly decrease

billion in 2015, of which US$68.3 billion was linked to

imported steel. This situation is aggravated by extremely

components exported to other markets. From January

low costs that importing companies offer, well below the

to May 2016, the auto parts industry was responsible

average in the domestic market.

for production worth US$32.8 billion. Although this represents a 44.15 percent drop for the domestic market,

With the Trans-Pacific Partnership (TPP) agreement’s

it has led to 5.58 percent growth in auto parts exports

eventual introduction, it is crucial for Mexico to develop

worth US$28.7 billion.

all levels of its local supply chain to remain competitive. At the moment, Mexico’s biggest opportunity is with Canada and the US thanks to NAFTA. This agreement

AUTOMOTIVE AUTOMOTIVEPRODUCTION PRODUCTIONCOSTS COSTS

requires local content for automotive production to be

Raw Materials

62.5 percent for vehicles of 15 passengers or less and 60 percent for units with greater passenger capacity. Mexico’s commercial relationship with Japan demands

Labor

at least 65 percent of local content, while other

R&D

agreements with Central and South America establish

Logistics Administratio Depreciation Others 10% Administration (Including 6% Depreciation

47% Raw Materials 21% Labor 6%

R&D

Logistics

Others

Advertising)

limits of 30-50 percent. Once enforced, the TPP will establish a 45 percent local content rule of origin for the automotive industry. Although significantly higher than the 30 percent originally agreed between Japan and the US, the agreement will still present a challenge for Mexican manufacturers as more Asian players with cheaper labor costs enter the market. The TPP will certainly bring opportunities for vehicle exports to markets like

Source: Market Realist

Australia and New Zealand but it will demand large investments from auto part manufacturers. This

mulitbillion-dollar

market

represents

clear

investment opportunity that many foreign companies

The latest trends in automotive production must also be

have seized. Unfortunately, local companies are yet to

taken into consideration as they will impact materials and

take full advantage. There are a few major Mexican Tier

technologies employed in component manufacturing.

1 suppliers like Arbomex, TREMEC, Nemak, Metalsa and

Aluminum is one of the main disruptive factors. Twice

MACIMEX but most industry participants are foreign

as expensive as steel, this material is being increasingly

players that have set up shop in Mexico. The country

used for body applications and without a logistics

has

advantage to counter this monetary surge, companies

advanced

terms

electronic

component

manufacturing and many OEMs and Tier 1 suppliers see

will face significant cost increases.

this as another window to growth. Moving further down the supply chain, opportunities for local companies are

Mexico has managed to attract many large investors

even greater. Improving efficiencies in Mexico’s raw

and now it is time to deliver. Five new automakers are

materials segment could boost cost reduction strategies.

entering Mexico between 2016 and 2019, which means it has three more years to fill any holes in its manufacturing

Raw materials account for roughly 47 percent of the

offering. The government is doing its part by creating

total cost of producing a vehicle, including steel, iron,

specific programs to support local suppliers entering

glass, plastic and aluminum. Steel alone represents 22

the supply chain but all industry players must come

percent of the car’s total cost and aside from some

together to make this a reality.

VIEW FROM THE TOP

LEADER STRENGTHENS ITS HAND IN MEXICO RENÉ SCHLEGEL President of Robert Bosch México 73

Q: How has Bosch’s investment plan for its plants in

country and people are excited about the opportunity to

Mexico evolved?

work with Bosch. We focus our recruiting efforts on public

A: Every year we invest between US$90-150 million in our

universities, though we do not shy away from private

manufacturing operations in Mexico, usually in two or three

institution alumni. We also always try to recruit recent

locations. Our investment in Toluca is now complete and

graduates. As development activities were practically

we expect to spend the remaining resources at our Juarez

nonexistent in the ‘90s in Mexico, there are almost no

plant within the next 12 months. Most recently, we invested

individuals with years of experience in these areas. We

in a training center for electronics manufacturing at that

have to develop our own talent, sending them to the US,

same location. Our focus for 2016 and 2017 is San Luis

Germany and India to close gaps in their knowledge. There

Potosi. Our gasoline direct injection systems as well as our

needs to be more investment to address this issue, as well

continuously variable transmission belt production take

as incentives from the government to justify our efforts.

place at this facility. This is one of only four manufacturing sites for these belts in the world. We are also investing

Q: How has Bosch contributed to the development of

heavily in our Aguascalientes plant manufacturing anti-

sustainable technology?

locking brakes and electric stability program to meet to

A: We focus on new developments in electrification and

high demand for these products in the international and

higher efficiency in combustion engines. We are the largest

domestic market. We are also launching a new plant in

producer of new patents for the automotive industry.

Queretaro for automotive steering solutions. It is our first

Furthermore, we reinvest almost 10 percent of our revenue

venture in Mexico involving these systems and production

in R&D, representing more than US$7.7 billion every year.

is expected to start by the end of 2017.

We are at the forefront of innovation. Opportunities such as battery technology, energy density and charging cycle

Q: What is Bosch’s strategy for R&D in Mexico?

improvements are intriguing topics for Bosch and other

A: Bosch’s take on R&D is investment-extensive and

industry participants. We understand it will take some time

people-intensive. In mid-2014, we started the Engineering

before we see these technologies significantly influencing

Development

Mexico. Therefore, Bosch is trying to innovate in already

and

Corporate

Solutions

Center

Guadalajara with 11 people and we expect this number

existing products.

to grow to 200 by the end of 2016. It was difficult since trust from customers is difficult to obtain in development

Urban mobility interests us, particularly in large vehicles

operations. However, the project has advanced promisingly

whose engines

and we foresee a bright future. We were among the first

particle filter technology in collaboration with HJS

companies to join the Creative and Digital City initiative in

(Emission Technology), currently in its testing phase,

Guadalajara and it is now a strong project that will attract

removes at least 90 percent of all polluting agents in black

new investors to the country. In 2015, we started the new

smoke. We want to prove the system can work with existing

development project for gasoline injection in San Luis

bus fleets, including public and university transportation

Potosi, which will increase the number of people involved

units, and we expect the technology to be available by

in development activities to 800 by the end of the decade.

the end of 2016. This filter was designed to be easy to

We foresee a similar outcome for our assisted breaking

install and maintain. Our teams are also developing dual-

products and boosters in Aguascalientes in the short term.

fuel retrofit options for Mexico’s diesel and natural gas

start and stop continuously. Our new

vehicle park. We started a new division focused on heavy Before finalizing the course of our R&D projects in Mexico,

vehicles and urban applications, and another dedicated to

finding the right people to support these initiatives was

two-wheeler systems, which present an opportunity for

a challenge. But STEM graduate supply is excellent in the

shorter commutes.

VIEW FROM THE TOP

MEXICAN COMPONENTS SPICE UP GLOBAL BRANDS MARIO RODRÍGUEZ CEO of Arbomex 75

Q: What led to Arbomex’s US$10 million investment in

Q: Following your collaboration with Chrysler, do you

Apaseo el Grande and what new projects have emerged?

foresee any opportunities to work with other brands of

A: The initiative that kicked off the investment at Apaseo

the FCA Group?

el Grande, Guanajuato. was the Phoenix camshaft program

A: Outside FCA, Arbomex supplies camshafts for 100

in 2010, now called Pentastar. This engine has been listed

percent of Mazda’s engines assembled at its Salamanca

among Ward’s 10 Best Engines on three occasions,

plant. Thanks to the collaboration between Mazda and

which also led to a further US$15 million investment

Toyota, the latter has introduced engines with Arbomex’s

from Arbomex. As a result of Arbomex's quality, Chrysler

technology, making us their indirect suppliers. Globally,

awarded us 100 percent production of the camshafts for

there are three main casting and machining camshaft

their latest Pentastar upgrade, which will be released with

producers. One is in Japan, the second in India and the

the new Grand Cherokee in 2016. This last development

third being Arbomex in Mexico. We are evaluating a joint

has been a challenge because the new design uses three

venture with a Japanese company that works with Honda,

lobes, instead of one in each section. We have pushed to

which could potentiate our collaboration with Nissan and

meet FCA's demands for new engine technologies. The

Toyota. BMW has already evaluated our company for its

latest improvements on the Pentastar engine include an

inclusion in their new manufacturing processes in San Luis

increased torque of 14.9 percent, 6 percent increment in

Potosi, since the company hopes to reduce its assembly

fuel economy and 291hp.

costs by sourcing Mexican products.

Q: How is Arbomex adapting its R&D programs and its

While we are excited about potential opportunities, we

production processes to satisfy these ambitious goals?

remain cautious, as being a reliable supplier on a global

A: We are investing in precision casting to offer added

scale would require a larger investment. Yet, Arbomex has

value to our customers. Arbomex is now supplying

invested US$60 million in the last five years. Although we

Daimler Trucks with precision-casting parts more effective

have considered expanding our production into Thailand

than other solutions. This technology reduces the weight

with the help of a Japanese partner, we are still cautious

of the final component and manufactures ready-to-be-

about expanding outside Mexico.

assembled parts at a lower cost. Q: To what extent is Arbomex involved in collaborative In terms of quality control, we test our components to

programs with educational institutions?

ensure they are correctly sealed and free of cracks. We are

A: We take 20 to 25 interns from at least three institutions

introducing ultrasound as part of Arbomex’s development

every semester, mostly from the National College of

stage, which will allow us to use nanotechnology in the near

Professional

future. Our final goal is to add an identification nanochip

Institute of Celaya and the Technical University of North

to all our components so they can be identified without

Guanajuato. These students are able to participate in our

disassembling the entire engine. Arbomex also uses

product development process, as was the case for the

flow simulation software to digitally check for potential

latest upgrade on the Pentastar camshaft. We had to

porosity, overlaps or cold metal that could weaken the

adapt a machine to produce new parts, which led us to

part. In return, we can begin production with the certainty

ask students to brainstorm ideas on how to do so. One

that we are manufacturing top-quality parts. Arbomex

of them suggested making the body out of carbon fiber,

has started using 3-D printers for prototypes, allowing the

an incredible innovation that led us to contract an Italian

company to present proposals to the clients much faster,

company familiar with this unusual material. This dropped

while measuring 100 percent of our components’ surfaces

the weight of our parts from 10 kg to 2.5 kg and the final

through 3-D vision.

components were much more precise.

Education

(CONALEP),

the

Technical

VIEW FROM THE TOP

QUESTION, LEARN, INVESTIGATE, INNOVATE JOSÉ CANALES Director General and CEO of MACIMEX 76

Q: What is MACIMEX’s role in the Mexican automotive

and able to meet those challenges. Asian OEMs have a

industry as one of the main crankshaft manufacturers?

unique way of differentiating and manufacturing their

A: MACIMEX has been an important player in the

products. They are often leaders in lean manufacturing,

Mexican market for the last 35 years, supplying machined

which equates to deeply competitive exposure and

crankshafts to the most important OEMs. We are now

economies of scale. Our company wants to find ways to

considered a partner to all these companies, capable of

be as productive and flexible as they are. As a result of

providing support through our technical teams when their

interaction with many OEMs new to Mexico and North

internal manufacturing operations face specific challenges.

America, we are actively exploring and developing new manufacturing methods in cooperation with our

Our

two

Mexican

operations

enjoy

privileged

machining equipment and automation partners.

geographical location, allowing us to satisfy our North American customers’ logistics and product requirements.

Q: What strategies has the company implemented to

Similarly, we target the many automotive manufacturing

increase its efficiency and keep up with demand in the

corridors in our country from our Tenango de Valle

auto segment?

facility, located 45 minutes west of Mexico City, and our

A: MACIMEX’s Continued Improvement philosophy is at

sister plant in Ramos Arizpe, Coahuila.

the forefront of everything we do. We try to implement specific plans that fit an overall strategy of becoming a

Q: What ratio of the company’s production is destined to

better partner for our customers every day. Constantly

the domestic market and exports?

striving for perfection can and will always make us

A: Historically, our ratio of direct and indirect exports

better professionals and a better company for all our

versus domestic demand has been close to 80:20. Even

customers to interact with. We strive to become an

though we supply our customers’ plants in Mexico, our

extension of our customer’s facilities, which is most

crankshafts might be exported as assembled engines by

likely the only way we can guarantee long-term survival.

the OEMs. Our competitiveness and technical expertise have allowed our products to be directly and indirectly

The development of the I2DEAS (Inovación, Ingeniería

exported to North America, as well as directly to Brazil,

y Desarrollo Avanzado Sustentable) Center has allowed

France, China and India.

us to question, learn, investigate and innovate, resulting in more advanced manufacturing processes, improved

We have a huge opportunity to continue our growth with

products and a general expansion into technical areas

all the new OEMs coming to Mexico. By offering products

that were once considered unimportant or not critical

and technical services to a highly demanding customer

to our long-term objectives. We are not only fostering

base, we can participate in a market where only the best

product improvement initiatives but also looking for

can compete. We have carved a niche and successfully

ways to improve manufacturing results and new materials

gained market share in the country. All we seek from

development. Once all our customers become aware of our

new OEMs establishing operations in North America is

R&D capabilities and state-of-the-art technical expertise,

an opportunity to show them our capabilities.

the intangible value of these activities will be recognized by our customer base. This is invaluable in a highly

Q: How challenging has it been to market the company’s

competitive environment like the automotive industry.

products to Japanese OEMs? A: We have approached Japanese and Korean OEMs

Q: What is the company’s take on human capital

that have set their technical standards and cost targets

development, especially for engineering and R&D

at extremely competitive levels. MACIMEX is ready

activities?

A: Human capital is among the most important assets

The study of lighter materials and the development of

for achieving our mid and long-term objectives, which is

new manufacturing processes to eliminate dead weight

why we have implemented our Personnel Development

is pivotal in helping us remain a competitive player in

program. This includes sponsoring a Master’s Degree in

our specialty. At our I2DEAS Center, we are managing

Automotive Engineering, developed in collaboration with

several projects focused on innovating raw materials

the ITESM’s campus in the State of Mexico. More than 15

for crankshafts and other components, improving

of our engineers have participated and are today part of

machining and complementary processes that allow

our engineering, operations and I DEAS Center staff.

common steel to have the technical characteristics of

higher-grade materials. Approximately three years ago, we also started a dualeducation program, in which we were the home base for

Q: How has MACIMEX improved its processes to reduce

many students at technical institutions. This is a win-

downtime and defects in parts per million?

win situation for all participants. Students match lessons

A: We use a variety of proven techniques such as 8Ds,

learned at school with actual experience gained on a

Six Sigma and Kaizen methodologies. As part of Grupo

daily basis, technical institutions can modify or tailor

QUIMMCO,

their syllabi based on industry needs and our company

program called QUIMMCO Excellence System (SEQ) in

helps by encouraging a sense of community among the

2015. SEQ pushes all Grupo QUIMMCO companies and

youth. Meanwhile, we also develop a talent pool that

individual operational entities to behave in a similar way.

also

incorporated

companywide

facilitates our growth with proven and capable potential employees who are also inspired by our program.

This approach monitors the day-to-day performance of all our production lines, assessing the situation

Q: What challenges has the company faced in terms of

when a problem arises and following a strict problem-

weight reduction trends and the introduction of new

solving methodology that requires involvement from

materials?

all key manufacturing and operations personnel. Grupo

A: Strict efficiency standards imposed on all new

QUIMMCO has played a key role in allowing MACIMEX

vehicles, intense global industry competition, as well

to become the global leader it is. The company has not

as the oil price fluctuation and its effect on total cost

only provided technical and financial support but also

of ownership line the playing field with challenges.

guidance through thick and thin.

VIEW FROM THE TOP

EFFICIENCY GOES BEYOND THE ENGINE FIDEL OTAKE Director General of GKN Driveline México 78

Q: What level of development has GKN had after its recent

Q: Has GKN adapted security and efficiency technology

expansion and what plans does it have for the future?

to stay ahead of its competitors?

A: NAFTA's approval brought a flood of competition to

A: GKN has remained one of the leading companies in

the country. GKN subsequently began working zealously

advanced technology. We supply top-notch technology

on productivity and supply chain enhancement to regain

solutions, raising industry standards and customers’

competitiveness. Expansion helped the company boost

expectations. GKN will continue to work on efficient fuel

driveshaft production to a total of 7.5 million in 2014

consumption, reducing our engine gaskets’ weight and

from nearly 2 million in 2005. GKN’s primary focus was

friction. Excellent design that can ensure vehicle and driver

consolidating itself as the largest powertrain supplier at

safety is what moves GKN. Our design processes begin

the regional level. The company is not satisfied with being

four years previous to a vehicle’s release, permitting us to

one of many suppliers. We strive to be the best supplier

adapt and mold our technology to the customer’s emerging

for our clients and the best company for our employees.

needs. Demand for electric technology is becoming more extensive. Consequently, its inclusion is growing across a

Vehicle exports have emerged as a primary motor for

large number of components. Powertrains impact multiple

Mexico’s economy leading to a manufacturing upsurge.

vehicle components through sensors such as breaking and

Furthermore, Mexico’s automotive industry continues to

stability. Therefore, mechanical and electric component

grow with KIA, BMW, Mercedes-Benz and Audi among

connectivity is required.

other OEMs settling in the local market. Welcoming premium brands opens new opportunities for GKN.

Q: What steps has GKN taken to amend challenges

Premium

presented by limited human capital availability?

vehicles

have

complex

traction

systems,

demanding higher safety levels and allowing us to insert

A: Finding a competent workforce has been a test for

a broader range of powertrain components. Our welding

the industry, especially when competing against foreign

operation in Villagran, Guanajuato has already doubled

companies for technicians and engineers. Training new

in size along with our axle shaft machining line. The

recruits to the level we need takes between five and

company’s new plant began operations in 2016 tackling

seven years and professional development does not cease

the emerging demand for all-wheel drive components.

at this point. We continuously work on improving our workforce’s capabilities. Failing to achieve this will hinder

Q: How has GKN developed its technological capabilities,

our operations. Industry globalization commands ongoing

factoring in the emergence of premium brands in the

communication with international players to ensure our

country?

workforce is up to par. In that regard, GKN offers MBA and

A: GKN’s Mexican technology center was established in 2000

doctorate programs to its employees.

and has been growing admirably to the point that its designs are implemented worldwide. The company has increased the

We believe the dual education system is the best solution

number of employees working on innovation and developing

for the automotive industry. If students can have both

equipment in Mexico to meet demand. We will continue to

theoretical and technical abilities after graduation, the

grow through R&D at our technology center. In contrast

industry could do an even better job completing their

to its previous drive shaft focus, GKN’s attention now lies

training. After being hired by a company, students usually

with developing entire powertrains including transmissions

face difficulties adapting because of the differences in

and PTUs among other components. The company’s global

project developments. The dual system would ease this

strategy is to push an emphasis on hybrid and electric

transition by offering students the chance to acquire

technology developments and we are responding with

understanding of the way companies operate before they

developments in GKN’s Mexican technology center.

graduate into the workforce.

VIEW FROM THE TOP

TRANSMISSION MAKER BETS ON DCT TECH ANTONIO HERRERA Managing Director of TREMEC 79

Q: How does TREMEC’s strategy differ between the

is projected to increase by nearly 60 percent reaching

domestic and the international markets?

1 million units, while its market share will increase from 18

A: The domestic automotive market does not exist anymore.

percent to 21 percent. Jatco is the biggest player in this

It is true that the market keeps growing, but only 18 percent

segment with Honda also contributing to its development.

of national vehicle production stays in the country. Therefore,

However, we must bear in mind that all the models being

it would be unwise to target only that small percentage of

manufactured in Mexico with a CVT are front-wheel drive-

the market. Unless an exclusive vehicle model emerges for

based, with torque ranges below 250Nm.

Mexico, we must work to satisfy the demands of the whole NAFTA region. Especially in commercial vehicles, we had

Manual transmissions are starting to fade in the light vehicle

to adapt our transmissions to Mexican demands but that

market but they will never completely disappear. Drivers still

is just a small part of our business. We are focusing on the

want to control gear changes, especially in the sport market.

pickup segment within the domestic market, mainly with

The ongoing efforts to save weight have led to several

our 5-speed manual transmissions including the TR-4050

improvements in our manual systems. These include the use

and the TR-3655. Our production also caters to real-wheel

of novel synchronizer materials such as sinter and carbon,

drive (RWD) models with high power outputs. Unfortunately,

which improve shift quality and durability.

these vehicles are assembled outside Mexico, meaning that we export 91 percent of our production.

How

has

TREMEC

participated

its

clients'

environmental strategy and how can transmissions improve TREMEC is a 100 percent Mexican company, which

toward performance and fuel efficiency?

means we develop all the technology we sell. Efficiency

A: We have to make these two factors our utmost priority.

and performance are always a priority, considering our

DCT technology, for example, is 4-5 percent more efficient

customers’ feedback. Light truck drivers are requesting an

than normal automatic systems and 2-3 percent more than

additional gear for transmissions and we are in the design

manual transmissions depending on the driver. TREMEC’s

phase of a new 6-speed transmission for this market.

products solve key challenges faced by the powertrain

Moreover, we launched a new 10-speed manual transmission

industry including mandates for increased fuel efficiency,

for commercial Class-8 trucks. TREMEC manufactures the

reduced emissions, lower weights and compact size.

lightest 10-speed system in its class, providing increased fuel efficiency, reduced emissions, smaller size and greater

Q: How is TREMEC preparing for the future of the automotive

torque capacity.

industry in Mexico? A: We are ready to make all the necessary investments

Q: How will TREMEC stay competitive despite decreased

to expand our operations, depending on the market’s

demand for manual transmissions?

development and we hope to develop our business in

A: We have shifted our attention progressively toward our

Mexico and South America. Within the heavy vehicle market,

dual-clutch transmissions (DCT). These are essentially

although we do not manufacture whole transmissions,

automatic transmissions with the benefits of a manual system,

we make all the components and already participate with

making them more efficient. Automatic transmissions are

Daimler, Volvo and Eaton. We made an important investment

excellent but DCTs are the best option for RWD applications.

in 2015 to improve our operations in this segment and plan

Continuously variable transmissions (CVT) are becoming

to do the same in 2016. We also recognize the market’s need

popular in the market given their high levels of efficiency but

for automation. That is why in 2012 the company acquired a

these systems do not perform well with RWD modes since

high-tech automotive design and development organization

they work best with low-power applications. In the next five

in Belgium, whose products and software solutions are

years, the volume of CVTs in passenger cars made in Mexico

found in leading European supercars.

VIEW FROM THE TOP

TIER 1 EXPERIENCE MEETS TIER 2 AMBITION GONZALO ESPARZA President of Tachi-S México 80

Q: How important is the Mexican market for Tachi-S’

more common. Joint ventures to meet OEM’s demand are

global operations?

also a possibility.

A: Our Mexican operations are the company’s largest in the world in production volumes and human capital. The

Q: What are Tachi-S’ expectations regarding the premium

Mexican branch’s group participation far exceeds even

and luxury market in light of Mercedes-Benz and Infiniti

China, making us Latin America’s benchmark. Since 2014,

entering Aguascalientes?

Tachi-S México’s production has grown over 30 percent

A: We are certified to supply premium brands, allowing

as a Tier 1 and Tier 2 supplier. Within the same time span,

us to work with Infiniti. As Mercedes-Benz will soon enter

the company opened two additional plants in Mexico to

the market, we will work to secure a contract with them.

cover demand. Our growth is contingent on our clients’

Given their product diversity, multiple elements have

development, which we almost always parallel.

to be factored in including customization and Tachi-S will be expected to obtain new certifications. Standard

Q: To what extent has the company’s participation with

vehicle seating has 30 different variations, while premium

OEMs grown?

brands can reach 300. Our mechanisms and processes

A: We are now Nissan Mexicana’s main seat provider,

must be up to par to ensure premium brands trust us to

supplying close to 90 percent of all three of its plants. Setex

be their suppliers. Automation is the best way to secure

Automotive Mexico, one of Tachi-S’ subsidiaries, covers

compliance. We are forthright about offering this in our

all of Honda’s requirements in Celaya and Guadalajara.

operations. Metal handling and seat filling processes

Together, these companies hold 25 percent of Mexico’s

have high automation levels in contrast with assembling

light vehicle market share. We believe that Toyota, Daimler

and covers operations but we incorporate automation

and Mazda will open up an array of new opportunities but

where possible.

we must move promptly. Just-in-time operations require seating suppliers to neighbor OEM manufacturing plants

Q: How much has Tachi-S’ Tier 2 segment grown in recent

and create long-term relationships from the day of their

years?

establishment. Under those circumstances, suppliers are

A: New projects as indirect suppliers are in the pipeline

normally brought to the OEM’s host country from their

for 2017 and 2018. Tachi-S is evaluating the viability of

country of origin unless a new business platform is created

alliances with new Tier 1 suppliers to meet OEMs’ demand.

in the market. Therefore, Tier 2 business opportunities are

Although we may not work with some OEMs in their Mexican operations, we have business with them abroad, which increases the probability of us supplying them locally. Considering Tachi-S’ multiple operations in America including Brazil and the US, we saw a business opportunity to expand our Tier 2 business area, which grew 100 percent in two years. The large number of companies in our group made this expansion much easier although we also supply

In two years, Tachi-S México’s production grew over 30 percent

companies outside the circle. Our extensive understanding of the industry’s requirements as Tier 1 and Tier 2 suppliers gives us an edge on competition. We project 25 percent growth with external companies over the next three years as capital for plant expansions is secured.

VIEW FROM THE TOP

FLEXIBILITY, VISIBILITY, TRANSPARENCY HASTEN INNOVATION MANUEL GUEVARA General Manager of Brose 81

Q: How do Brose’s Mexican operations impact its global

Q: What type of expertise is required to be part of Brose’s

approach?

team?

A: The company’s growth has accelerated enormously and

A: We need academic institutions to develop professionals

our level of investment has kept pace. After 21 years, Brose

who will meet industry needs. The benefits of the German

now has seven manufacturing plants in North America.

dual-educational system encouraged us to implement

Three are located in Mexico, one in Canada and three in the

it in Mexico. Brose has already offered its help and

US supporting our headquarters in Detroit, Michigan. Brose

facilities to Queretaro’s Ministry of Education, which

El Marques, our largest plant in Mexico, was a significant

had a positive impact. We are trying to replicate our

investment for the company in 2009 and is dedicated to

German model encompassing every professional field in

the manufacturing of electric motors, including drivetrain

the industry,including human resources, mechatronics

actuators, power steering motors, window regulators, ABS

technicians, financial experts and environmental system

motors, heating and air conditioning motors, as well as

experts. We have 40 students that split their time between

engine cooling fan modules. The Brose Group is planning

Brose’s installations and their universities to strengthen

to build a new manufacturing facility named Brose

their knowledge. Teacher training delivered in-house or

Aeropuerto, which will exclusively produce seat frames.

at universities combined with long-term internships give

This will become our largest seat plant in North America

students the opportunity to hone their skills over time.

and will be vastly different from our current operations as

We also invest in international exchange programs to

it requires a special emphasis on safety standards.

attract promising talent from everywhere in the world. Brose also held a Talent Day here in Queretaro. This was

Brose Mexico exports more than 50 percent of its products

a two-day technological and cultural event highlighting

to the US, Asia and Europe. We have been audited by most

the possibilities offered by Brose and a few other German

OEMs that enter Mexico leading us to secure business

companies from a career-path standpoint.

with Audi, Honda, Nissan, Ford, Volkswagen and GM, among others. Brose’s investments in countries including

Q: How is Brose adapting its technology to cope with

Mexico and China will continue, as well as its investments

emerging trends such as electric and hybrid vehicles?

in emerging unexploited markets.

A: The increasing pace of technological innovation is

profoundly

changing

our

lives.

Mobility's

social

Q: How does Brose’s innovation give the company a

significance is growing worldwide and so too are

competitive advantage over other manufacturers?

demands placed on vehicles. Brose’s engineers work in

A: Mexico has evolved from its previous position as

interdisciplinary teams to meet these expectations and

stronger

shape the mobility of tomorrow and beyond, enhancing

technological added value, leading Brose Mexico to

comfort and efficiency. Electrification is one of the keys to

develop as a center for design. Brose El Marques is

greater efficiency and Brose’s motors play an important

equipped with a testing laboratory where we create and

role in enabling it. Recently, Brose El Marques was awarded

test new products on a regular basis. We developed an

the production of a large oil pump for a North American

intelligent system that improves Heating, Ventilation and

OEM with its launch scheduled for 2018. This plant will be

Air Conditioning (HVAC) performance while reducing

the sole producer of this component. The pump works

vehicles' weight. Another key to our competitiveness is

through “coasting,” which allows the engine to turn off

our workforce. We have been able to spread the German

when not needed. Our product takes over to maintain oil

mindset of flexibility, visibility and transparency among

pressure in the transmission until the main pump resumes

our Mexican employees, ensuring quality and consistency

operation. This significantly reduces emissions and fuel

worldwide.

consumption.

manufacturing

hub

toward

generating

PLANT SPOTLIGHT

SEERÄUBER AUTOMOTIVE DE MÉXICO Companies

cannot

experts

everything

and

sometimes it is better to allocate resources elsewhere to

ensure

the

corporation’s

wellbeing.

Seeräuber

Automotive de México was inaugurated in 2014 with to assist the booming industry with process design, product assembly, logistics and supply chain management, incorporating expertise from the electronics sector. 83

The company decided on Guadalajara’s metropolitan area as the best destination for its operations, close enough to support all players in the Bajio region. Located at Parque Industrial Guadalajara in El Salto, Seeräuber offers a unique geographical locale for both domestic and international customers. Guadalajara offers a unique logistical advantage to Seeräuber, located only 200 miles away from Manzanillo, which is one of the most important freight ports in Mexico. The city also is evolving into one of the main technological hubs in the country. Seeräuber decided to fully renovate its plant in 2016 and now it specializes in offering solutions for contract manufacturing, precision machining and supply chain management. The company has more than 2,300m2 of production space, allowing it to produce approximately 600,000 assemblies per month. Seeräuber specializes in different automotive components, operating Just-in-Time production lines. The company also handles inventories and offers JIT deliveries to its customers directly to their production sites. Seeräuber Automotive de México is working to obtain the ISO TS-16949 certification, which will be finalized by the end of 2016. The company is already ISO 90002008 certified and is supported by a skilled and qualified workforce

trained

under

the

strictest

automotive

standards. Keeping up to date with the latest trends in ERP solutions, Seeräuber offers integration through SAP’s platforms and SupplyOn, making the company a strategic partner for potential manufacturing operations in Mexico. The company offers consulting services to prospective clients to determine the most suitable operations for outsourcing, ultimately potentiating their clients’ results. Seeräuber is considering building a second facility in San Luis Potosi or Guanajuato to be closer to potential customers.

VIEW FROM THE TOP

ON TARGET TO BE TOP IN PRODUCT FLEXIBILTY PATRICIO GIL Director General and CEO of Blackhawk de México 84

Q: What new business opportunities has Blackhawk

While Blackhawk had a larger market share in the heavy-

engaged in recently that have most impacted the

duty vehicle segment, our new partner holds a stronger

company’s results?

position in the light vehicle market. Therefore our client

A: Mexico is undoubtedly enjoying an extremely fruitful

portfolio will be complemented without having to change

period, which is an inviting scenario for foreign companies

our processes drastically. Once our second facility is

wanting to take part in its success. But in terms of

operational, Blackhawk will be the most flexible foundry

foundry operations, both the government and ProMéxico

in the country with a product range from 0.5kg to

estimate that a total of MX$10 billion (US$550 million)

400kg components. While the size of the machines and

in components is still imported on a yearly basis, which

the speed at which they operate may change, the raw

equates to 250 percent of the MX$4 billion (US$220

materials that Blackhawk uses and the foundry stages will

million) that is produced domestically. Risk minimization

stay the same.

tops the list of concerns for foreign investors, which Q: In terms of production, how has Blackhawk evolved

hinders investment.

to further guarantee the high quality of its components? Many have sidestepped this issue by collaborating

A: Blackhawk has grown extensively in its development

with a Mexican company, which is precisely what led

operations. We have invested heavily in simulation

to Blackhawk’s most recent investment. We began

software and scanning equipment, which has made our

negotiations

consolidated

operations much faster and more efficient. Every piece

our relationship with Metal Technologies Inc. (MTI),

2015

and

have

now

that we develop is 3-D designed with solidification

resulting in considerable growth for our operations.

and cooling simulations taking place before the actual

Blackhawk sold 49 percent of its shares to MTI and we

elaboration of the component.

jointly decided to build a new plant next to our existing operations, which will be managed by Blackhawk. Our

We also had to open a sand laboratory for the new plant,

strong presence in the Mexican market,

advanced

since this project will use different sand requirements. This

procedures and technology, a broad product portfolio

demands a larger investment and longer time frames in

and a healthy client network are the main factors that

the design stages but results in significant time reductions

attracted MTI to form a joint venture with us. This

during development and manufacturing.

added to Blackhawk’s optimism regarding upcoming opportunities and growth.

We are also reinforcing Blackhawk’s engineering center with a large number of young professionals. We created

How

will

this

partnership

change

Blackhawk’s

five new positions in the electronics, metallurgy and

production program?

the mechanical divisions that will help us coach new

A: We can produce up to 2,500 tons on a monthly basis

engineers. The industry’s demand for talent is immense

but our new plant will increase this number to an average

and we must work to train and retain the best people in

of 8,000 tons. Our operations will double in size counting

the market if we want to be successful. Fortunately, the

this second plant in our Monterrey complex, creating

Autonomous University of Nuevo Leon (UANL) offers

an estimated 400 direct employment opportunities.

relevant specialization areas in its academic program.

Construction started in April 2016 and operations will begin

The Technological Institute of Saltillo and the IPN also

in October 2017. We expect to receive all the necessary

have produced graduates that we hired as trainees.

equipment in the first half of 2017 and thereafter we will

Metallurgic areas are essential for the economic well-

enter a component approval stage, which is particularly

being of our region, so we must work on instilling these

intricate within the automotive industry.

types of skills.

VIEW FROM THE TOP

INTERNATIONAL VOTE OF CONFIDENCE IN PUEBLA ERWIN POLO FELDMANN Vice President of Gestamp Mexico 85

Q: How has Gestamp’s US$75 million investment in its

Q: How is Gestamp’s latest issuance of bonds going to

second plant in Puebla contributed to the company?

affect the company’s global operations?

A: Our strategy has always been project-oriented. We

A: We issued bonds in 2013, which helped us finance

are expanding our original production facility in Puebla

the projects now being consolidated in Mexico. Now,

to target the new Volkswagen Tiguan’s production. We

we have issued €500 million (US$568 million) at even

have a defined plan to target opportunities with other

more competitive rates than in 2013. This shows that the

OEMs involving the construction of a new facility in the

market trusts Gestamp, especially considering the initial

Bajio region. Edscha, which is also part of our Group, is

quantity was €400 million (US$455 million). The vote of

starting a new project in San Luis Potosi that will be a

confidence will help us finance future projects and Mexico

great contribution to our future operations in the Bajio.

is among the company’s top priorities to receive these resources.

With our second Puebla plant, we launched the first phase in 2014 to stamp Class-A outer-body panels for

Q: How is Gestamp developing its R&D activities in

Volkswagen. This year we launched a second production

Mexico?

phase, mainly producing components for the new Audi Q5

A: Gestamp operates several R&D centers around the

that will be manufactured in San Jose Chiapa in Puebla.

world, all of which are close to OEMs. Our new tooling

We plan to add two more press-hardening lines as well as

shop in Puebla specializes in new dies and production

welding operations but we are content with the way the

of press-hardening tools is an added value for our

plant is working to date. We also can confirm that we will

customers, avoiding the need to import tools from

bring our hydroforming process to Mexico, as well as our

Europe, South America or Canada. We want to have a

press-hardening operations. Gestamp manages assembly

stronger regional presence to be more self-sufficient

operations and eventually chassis and axle components

and plan resource distribution across our markets. OEMs

will be added to our portfolio.

tend to award projects to the same company in different regions. This will probably be the case for Daimler’s

Q: How significant is Mexico to Gestamp’s international

production in Aguascalientes, as well as Ford’s and

business model?

BMW’s sites in San Luis Potosi. Mexico ought to have its

A: Mexico is the sixth biggest market worldwide for

own engineering operations supported by the Gestamp

Gestamp. The country is now the sixth largest auto

group’s international offices.

parts manufacturer and also the fastest growing region in North America. There are possible business ventures

Few competitors match our technological level, so we have

with Japanese OEMs, with whom we did not have a

worked extremely hard to develop our own human talent.

strong relationship. That is no longer the case, as we

We collaborate with several universities and we hired

work with Honda in the US and have established an

35 graduates in 2014, 12 of whom stayed at our Puebla

office in Japan to strengthen relationships with these

plant while the rest were sent to different international

customers. Having received a Development Award from

locations. This shows that not only are we developing

Honda for our operations in West Virginia, our goal is to

talent, we are also exporting it. Our priority is to hire

develop similar connections in Mexico. Our expectations

and train staff at our existing facilities so that in one or

for the Mexican market are positive and 2016 will be

two years they can move to our new production sites as

a consolidation year for our latest projects. We are

experts in their fields. We are also adding a tooling school

increasing content and sales turnover in the country. By

to service all our Mexican facilities. This is a virgin market

2018 we will secure new business that will expand our

and the Mexican tool market’s potential is immense, so

sales even further.

any efforts will benefit the country significantly.

VIEW FROM THE TOP

STEELING UP FOR THE FUTURE MÁXIMO VEDOYA CEO of Ternium México 87

Q: How has Ternium’s Pesqueria plant advanced toward its

widening our advanced, high-resistance steel portfolio

production and participation goals within the automotive

with dual phase products, stronger bainitic solutions

market?

and complex-phase steel.

A: The Ternium Industrial Center in Pesqueria is the most modern automated steel complex in Latin America. It was

Q: How has the Ternium Industrial Center evolved in terms

also the first plant in Mexico focused on high-spec steel

of technology development and integration?

mainly for the automotive industry. Nowadays, Ternium is

A: The Ternium Industrial Center includes the Ternium cold-

the main steel supplier for this sector in the country. In

rolled process and the Tenigal continuous galvanizing line,

2010, our sales in the automotive industry represented 14

our zero-waste water treatment plant, our power station

percent of our total income but they now add up to almost

and our quality-testing laboratory. The center is home to

22 percent. Ternium has a production capacity of 11 million

a 99Ha ecological reserve, part of the total 437Ha terrain

tons and 62 percent of its sales are in Mexico. The company

dedicated to the preservation of the natural habitat. This

has invested US$2.5 billion in the past seven years and

includes an ambitious rescue program for more than

our goal is to keep growing at that rate, competing with

17,500 plants and animals.

imports coming from the US, Japan, Korea and Taiwan. We are working on the Pesqueria Electricity Center, which Q: What future investments does Ternium plan to

will eventually supply energy to meet the entire country’s

introduce to Mexico to boost the company’s presence in

demand. This project is expected to be finished in the

the automotive market?

second half of 2016, after a total investment of US$1 billion.

A: This year Ternium announced an investment of US$300 million in a new Tenigal steel galvanizing line in the

Q: What is Ternium’s position regarding the growing

Ternium Industrial Center. This will increase our possible

aluminum trend in the automotive industry?

annual production by 430,000 tons, resulting in a total

A: Steel offers several advantages over aluminum,

installed capacity of 830,000 tons. We are also investing

especially its environmental benefits. Producing 1 ton of

US$150 million in our plant in Churubusco, located in

aluminum generates four times more emissions than 1

Monterrey. In 2016, we will also inaugurate the Roberto

ton of steel. Therefore, though lighter, it pollutes more. At

Rocca Technical School in Pesqueria, following a US$29

the moment, CO2 emission standards only consider the

million investment. This academic center will be in charge

vehicle’s lifecycle. However, this vision must be broadened

of shaping the quality human talent that the industry’s

to include the materials involved in the production process

growth demands.

and the possibility to recycle them.

Innovation is crucial for Ternium and we are developing

Q: How have growing steel imports from China influenced

150 new projects, most of which are in collaboration with

Ternium’s sales in the domestic market?

our industrial clients. Our bainitic steel, for example, is

A: Over the last few years, China’s overcapacity alongside

used in alloy rims and other components that require a

that of other countries such as Korea, Taiwan and Russia

high fatigue resistance, while die-cut pieces require our

have caused grave distortions in global markets. Prices

high-resistance, high-elastic ratio steel. Ternium’s hot-

do not reflect actual production costs. Mexico’s steel

rolled products result in a significant weight reduction

demand continues growing above the international rate.

for chassis components when compared to conventional

Unfortunately, this surge was met with imports arising

steel parts. Similarly, Tenigal treated steel offers the same

from disloyal competition but the Ministry of Economy

results for body components. Our new cooling table in the

has done an excellent job limiting the impact on the

Churubusco plant has proven to be an excellent addition,

national industry.

VIEW FROM THE TOP

THE ROAD TO A BETTER DRIVING EXPERIENCE MARTÍN ROSALES President and Managing Director of Goodyear México 88

Q: Goodyear posted a record profit in 2015. What are your

has drones hovering over the new site, transmitting live

expectations for this year??

images of its progress. Our main objective is to keep up the

A: Goodyear’s results at the end of 2015 were excellent.We

momentum. We are confident this plant’s production, using

reached a record high of US$2 billion in operating profit

state-of-the-art technology, will lead to more opportunities

and something we plan to replicate in 2016. This is due to

in the aftermarket. It has a wider and more competitive

the consistency of our operations. For the last four years

portfolio and a stronger presence in the original equipment

the company has implemented a global strategy to obtain

market. Eventually we hope our success will lead to a

year-on-year growth. Goodyear was able to restructure

stronger engineering and R&D presence in the country. We

its finances successfully, totally covering its debt and

have a long-term strategy that will not change because of

overcoming all previous hurdles. Our strategy is based on

transient complications.

understanding the market to identify the main segments where we want to compete. We want to participate where

Q: How is Goodyear targeting the upcoming operations of

customers value our brand, have an emotional attachment

Audi and KIA?

to our products and understand the technology and

A: We have a longstanding relationship with Audi, several

innovation that we integrate into our tires.

of whose models already include our tires. Audi mainly employs our Dunlop brand. These tires are excellent for

Q: What part has Mexico played in Goodyear’s overall

sports and performance vehicles, offering the best design

success?

and characteristics to satisfy this demanding segment.

A: Mexico is as committed to this vision as any of our

KIA, on the other hand, has a strong SUV segment and

international branches. For the last three years we have

our Wrangler line offers a complete solution for them. We

seen double-digit growth in our Mexican operations,

specifically design products for on-road use, including a

gaining a significant market share and developing well

popular line in Mexico intended for half on-road and half

above the industry’s average. The Mexican vehicle park is

off-road use and another line intended for 70 percent off-

unique in terms of diversity and complexity, so we have

road and 30 percent on-road use. The latter is particularly

concentrated on identifying this market's main needs.

successful in northern Mexican markets and offer excellent

Although Mexico’s vehicle park has an advanced average

driving conditions and durability.

age, it is undergoing an important renovation fueled by the automotive industry’s development. The country was

As well as Audi and KIA, other OEMs are being drawn to

previously dominated by US brands but OEMs from all over

Mexico, as is evident in BMW’s investment in San Luis Potosi.

the world have diversified the market. As a result, Mexico

Plenty of product placement opportunities are materializing

is one of the most demanding countries regarding Stock-

thanks to the growth of the Mexican automotive industry.

Keeping units (SKU), and Goodyear alone has more than

We are contributing to development with a US$550 million

800 tire types for the market. Our segmentation strategy

investment that will generate over 1,000 new jobs in the

plays a fundamental role in our broad offering, allowing us

region.

to identify different purchasing habits and drivers within our client segments to allocate SKUs affectively.

Q: How has Goodyear cultivated its human capital in the country?

Q: How is Goodyear’s latest manufacturing project in

A: We are already hiring people to manage our San Luis

Mexico advancing?

Potosi plant and are training 50 local technicians in the

A: Proof of our success and belief in Mexico is our decision

culture and mindset of the company. We plan to take these

to open a new manufacturing plant in San Luis Potosi.

people to different Goodyear locations around the world

We expect to start operations in 2017. Goodyear already

so they can see their trade in action abroad. We gained

the Great Place to Work certification in 2015, showing that our people are happy and that there is a shared feeling of success throughout the company. Everything comes down to people. Our clients, human capital and our associates are pivotal to our success so it is important to understand their concerns. Empathy drives our staff to go that extra mile. Q:

Regarding

innovation,

what

new

products

and

technology is Goodyear working on? A: A joint project with Tesla, targeting a reduction in the noise that tires make when they vibrate against the pavement, was developed to take a complicated problem

Record operating profit of US$2 billion in 2015

and solve it in the simplest way. Goodyear worked with sound specialists, recreating the same technology available

models did. This makes our clients’ purchasing processes

in sound cabins to reduce noise to a minimum. The solution

much simpler but also simplifies all activities for our

was to use a thick layer of the same material employed in

distributors and our own manufacturing system.

sound cabins to achieve a 70 percent noise reduction. Tires are subject to high levels of pressure and temperatures

Q: How has Goodyear’s technology development process

leading us to develop a specific adhesive for the isolating

permeated its sales and distribution efforts?

material. The final obstacle was to automate the production

A: We have changed in our commercial processes and

of this component to produce thousands of units in a short

moved toward a more digital approach to help customers

period of time. The product was presented at a Goodyear

who may not know what kind of tire their vehicle needs.

event in Washington state to our North American clients

At the same time, we plan to implement our e-commerce

and it is now being used by Tesla in its latest models.

platform, which has thrived in the US market as it supports

Certain Lincoln and Cadillac models may also employ this

the customer during the decision-making process.

technology in the future. This project perfectly highlights the road the industry is taking and our innovations will

We have merged our North and Latin American operations

always improve the driving experience.

to create a single branch for all the Americas. This gives us more flexibility to tend to customers and helps with

Another product unveiled at our event was an all-season

to integrate new projects in other regions. This approach

Wrangler tire for the truck segment, which combines all the

will target the Hispanic population residing in North

benefits of an on-road product with off-road applications.

America. We expect Mexico will play a crucial role in future

As a result, one product can do what five of our previous

expansions.

TECHNOLOGY SPOTLIGHT

CIDETEQ WEATHERING TESTS As Mexico solidifies its position as the world’s seventh-

years of experience offering accelerated weathering tests

largest light vehicle manufacturer, the country’s suppliers

to ensure the quality of new paint services, colors, surface

are rising to meet new requirements. The sector represents

treatments and other applications involving direct contact

3 percent of national GDP and 17 percent of manufacturing

between the component and the environment.

GDP. Beyond infrastructure and human capital, the industry is hungry for testing laboratories capable of providing

In its portfolio, CIDETEQ follows laboratory quality norms

certainty and reliability for production operations at all

ASTM B117, D2247, B368, G154, G155 and B487. The center

stages of the automotive chain.

is certified in ISO 9227, 2812 and 16474 applications, as well as specific client-oriented tests such as GMW 14872,

Jaime Gutiérrez, Researcher at the Electrochemistry

PV 1210, NES M4040, JIS Z2371 and SAE J2334. That has

Research and Development Center (CIDETEQ), says the

allowed CIDETEQ to improve production of several major

center understands these worries. It has grown to be a

automotive companies, validating new products and

strong provider of several testing solutions certified by the

training its clients’ workforce in accelerated weathering

Mexican Accreditation Organization and has more than 12

equipment and material characterization.

VIEW FROM THE TOP

ASIRATIONAL BRAND BUILDS ON REPUTATION HUMBERTO GÓMEZ Director General at Yokohama Tire Mexico 90

Q: Which segments are having the greatest influence on

Yokohama is now using a new technology involving

Yokohama’s position in the Mexican market?

orange oil, an environmentally friendly substitution for

A: In Mexico, not only do we sell tires for cars, SUVs and

crude oil that reduces petroleum inputs by approximately

trucks but we also sell them for mining and industrial

20 percent. This material increases tire recyclability

vehicles. Yokohama Tire Mexico has been operating in

while performing equally or better than previously used

the country for two and a half years so we are a relatively

compounds. Another exemplary product is the AVID

recent entrant to the market. Our market share of 22

ENVigor, which combines all the high performance and

million light vehicle tires and over 3.5 million truck tires

environmental protectionist qualities available in a single

is still small but our focus is on expanding as much as

tire, creating the all-new category Grand Performance.

possible, improving the perception of our company’s

Furthermore, in 2007 Yokohama announced a patented

image. Yokohama is already considered an aspirational

solution called AIRTEX Advanced Liner. Engineered by

brand. We have boosted our presence with a professional

blending rubber and plastic molecules, AIRTEX is lighter

dealership network in every segment to continue building

but less porous than conventional butyl liners. This means

on this reputation, as we deem all segments equally

that less air leaks out, keeping the tire properly inflated

important.

over time while delivering improved rolling resistance thanks to the liner being lighter.

Q: What have been the greatest challenges in establishing Yokohama’s brand in Mexico?

Regarding innovations in the truck and bus segment,

A: Some of our competitors have had a presence in

we are also proud to say we have products that are

Mexico for more than 60 years, not to mention numerous

performing excellently. As a tire rotates under a load

companies that offer low price and low-quality tires.

thousands and thousands of times the stress on the steel

Therefore, one of our main goals is to communicate the

casing and rubber compounds is tremendous, which can

quality of Yokohama’s tires to end users and clarify that

age tires prematurely. Our exclusive technologies help

they do not have to pay the highest price to access a

combat this fatigue, reinforcing the casings to extend

premium product. To raise awareness of our brand,

tire life and allowing for multiple retreads and reducing

Yokohama has signed a five-year partnership agreement

maintenance costs. Tires are one of the biggest expenses

with the Chelsea Football Club, one of the English

of a fleet company and if the deciding factor is price, this

Premiere League’s powerhouse teams, which is part of

can often prove to be more expensive. Therefore, we try to

positioning ourselves as a premium player focused on

advise customers that in the long term the best tire is that

end users.

which delivers the lowest cost per kilometer.

Q: In terms of R&D and technology, how does Yokohama

Q: How does Yokohama manage direct relationships with

distinguish its product from its competition?

OEMs based in Mexico?

A: At Yokohama, we stress the fact that a fraction of a

A: Expanding OEM business worldwide, especially outside

second saved by the immediate reaction of a tire can

Japan, is a basic strategy in The Yokohama Rubber Co.,

be the difference between life and death. Even so, the

Ltd group. Yokohama Rubber Co. already has connections

importance of a tire is often overlooked. This point

with most OEMs in the world and our offices in Japan, Asia,

of contact between the road and all the engineering

Europe and the NAFTA region are in contact with them

innovation and manufacturing excellence involved in a

daily to discuss future business. As a result, Yokohama

vehicle is crucial and our clients need to know they are

Rubber Co. has already supplied our premium tires to the

buying a product that will guarantee the safety of all the

industry leading including Mercedes, Porsche, Audi, Lexus,

passengers on board.

Mazda and many others around the world.

VIEW FROM THE TOP

MONOZUKURI JIT PHILOSOPHY STARTLES GUANAJUATO HISASHI MORI CEO and President of Akebono Brake México 91

Q: How have Akebono’s production operations evolved in

Q: How has the government of Guanajuato supported

Mexico and which companies are you mainly targeting?

Akebono and to what extent has this helped your

A: Akebono has facilities and customers all around the

operational development?

world but Akebono Mexico was established to cover

A: The first hurdle when embarking on any expansion or

the demands of new automotive companies investing

startup is the capital investment, for which Guanajuato

in the country. Akebono Mexico’s capacity is very low,

offers exceptional support to companies in the region.

as operations here began with 20,000 vehicle parts per

The state has supported us enormously already and in

month, which is 5 percent of Japan’s total workload.

return we hope to provide employment opportunities to

Although we would like to do business with Toyota once

local residents, improving their quality of life. Akebono

their Guanajuato operations start, Nissan and General

hopes to develop a welcoming environment that will

Motors remain our main clients. In terms of our growth

incentivize our suppliers to accompany us in Mexico. This

expectations in the Mexican market, we are still trying to

would allow both Akebono and its customers to grow in

identify the needs of OEMs expanding into Mexico. As a

Mexico. Although most of our materials are imported, we

result, it is not yet clear where our focus will be in the future

have identified opportunities to source them from Mexican

but the state of Guanajuato offers good opportunities to

companies. Even so, it does not really matter where the

Japanese companies and the country’s many free-trade

supplier is based as long as they are competitive and

agreements (FTAs) make our operation easier.

understand our Monozukuri JIT philosophy.

Q: Akebono is fairly new in the Mexican market. What

Q: How is Akebono innovating in the automotive industry

challenges have you faced while establishing your

in terms of products and R&D operations?

operations and creating brand recognition in Mexico?

A: Akebono is one of the biggest brake suppliers in the

A: The transition has been much more challenging than we

auto industry and we have a huge market share, as well

expected. Before we arrived here, we heard that it was easier

as good foundation brake technologies. Our R&D centers

to set up shop in Mexico than it was in similar countries.

are located in the US, China and France as well as at home

In China, for example, they might expect us to pay for the

in Japan. The technology development leaders in Mexico

privilege of setting up operations. In contrast, Mexico is

are carmakers that have local R&D operations. Usually

grateful that we support the industry and welcomed us with

they are followed closely by their suppliers. In Asia, there

open arms. Having already established operations in North

are a number of small innovative carmakers but we have

America, Europe and other Asian countries, we expected

not yet seen one in Mexico. From our standpoint, Mexico is

the move to Mexico to be fairly similar but it was surprisingly

still dependent on the US for innovation. This is why OEMs

dissimilar. The culture and the mindset are vastly different

from other countries should open R&D centers in Mexico,

to those in Japan, presenting the greatest challenge for us.

promoting a collaborative development environment.

For example, the core philosophy of Akebono is oriented toward the Akebono Production System (APS), requiring

Akebono’s

innovative

Just-in-Time (JIT) delivery of a minimum volume of parts.

supported

In Mexico, the idiosyncrasies behind how things work

elimination of waste, is based on the idea that Monozukuri

were drastically different as the country has adopted a

is achieved by developing people.

North American style of well-stocked inventory that allows

education and training human talent so our workers can

companies to sell anything at any given point. Nevertheless,

develop solutions through constructive thought. Akebono

labor costs in Mexico continue to decrease compared

is not only utilizing APS as a production method but

to Asian countries where employee wages increase on a

is also conducting various activities to elevate it to a

yearly basis.

management philosophy.

APS,

Monozukuri which

JIT

represents

philosophy a

thorough

Akebono is driving

VIEW FROM THE TOP

NEW ENTRANTS POSE BIGGEST OPPORTUNITY RAMIRO DELGADO Director General of SA Automotive 92

Q: How has SA Automotive generated and strengthened

transparent and honest about our products and quality

business opportunities among OEMs and suppliers?

and we always deliver orders on time. The company is

A: SA Automotive’s strongest segment is the light vehicle

open regarding processes and operations and the team

market, in which we work with General Motors, Ford, FCA,

always aspires to offer excellent customer service.

Daimler, Tesla, Nissan and BMW. We have a relationship with Volkswagen as a Tier 2 supplier. Our production is

We certainly have areas of opportunity to address, one of

diversified through car interiors for compact cars and trucks,

which is our teams. Machines can always be replaced but

including roofs, armrests, trunk compartments, door panels

people have to be developed, trained and taken care of

and protection components for the engine. We frequently

professionally. We believe in giving younger people a chance

receive requests for quotes on different brands and models,

to participate and grow in the company by integrating

including our recent tender for the Toyota Camry that will

their ideas with our operations. Both technology and

be manufactured in Guanajuato. As we begin to target

human capital are essential in a company but integrating

Honda and Mazda, we plan to open a new facility in Celaya,

new equipment entails staff being willingness to learn how

Guanajuato to be closer to them. SA Automotive also

to operate it. Training and education are crucial for our

hopes to develop a stronger relationship with Volkswagen.

development along with incentives when deserved.

As model renovation occurs every five years, our biggest opportunity lies with new market entrants.

Q: What are your expectations for SA Automotive’s new plant in Celaya?

SA Automotive has been present in Mexico since 2010 but

A: About 400 people will work at this new site for SA

the company’s owners have accumulated more than 30

Automotive but we intend to develop the plan carefully.

years of experience in the automotive market. We have a

We must team up with the most appropriate partners

planned expansion for our operations in the city of Puebla

so our operations run efficiently, which involves the

to continue catering to the local automotive industry. The

government, suppliers and even the people in charge of

plant covers 4,000m and has 3,000m of storage for raw

the construction project. Once our team is set up, we want

materials and a product specifically for Daimler. In June

to consolidate the SA Automotive brand in the national

2016, we added an extra 2,000m for new projects.

market. We have already prepared information brochures

and are designing a new webpage and training the sales Q: What advantages does the company have over its

force that will promote our brand in the local market.

strongest competitors? A: Our vision is to have no competitors but allies that help

Q: What are SA Automotive’s key targets in the Mexican

us deliver the best products to the customer. We work

market?

closely with Faurecia, Johnson Controls, Lear and Antolin

A: We want to have a strong presence in the entire

as a Tier 2 supplier, so it would be difficult to consider

Bajio region. Having planned this project for over 18

them competition for our Tier 1 market. Especially in the

months, it is now becoming a reality. There are many

automotive market, companies may occupy both roles

other opportunities to seize, especially in the automotive

of supplier and client so we must concentrate on being

sector. Mexico has seen enormous investments and new

equally attractive to our suppliers and our customers.

companies appear every day. We want to become a key player in the auto parts sector without focusing solely

SA Automotive offers advantages that make our clients

on automated equipment or the latest technology. Our

more comfortable during the purchasing process. Our size

true objective is to improve the quality of life for the local

presents an opportunity for our customers to maintain

population by creating job opportunities for everyone who

a closer and more personal relationship with us. We are

wants to grow personally and professionally.

VIEW FROM THE TOP

MEXICO TO SEE FASTEST GROWTH IN LATAM EDUARDO MELÓN Plant Manager of Inaumex 93

Q: How do Inaumex’s Mexican operations relate to its

in Europe. The company has strong relationships with

global strategy?

Nissan, Toyota and BMW and is working to retain business

A: Inaumex is a Tier 1 supplier with Spanish roots that

in Mexico. Ford and Honda are the company’s main focus

supplies major OEMs. Considering our group’s small

for 2016. That being said, we are targeting Mazda as it

operations, comprised of around 400 people worldwide,

would be an excellent boost to our position in the market.

it is not unusual for us to work directly with OEMs. Our global operations saw a 25 percent turnover in sales in 2015

Q: How have new global trends such as lightweight

and Mexico is expected to grow significantly in the short

materials and space reduction impacted Inaumex?

term. Although Inaumex’s European plant will not expand

A: Large truck consumption in the US is on the rise,

quickly, we foresee our plants in China and Mexico behaving

especially since fuel prices continue to plummet. Many

differently. Our Mexican facilities will double production

of Inaumex’s components have transitioned from steel to

by 2017. For the most part, Inaumex Mexico manufactures

plastic and for some components we have begun using

stabilizer links and suspension chassis modules. Suspension

our patented hybrid material, which combines both steel

ball joints will soon be included as well.

with plastic. Over 50 percent of our European projects are being manufactured in plastic and hybrid materials. Mexico

Q: How capable is Inaumex of catering to domestic

will see this technology enter the market in the short term

demand in Mexico’s booming automotive sector?

as Inaumex is investing in its first plastic injection line.

A: Demand in Mexico’s industry is rising and indicators suggest this trend will continue. Most of our products are

Creating a strong supplier network in Mexico has been

sold in markets other than NAFTA, primarily China and

one of Inaumex’s greatest challenges, following industry

Europe. Customer expectations rise every year, forcing

growth that limited raw material availability. We expect

us to systematically improve our operations to meet and

our products to be manufactured with 90 percent local

exceed these expectations. Resource allocation is crucial.

content but due to the exchange rate and the market’s

We cannot be too eager to grow before consolidating

limitations, domestic production costs may exceed those

projects that are already in the pipeline.

of European imports. Importing its components has been Inaumex’s strategy for the past three years. To stop doing

Mexico’s production plant and Detroit’s technical and

this, we believe new steel market regulations must be put

engineering center help Inaumex cover regional demand.

in place to improve the quality of local suppliers.

Although the company’s sales and engineering strategy is defined in Europe, project management and customer

contact is handled through our production facility. Design

specialization impact the country’s competitiveness?

How

will

rising

labor

costs

associated

with

and engineering activities are also performed in Europe

A: Mexico’s competitiveness is not contingent on labor

but ongoing communication is maintained between our

costs. Economic growth is accompanied by increased

headquarters and our Mexican operations. Due to their

salaries, as is standard in any business. But the market

proximity to the client, Mexican plant officials lead project

is behaving strangely, as there is a lack of human capital

management while our headquarters’ technical center

to cover the large demand that resulted from five years

performs testing and engineering.

of booming industry growth. We expect educational institutions to catch up soon and training the appropriate

Q: How is Inaumex targeting new OEMs entering the

human

country, such as Toyota, Audi and BMW?

companies like Inaumex do not need large volumes of

A: Although commercial relationships with OEMs have

employees; they need prepared professionals with the

not yet been secured in Mexico, we do work with some

right skillset.

capital

for

domestic

industries.

Automated

INSIGHT

GLASS MAKER HAS CLEAR VIEW TO GROWTH the company’s technological development,” says Miguel

MIGUEL TOVAR

Tovar, President of Euroglas.

President of Euroglas Although the company’s biggest market is the coach

All auto components need to have the highest resistance

segment, Euroglas has implemented a diversification

and durability to ensure passengers' safety. Glass is no

strategy to target more clients. According to Tovar, the

exception and finding the right local partner can make a

best-selling product for the company in 2015 was a smart-

big difference in operating and logistics costs. Catering

glass blackboard used in light vehicle applications. The

to that demand, Euroglas has emerged as the biggest

system included a projector, a QR code reader and was

glass manufacturer for the bus segment in Mexico.

fully interactive. Euroglas manufactured approximately 1,500 units per week, exporting them to Germany, Spain,

Competing against other brands like Vitro and Citsa,

Canada and the US. “The more dependent a company is

the company has secured a strong presence in flat glass

on one market the more vulnerable it becomes to external

and curved glass, with a position also in the tinted glass

shocks. For that reason, we are focusing on exporting

market. Its array of products for the automotive industry

our products to the US, Europe and Brazil, as well as

includes windshields for buses, side windows for cars and

increasing our presence in the local market,” says Tovar.

rear windows for both. Thanks to the growth rates witnessed in the automotive Euroglas’ participation in the automotive industry began

industry, Euroglas has seen a significant increase in

when Irizar brought its manufacturing operations to

demand for its products. “The combination of the

Mexico. The company was importing glass from Spain but

industry’s success with the current exchange rate

realized Euroglas could provide better quality products

between the dollar and peso has had a positive impact

locally. Euroglas’ first product patent was for rolled glass.

on our sales,” adds Tovar. “Assembly plants that used to

Today, the company is working on a way to bend glass

import their glass from China are shifting their supply

along three different planes and it has two processes

chain to us, since the price of the dollar has increased

for glass treatment. These are laminating or hardening

costs.”

through a tempering process. Tempered glass is four times more resistant than normal glass.

Maintaining the same growth levels for years requires commitment to efficiency. The company manufactures over

Based on Euroglas’ innovations, the company developed

200 tons of glass in its first plant and will satisfy growing

the first oven in Mexico that can temper and harden

demand with the second facility. To help it reach that goal,

curved and flat glass measuring 3mm. “We are proud of

Tovar says more efficiency is needed. “Bigger, more efficient lines of production are necessary in Mexico. Our current machines produce a piece of glass every 14 seconds. We want to push for four seconds per unit, which will require fully automated lines that can cut and polish glass.” While Euroglas has focused on the window-manufacturing sector, Tovar’s goal is to keep innovating and taking advantage of the US$230 million glass market. The company is introducing new solutions targeting weight reduction, which will result in lower operating costs and emissions for the final client. Engineering advances in thermal insulation and soundproofing has also led

Current production is a piece of glass every 14 seconds, the target is 4 seconds per unit

Euroglas to glass-ceiling production. “Windshields could display GPS projections if we pushed the innovation,” says Tovar. “Our strategy focuses on the end user. It is important to maintain contact with our audience to know how we can provide better service.”

INSIGHT

MEXICAN LEADER EXPANDS BEYOND OEMS In a market dominated mostly by foreigners, Mexican suppliers stand out as they must excel in quality and overall

LUIS AGUILA

efficiency. While it is not uncommon to find Tier 3 and Tier

Director General of Eagle

4 national providers, Mexican Tier 1s are a rare commodity.

Plastic and Manufacturing de

Eagle Plastic and Manufacturing de México is the result and

México

consolidation of Luis Aguila’s years of experience working 95

with the automotive industry. His experience in the automotive industry includes an array of components such

Queretaro also offers new business opportunities for the

as trunk carpets, seat covers, plastic injection for visors

company. Eagle aims to break its traditional role as a Tier 1

and safety triangles. However, his collaboration with FCA

supplier and become a Tier 2 business. The new plant has

and particularly Chrysler led him to manufacture products

an installed capacity that exceeds the company’s demand

designed to protect vehicles from possible damage while

of 350,000 warning triangles. This means the company

they are still on the assembly line.

can offer plastic injection services to other suppliers in the region. The enterprise expects the help of the Queretaro

The company now manufactures covers for doors and

Automotive Cluster. Aguila plans to offer Eagle’s products,

frames, protecting them from dents or possible spalling

services and assembly line to the several industrial parks

before reaching the end of the line. This ultimately represents

and Tier 1 companies located in the state.

significant savings for OEMs avoiding extra costs to repair or re-machine components. FCA is not the only company

The new site will also allow the company to broaden

benefiting from Aguila’s business experience. GM is also

its production scope by performing subassemblies.

working closely with him and will directly benefit from the

Delivering already assembled components will add value

construction of Eagle Plastic and Manufacturing de México’s

to the product portfolio and help attract newcomers to

newest plant in the state of Queretaro. The new production

the region. As Toyota and Ford move into the state of

site will manufacture and supply GM with warning triangles

Guanajuato, Aguila expects to boost Eagle’s presence and

and will continue with Chrysler’s products.

become a partner in their new operations. The increasing competition in the automotive industry does not seem to

When asked about choosing Queretaro as the home for

be a problem for the manufacturer either. “The automotive

the new plant over states such as San Luis Potosi and

sector is overly demanding, constantly requiring efficient

Guanajuato, Aguila explains that the privileged location

and Just-in-Time results. Therefore, even though there are

of the state played an important role in its election. “Our

many competitors, the region still needs a stronger local

previous production site was in Mexico City but we are

supply chain,” concludes Aguila.

transferring our production to Queretaro to be closer to GM’s plants in Silao, Guanajuato and the state of San Luis Potosi. Queretaro is the center of the automotive industry. The state has a large supplier platform and enough infrastructure to cater to the automotive industry.” The new site will be in the business area of the state and close to the highway that leads to San Luis Potosi. Queretaro also offers human capital availability for Eagle Plastic and Manufacturing to expand its new operations. “The state offers excellent technical capabilities and we are confident about the development of our new operations,” says Aguila. Expanding its current production is part of the plan but it must be done according to the needs and requirements of the OEMs. For now, the warning triangle Eagle

“The automotive sector is overly demanding, constantly requiring efficient and Justin-Time results. Therefore, even though there are many competitors, the region still needs a stronger local supply

manufactures is included only in cars sold to the domestic

chain”

market. But Aguila does not exclude involving the

Luis Aguila, Director General of Eagle Plastic and

company in direct exports in the near future.

Manufacturing de México

VIEW FROM THE TOP

THE AUTOMOTIVE INDUSTRY’S HIDDEN PARTNER VICENTE CÁRDENAS Sales Manager Mexico of Parker Hannifin Corporation, Racor Division 96

Q: How has Parker adapted its commercial strategy to

than sole products, correlating our solutions with the

the Mexican market?

customer’s needs.

A: Our hoses, connectors and hydraulics divisions have been our company’s most popular segments in

We work closely with our clients’ design and engineering

the Mexican market. However, Parker has many other

departments to ensure they are familiar with all the new

products including gaskets, filters and even automation

products we offer. Even though most of our products are

solutions. Clients may not even realize they are using one

developed in the US, we try to keep close contact with our

or several of our products in their installations. Parker is

counterparts to know what we could develop for clients.

directly connected with the original equipment market in

It is crucial to identify customers’ needs to offer the best

Mexico. Our client base includes Freightliner, Kenworth

solutions. This contact with clients builds a relationship

and Navistar in the heavy-duty market and Volkswagen,

and attracts new clients to the brand.

FCA and Isuzu in the light vehicle segment. We are always on the lookout for new OEMs entering the market.

Q: What opportunities do you see to develop Parker’s

We approached Hyundai Truck & Bus’ engineering

engineering division in Mexico?

department as soon as the company established local

operations. Parker can offer complete solutions rather

engineering operations is the company’s human capital

The

biggest

opportunity

strengthen

our

TECHNOLOGY SPOTLIGHT

YOKOHAMA MAKES A SOCCER PLAY WITH ORANGES English soccer club Chelsea FC not only has a championship

commitment to increase the proportion of oil-free

under its belt. It now has its own tire, thanks to team

materials in its tires by 80 percent or more. When

sponsor Yokohama Rubber and a bunch of oranges.

combined with natural rubber it offers excellent grip and low rolling resistance, ultimately improving a vehicle’s

In honor of its five-year sponsorship contract with

fuel consumption. Low heat-generation rubber is used

the 2014/15 Premier League champions, Yokohama

alongside orange oil to boost its properties, diminishing

Rubber launched a special edition BluEarth-A AE-50

energy loss and improving comfort for the vehicle’s driver.

tire emblazoned with the team’s logo. The BluEarth-A EDITION AE50 CHELSEA FC was developed to the

The

BluEarth-A

highest performance, maneuverability and efficiency

aerodynamic and designed to lower wind resistance,

standards using two types of silica and Yokohama’s

which

exclusive orange-oil technology. The tire offers a balance

Rubber tested the tire using a wind tunnel. The tread

between efficiency, grip on wet roads and wear resistance.

is asymmetric to improve overall performance and the

makes

EDITION more

AE50

energy

CHELSEA

efficient.

Yokohama

interior shoulder includes 3-D drain sipes to counter Orange oil is a byproduct of the fruit’s peel and is fully

irregular wear, while the exterior shoulder features wider

renewable. The product is in line with Yokohama’s

sipes to provide more stability while turning.

development. To date, we only employ one applications

solutions Parker can offer to clients. Biofuel is also more

engineer but we normally have more than one project

commonly used, which generates other mechanical

running at a time. Ideally, we would like to have one

challenges that we would not find in Mexico.

engineer per OEM but this is only the norm in the US. Excellent human capital availability in the country,

Our sales force needs to grow significantly but we have

especially in Monterrey, Nuevo Leon, would make it

been successful in the South American market. Being

perfectly possible to have the same dynamic in Mexico.

aware of potential challenges means that we can prepare

To this end, we offer specialized training courses for

in advance. Parker is being restructured, reallocating

all our new recruits and these courses are adapted to

resources and evaluating administrative efforts.

Mexican industry needs. Q: How do you plan to diversify your operations in Q: In which regions is Parker determined to boost its

Mexico?

presence?

A: We see many new opportunities under our new

A: For the past five years, several new companies have

structure. Parker has a consolidated customer base

introduced manufacturing operations to Mexico. Parker’s

and our interests lie in improving relationships with

contact with them provides insight into market gaps as

existing clients. As we supply most OEMs in the

soon as they emerge. However, our current priority is

market, our primary strategy should be to understand

the South American market. Mexico manages all the

their operations and know which products we could

operations for this region but we want to open corporate

offer them as part of an integrated solution. Distinct

offices in strategic countries to serve local companies.

opportunities with companies that have generator

South America is a complex market in which each region

plants, apart from the marine and the oil and gas

varies radically. The characteristic in common is that the

market, could be worth exploring. The aerospace sector

South Cone is completely price-oriented.

also presents an interesting business proposition for Parker, for which we have a separate division in the

We make a special effort to portray the benefits of a

company. We have already started working in aerospace

product with an elevated price to convince price-

by building off our experience in automotive and fully

savvy decision-makers. Several factors such as extreme

orienting our Guaymas, Sonora production toward its

climate conditions also affect our components and the

specific requirements.

INDIRECT SUPPLIERS

Lower tier companies are the bedrock of Mexican manufacturing industries. Without them the supply chain would weaken and break. The contribution of indirect suppliers to the automotive industry ranges from oil and gas tanks to water-treatment machinery, gaskets and leather treatments. In Mexico, most indirect suppliers are SMEs. Regardless of size, Tier 1 companies could not operate without them.

How indirect suppliers function is the key focus of this chapter. It explores the ways in which the automotive industry has offered new commercial opportunities to existing businesses and how Mexican companies have the opportunity to become key pieces of the supply chains of big OEMs.

100

CHAPTER 4: INDIRECT SUPPLIERS 102

VIEW FROM THE TOP: César Gutiérrez, Vistamex

104

VIEW FROM THE TOP: Piermatteo Barucco, Materias Plasticas y Elastomeros de Mexico

105

VIEW FROM THE TOP: Enrique Dorantes, MD Manufacturing

106

TECHNOLOGY SPOTLIGHT: Fire Service Plus (FSP) Enforcer 10

107

VIEW FROM THE TOP: José Luis Díaz del Castillo, DC Gaskets

108

VIEW FROM THE TOP: Francesco Centaro, Brovedani Reme México

109

VIEW FROM THE TOP: Mauricio Arzate, Hope Global

110

VIEW FROM THE TOP: Óscar Medina, Medina Torres

111

VIEW FROM THE TOP: Octavio Azcoitia, OSRAM

112

INSIGHT: Akira Ishii, EXEDY DYNAX MEXICO

113

VIEW FROM THE TOP: Alejandro Mengual, Hoffman Quality Tools Mexico

114

VEHICLE SPOTLIGHT: Volvo 9800

116

INSIGHT: Tohru Kohno, Tohken Thermo Mexicana

117

VIEW FROM THE TOP: Adonai García Escudero, Mirka

118

VIEW FROM THE TOP: Tebaldo Mureddu, Klüber Lubrication Mexicana

119

VIEW FROM THE TOP: Eugenio Floresgómez, Pochteca

121

VIEW FROM THE TOP: Vicente Pastallé, Atotech

122

VIEW FROM THE TOP: Yuri Avitia, Ferreplus Refacciones y Materiales

123

VIEW FROM THE TOP: Thomas Slabig, Nicro Bolta

101

VIEW FROM THE TOP

IMMINENT LOSS BECOMES PERFECT OPPORTUNITY CÉSAR GUTIÉRREZ Director General of Vistamex

102

Q: How did Vistamex evolve from the plant’s previous

some subassemblies. This relationship helped us build a

incarnation as Moulinex to develop as a supplier in the

name for ourselves and to target other companies from

automotive market?

the US, Germany and Japan. We moved from net sales of

A: Moulinex decided to close its operations in Apaseo el

US$4.8 million to US$15.6 million in 2015 thanks to our

Grande, Guanajuato in 2006. At the time, I was head of

diversification strategy after the economic crisis. Mabe

the human resources department and knew almost 250

still represents almost 30 percent of our total sales while

people would lose their jobs. The plant had excellent

our automotive division totals close to 42 percent of

plastics injection and white goods production capacity,

Vistamex’ production

so some of the employees and I decided to keep the plant and start our own operations. Eventually, the plant was

Q: How did Vistamex begin its joint venture with

sold to Arbomex but we kept all the equipment, allowing

Yamada?

us to start Vistamex in late 2007.

A: We finalized our initial certification process in 2010 and before the year ended we received an offer from a

Vistamex

started

manufacturing

appliances

and

the

when

2008

small

domestic

economic

Japanese company to buy our operations. We turned

crisis

the offer down but three months later the company

hit, Arbomex decided to leave the plant to us. We

returned after realizing we were the most competitive

approached new clients like Mabe and Automotive

player in the region. This company needed a closer

Lighting, which was when we entered the automotive

production facility to reduce costs and a local partner

sector as an aftermarket supplier. We saw an opportunity

to ensure the best operations. That is how Yamada-

to participate more actively in this sector and Valeo was

Vistamex was born in 2011 as a 75 percent Japanese

the next company to open its doors to us. We were not

and 25 percent Mexican joint venture. Our workforce in

ISO/TS certified so Valeo audited our process directly

that plant is 100 percent Mexican and after five years

and we have been its supplier ever since. Today we work

we have already improved our production rates through

with six companies within the Valeo Group, in Mexico and

lean processes. This has made us a reference for other

Europe, manufacturing plastic components and operating

Yamada plants around the world.

103

Q: What strategy have you implemented to consolidate

Q: What added value can Vistamex offer its clients?

your operations?

A: We moved from being just a plastic component

A: First, we identified the existing need in the market and

manufacturer to a subassembly provider. Valeo was the

then we integrated our operations offering competitive

first to present a specific problem with lighting harnesses

prices, the right quality and a timely service. We collaborated

and as we were already manufacturing the plastic covers

closely with the government of the state of Guanajuato as

for the headlights, the company asked us to assemble the

it monitored our development. The state even introduced

whole body and test the electric wiring before sending the

us to several companies that wanted to form a joint venture

final component. Building a robust tooling workshop to

with a Mexican company. Even though these negotiations

support our operations is another objective for Vistamex.

fell through, we participated considerably with COFOCE

We want to be fully capable of maintaining and repairing

to highlight our exporting operations. The organization

all our clients’ tools and to make engineering changes

helped us promote our activities and now we have more

to the dies. We are still working on implementing design

business outside Guanajuato than within.

and manufacturing for our own molds and tools. Finding people with the right expertise has been a challenge and

When we started there was not the same demand for

we need to update our equipment for more complex

plastic parts in Guanajuato. GM’s supplier base was already

operations.

established and neither Mazda nor Honda were an option to expand our reach. We are now ISO 9001 certified, which

Q: What are the chances of a joint venture with another

ensures quality management systems, and TS 16949 certified,

automotive company?

which surveys the development of quality management

A: Our joint venture with Yamada has been a great

systems. We have a Customs Trade Partnership against

experiment to see how we work with a partner. We have

Terrorism (C-TPAT) certification and we are working on our

two prospects for a new joint venture. The first is with

NEC certification, which means we are fully prepared to be

an Eastern European company but we still need the right

a supplier to the automotive sector. It has been a long and

talent to make this relationship successful. Tooling experts

difficult process but we can proudly say that we now work

are clearly lacking in Mexico as more than 80 percent of the

with some of the leading suppliers in the industry like Hella,

components used in the industry are imported. The second

Valeo, Magna, Fujikiko and Sanko Gosei. We are building a

prospect is with a Japanese company but the details are

plant in the Amistad industrial park and are expecting to

unclear. Vistamex is open to doing business with national

move our operations to the new location by the end of 2016.

and international players and as one of the biggest Mexican

Vistamex will be the first Mexican company in this park, which

companies in the state, our next goal is to be recognized

will offer us a better position to compete within the market.

as a company where people feel happy at work. Our labor

All companies can participate in any market, it is simply a

turnover is incredibly low, reaching only 1.4 percent annually

matter of understanding the segment’s requirements.

in a region with rotation levels of 30 percent.

VIEW FROM THE TOP

NEW JAPANESE ENTRANTS OFFER WINDOW OF OPPORTUNITY PIERMATTEO BARUCCO General Manager of Materias Plasticas y Elastomeros de Mexico SA de CV (MPE Mexico)

104

Q: As the new General Manager of MPE Mexico, what is

or three injection and blow molding machines. By the

your vision for the company?

end of 2016 we will have grown to 11 machines. The 25

A: We want to stabilize our 20 percent increase in sales

people we employ in Mexico are largely focused on

to ensure this is sustainable growth. Secondly, we want

production and maintenance but three are specifically

to limit staff turnover as much as possible. Our benefits

dedicated to quality control, and we are pleased with

and salary plan will be updated to make staying with the

our products’ standard. MPE Group also has a plant

company much more attractive. The majority of our team

in North Carolina, which works with similar products

has five or six years’ seniority with MPE and the directors

to those machined in Mexico. Our design and project

overseeing production and quality are critical to our

development operations take place in Italy, but our co-

success. Thirdly, we want to expand our plant to double

workers visit us periodically to relay information back to

the square footage we are currently managing. Therefore,

their technical teams at MPE Plastics’ headquarters. Our

in the next two to three years I will be fully dedicated to

molds are produced in Europe with German or Italian

ensuring that we occupy this space effectively. Our interest

companies, allowing us to guarantee the same level of

in opening a new plant is dependent on finding an equally

product control around the world.

accessible location where our employees can continue walking or cycling to work, to maintain their quality of life

Q: How does MPE Plastics make contact with new

and, consequently, their job satisfaction.

companies that are installing facilities in Guanajuato? A: We have recently been investigating an increasing

Our new plant investment is targeted at consolidating

number of Japanese contracts. In the first quarter of 2016,

the business relationship with our established corporate

we signed a deal with a Japanese client, which we hope will

customers and the Japanese companies entering the

be the first of many. The fact that MPE Mexico produces

market. We hope to increase MPE Plastics visibility to Honda,

suspension arm dust covers and bellows for the majority

Mazda and the full supply chain that these large brands have

of our local clients strengthened our reputation, allowing

imported from Japan. As indirect suppliers we are tied to

us to show our new Japanese client that our personnel

our most important clients. Guanajuato is a strategic location

and machines are highly competitive. We were also lucky

as we have an important client in Celaya, GKN, and work

enough to meet several companies at the most recent

with ZF Sachs in Guadalajara, on top of other significant

Automotive Forum in October 2015 in Leon, and spoke

partnerships with companies in Queretaro, Toluca and San

to the Japan External Trade Organization (JETRO). This

Luis Potosi. Once we consolidate our plant expansion, we

increased our visibility and several Japanese companies

could consider exploring other automotive clusters.

requested facility visits to evaluate us as suppliers.

Q: How has MPE Plastics expanded its participation in the

Q: There are a limited number of local raw material

domestic automotive industry?

suppliers. How has that impacted MPE Plastics and what

A: The year in which we entered the market, 2008, was

are you doing to overcome this hurdle?

a difficult year for the whole industry, but the owner of

A: Raw material suppliers, including those of plastic

MPE Plastics maintained his vision. This put us ahead

pellets, have opportunities to improve distribution in

of the competition, as we had the time to consolidate

Mexico. The majority of large plastics producers have

partnerships with US and European companies over

distributors based locally, but MPE Plastics requires tailor-

the years and to establish contact with Mexican clients,

made materials. We have to import 70 percent of the raw

expanding our local customer base. MPE Mexico made

materials we need from two large providers in the US and

a name for itself early on in the automotive boom.

from Europe. Thus, the presence of more local plastics

When we inaugurated our plant in 2008, we had two

suppliers would be hugely beneficial for our operations.

VIEW FROM THE TOP

BOTTLER UNCAPS AUTOMOTIVE OPPORTUNITY ENRIQUE DORANTES Executive Director of MD Manufacturing

Q: What are MD Manufacturing’s competitive advantages

Japanese experts who worked for three years in our plants.

over other plastics suppliers?

We were one of nine companies in Guanajuato to receive

A: It is clear that competition is no longer regional or

this assistance and which later formed the Kaizen Group.

national but global. We recognize the need to direct our

Through this association we have organized courses and

company toward a joint venture with another corporation

plant visits to Tier 1s such as Hirotec and OEMs like Hino

of the same size and vision. We would like to find a

Motors, Mazda and Honda. These visits target best practice

partner to complement our operations, which we could

improvement and adoption in each of these companies.

support with technology, shared clients and contacts, and ultimately offer greater specialization. In the meantime,

Mexico joined forces with the German government in

we will continue to distinguish ourselves with our flexibility

2014 to train our technicians. Additionally, the Automotive

and customer service. It is difficult to differentiate ourselves

Cluster of Guanajuato (CLAUGTO), the Ministry of

simply on products as all industry players have access to

Sustainable Economic Development, JICA and APIMEX

the same raw materials and molds. High quality is implicit

all helped us achieve the presence we enjoy in the

and prices are inelastic. MD Manufacturing has focused

market today. Thanks to these patronages, our company

on offering flexibility, responding to client needs and the

developed its own MD Production system in 2015, defining

quality of our customer service. By offering effective mold

quick-response quality control as one of its core practices.

changes or adapting to emergency needs, we can provide our clients with a more complete service.

Q: How will the company shift its technology now that it manages more automotive activities?

Q: To what does MD Manufacturing attribute its growth

A: Using injection and blow molding we manufacture

and success in Mexican industry?

exterior components such as wing mirrors and under-

A: Our origin in MICLE as a bottle manufacturer was

the-hood parts like air-conditioning ducts and air-filtering

fundamental to our current position assisting automotive

systems. Our injection area has machines that range from

companies. We began offering fuel and oil tanks for small

100 to 1,000 tons of force and our blow molding machines

gas engines and manual tools that led to our integration in

produce parts of up to 150 liters. We try to add value to

the industry. The launch of our injection processes opened

our products by molding their shape and offering assembly

the door to several sectors but MD Manufacturing did not

services.

exist independently until 2012. We have since increased our operations to produce 38 different components and

Q: How have you adapted your in-house operations to

are awaiting the arrival of equipment that will allow us to

newcomers in Mexico?

further increase production for Tier 1 companies. While

A: We hope to immerse ourselves in the automotive

60 percent of our sales caters to the food industry, the

industry as large OEMs complete plant expansions in the

automotive sector now represents 40 percent of our

cities of Puebla, Aguascalientes and San Luis Potosi. We are

business and this proportion is growing. We supply FCA,

certain MD Manufacturing will produce several components

General Motors, Honda, Mazda, Nissan and Volkswagen.

of the processes now being managed in these plants. We believe the number of Tier 1 companies and OEMs installing

Q: Which authorities have been instrumental in integrating

and expanding operations in the Bajio region will allow us

MD Manufacturing into Guanajuato’s automotive industry?

to focus on domestic sales rather than pushing to export

A: Local government has supported us from the beginning,

our products. There is plenty of industry in the region

namely the Ministry of Sustainable Economic Development

for the foreseeable future and although our products are

for the state of Guanajuato. The Japan International

reaching foreign clients indirectly, our focus will remain on

Cooperation Agency (JICA) has also contributed with

the companies operating in Mexico for the short term.

105

TECHNOLOGY SPOTLIGHT

FIRE SERVICE PLUS (FSP) ENFORCER 10

106

In every plant, quality and productivity are important but

includes a 23m hose that allows the user to move freely

safety comes first. FSP has developed numerous solutions

in any direction. FSP made sure the Enforcer 10 was easy

to combat fires before they can do much damage to

to transport and to adapt to different mobile applications.

a clients’ assets. Among its innovative solutions is the

The system can be integrated to all-terrain vehicles, trucks,

Enforcer 10, a fixed system with 10 gallons of fire-fighting

trailers and rescue vehicles. This allows the operator

foam solution, propelled by nitrogen or compressed air.

access to all affected areas without compromising the firefighting equipment’s functionality.

Once fired, the Enforcer 10 can generate up to 200 gallons of foam that can be applied vertically and horizontally,

Just like all other FSP solutions, the Enforcer 10’s foam

creating a barrier between the fire and the atmosphere.

is biodegradable. It does not have an expiration date

The Enforcer 10 can fire up to 14m away, ensuring the

and is neither toxic nor corrosive. These are particularly

operators’ safety. The equipment is 56 cm high, 66 cm

important features, as the foam could come in contact

long and 56 cm wide with a weight of 43kg, plus 36kg

with high-precision manufacturing equipment that must

once filled. This means it can be installed easily and

be protected despite an incident.

VIEW FROM THE TOP

CERTIFICATION TO STRENGTHEN INDIRECT SUPPLIER JOSÉ LUIS DÍAZ DEL CASTILLO Director General of DC Gaskets

Q: What new projects are in the works for DC Gaskets?

development. There has been excellent collaboration

A: Our gasket division continues to grow consistently

between the private sector and the government in

in the domestic and international markets. We have

Guanajuato, coupled with tremendous human capital

also made excellent progress in other divisions. Many

availability.

competitors manufacture the same products as we do but

numbers keep rising, as do sales to the domestic market.

few have their own tooling workshop. We are also working

The auto parts sector has consequently seen significant

on water-based adhesives and silicon-based coatings, as

development, especially in the Bajio region. The increasing

well as acrylic epoxy resins with a water base. Our R&D

number of different car models represents a challenge for

department is in charge of sustainable solutions and is

all auto parts manufacturers. No one company has the

pursuing a patent for silicon rubber production. We are one

flexibility or the volume capacity to satisfy the tooling

of the few companies in the world that integrates its own

demands of automakers. Thanks to INA, we have a clear

laminated graphite production and a rubber mixing plant.

idea of the most popular products in the market on which

We have the second biggest rubber company in Leon

to focus our production.

Mexican

vehicle

production

and

export

supplying our operations, as well as other companies in the region in and out of the automotive industry. Similarly,

Q: How much emphasis does DC Gaskets place on

we have a company that produces cardboard boxes for

investment in R&D?

our packaging needs. We are working on the production

A: On top of our testing laboratories we have a whole

of our own starch, which will be used as an adhesive agent

department dedicated to research in each of our divisions.

for our paper and cardboard products.

Many industries have remained constant throughout the years but companies in the automotive sector require

This integration has brought us huge cost benefits and

perpetual

innovation

stay

competitive. Graphite

has helped us maintain close control over the quality of

components have proven to be an excellent alternative

our products and operations. 2016 has been an excellent

to regular latex and other fiber-based parts. This

year for the company in Mexico. We are expanding our

material is 99.9 percent carbon so it offers excellent

operations and opening more job vacancies to satisfy

thermal resistance and despite being more fragile than

growing domestic demand. In terms of equipment,

alternatives, it has enough physical resistance to be used

we just made an important investment in the rubber

in certain exhaust applications. Several companies are now

division, including eight new rubber and plastic injection

testing their products with graphite components, and our

machines specifically for our oil seals production. These

research team is working on a recycling plan for the scrap

new machines have increased our capacity considerably,

produced.

adding more precision and efficiency to our process. We are in the middle of a certification process and have already

Q: What are your growth expectations for the company

established solid partnerships in the original equipment

in 2016?

segment. Our Mexican facilities have been supplying Tier

A: We hope to see a 12 percent increase in sales and similar

1 and Tier 2 companies in the US for the past six years

figures in production. The auto parts segment remains our

with a 0ppm standard and we even send components to

priority but we hope to see major growth in our divisions.

Australia, Central and South America.

Our companies have developed a significant presence within the market and have expanded to the extent

Q: What are your expectations regarding the development

that we might have to start looking for new facilities. In

of the auto parts segment?

the automotive segment the priority is to complete our

A: The general expectation is that the automotive industry

certification process. Thereafter, we will be able to attract

will remain a fundamental cog in Mexico’s economic

even more business in the US and the domestic market.

107

VIEW FROM THE TOP

ITALIAN MAKER EYES CONSOLIDATION AND EFFICIENCY FRANCESCO CENTARO Managing Director of Brovedani Reme México

108

Q: How significant is the Mexican market to Brovedani’s

Our 2016 strategy includes moving the company’s central

global operations?

commercial department in Italy to a more locally managed

A: Brovedani began operations in Mexico in 2009, amid the

division. This department manages and closes all the

economic crisis. This turned out to be the right decision

contracts with clients across the world before delegating

for us because we were able to establish a solid base and

projects to different plants. We established a commercial

clientele just in time for the market boom. Our Mexican

department in Mexico to implement more aggressive

plant is the first operations location we established on

tactics to cover local market demand. Face-to-face

this side of the world. Our decision was principally fueled

interactions are needed here so I have turned the focus

by our clients’ requests, namely Bosch, to be closer to its

toward implementing this commercial approach.

production locations. Nonetheless, the suggestion that we enter a country with such high potential for growth

Q: Can you describe the process of obtaining and

made the decision even easier. Brovedani’s objective

developing a skilled workforce?

is to completely fill its 10,000m2 plant in Queretaro,

A: In 2009, the city was very different. Fewer companies

although we have bought a further 10,000m for future

were competing for human capital and employee turnover

projects. The company will undoubtedly require this

was far lower. Today, limiting this requires a complicated

space very soon, as last year we grew by 40 percent

daily process of motivating the workforce. The group

and we forecast a further 20 percent growth this year.

must ensure that our people have constant professional

We would like to consolidate our existing operations

development opportunities so that no one stagnates

to achieve as much stability as possible. We consider

because this risks us losing talented personnel. In the

precision and efficiency to be paramount and consistently

indirect part of our operations, we are training workers

work to maintain our strong reputation to be a profitable

from scratch and hiring technicians who are progressively

entity for our shareholders. Our strategy in Mexico is 60

trained by talented operators.

percent focused on the gasoline segment, which has been the fastest growing market and is predicted to see the

Q: What is the company's stance on automation versus

greatest growth in coming years. In Europe, Brovedani

manpower?

was completely focused on the diesel market, though

A: The cold numbers suggest there is no economic benefit

recent tendencies show that gasoline is now much more

to automating our operations in Mexico and that the cost

important there. We also have products for suspension

of manpower does not justify this level of investment.

parts, specifically dampers.

Nevertheless, employee turnover is inevitable and remains high across the sector, while human capital is still lacking in

Q: How has Brovedani adapted to the demands of the

skills. These points, then, suggest the return on investment

domestic market?

in terms of efficiency and quality of our products is worth

A: This facility was originally created to be only a

the initial expense. For this reason, we are in the process

production plant but last year the group decided to award

of automating our operations, following a several million-

complete autonomy to all individual plants, thus our

dollar investment in two robots, which load, unload

Mexican team chose to reorganize the plant’s operations.

and arrange components. We have also implemented

The economic environment is different here and projects

four semiautomatic machines that can dimensionally

cannot simply be copied piece by piece between one

measure the accuracy of a piece in 2.5 seconds. One of

country and another. This led to the creation of our eight-

our targets this year is to reduce staff by 30-40 people by

man development department — seven Mexican engineers

implementing automation processes for extremely precise

led by an Italian engineer — to develop 100 percent of the

production. This will help us reduce risk and get as close

projects here.

as possible to the level of 0 ppm that our clients request.

VIEW FROM THE TOP

VERTICAL INTEGRATION A KEY ADVANTAGE MAURICIO ARZATE Plant Manager of Hope Global

Q: How has Hope Global managed its evolution in the

continuous improvement pushing for faster and more

Mexican market?

precise operations. We have automated our processes as

A: Although 74 percent of our global operations are

much as possible but it is still a combined effort between

directed at the automotive sector, our Mexican plant is 100

machines and skilled workers. Certain products can be

percent dedicated to this industry. We do business with

manufactured with a greater level of automation but other

many of the major Tier 1 companies globally and are seen

operations still have to be done manually.

as a trusted partner and supplier. Hope Global has over 130 years of experience in the manufacturing and supply

Q: What has been the company’s strategy regarding its

industry since its foundation in the US in 1883. We decided

supplier base in Mexico?

to expand our operations to Leon, Guanajuato in 1997

A: Local suppliers help us remain competitive and

and the results have been amazing. We expect continued

reduce costs for our customers. This process is highly

growth here for many years.

dependent

the

client’s

strategy.

they

have

established relationships with suppliers located abroad, Q: What advantages can Hope Global offer its clients over

we have to adapt to those specific requirements. Our

other textile suppliers?

customers challenge us to find the best suppliers,

A: One of our main advantages is that textile production is

quality and cost alternatives. Given the dollar to peso

part of our core business so we enjoy a complete vertical

exchange rate, we have faced some obstacles that

integration with our headquarters. We have the expertise

pushed us toward a healthier business strategy. Looking

and infrastructure to deliver top-quality products. We also

for local partners has been our top priority and we have

have an advanced engineering team that works with our

developed methods to reduce logistics costs when local

customers to develop new and innovative products. Our

sourcing is not a possibility.

quality is enhanced by integrating technology to provide real-time data on production quality to ensure we meet or exceed customer requirements. We have vertically integrated plastic-injection molding and foam-injection equipment, which provides us with the flexibility to develop more complete component solutions. Our

location

has

proven

advantageous,

Automotive represents 74 percent of Hope Global’s international operations but 100 percent of Mexican plant

Guanajuato has a well-trained workforce. Our staff

Q: What future expansion plans does Hope Global have

turnover is around 3 percent and absenteeism is less than

for its Mexican operations?

1 percent. The sustainability of our operations is a further

A: Our goal is to attract new business while taking care

advantage. Waste and scrap is minimal, our gas emissions

of our existing customers. Hope Global will invest in

are well within the legal limits and we are in the process of

expansion where necessary if it makes sound business

certifying the plant as a clean entity.

sense and allows for stronger partnerships with our customers. We have capacity available for new business

Q: How has Hope Global adapted its production to satisfy

and the space to double our facilities in size. As many

the demands of the premium market?

new OEMs are establishing plants in Mexico, we expect

A: All our products have the same quality and specifications

to see increased demand from new suppliers and

regardless of their target market. We have clients in

carmakers. We have a sales team exclusively dedicated

both segments and our processes and technology are

to the domestic market and we are already creating

the same for both. Hope Global implements a culture of

quotes for new players.

109

VIEW FROM THE TOP

AUTOMOTIVE SECTOR A PERFECT FIT FOR SHOEMAKER ÓSCAR MEDINA Director General of Medina Torres

110

Q: What spurred Medina Torres’ move into the automotive

A: Having such broad experience gives us unique flexibility

market and what opportunities are you targeting?

in leather selection. Each pelt is assigned to an industry

A: Although all OEMs use leather every company

based on its quality. While other companies may use

has specific requirements, especially in the premium

both good and lower-quality leather in their automotive

market. This involves large investments and the complex

products, we use only the best pelts for these applications,

transformation of our manufacturing process. We have

resulting in stable, competitive prices.

been implementing renovations since 1997 and the most important update started in 2010. Previously Medina

Even though we are not 100 percent focused on automotive,

Torres solely targeted the shoe industry but the economic

we are ISO 9000/TS 16949 certified, which ensures best

crisis of 1994 led us to change our strategy to target four

practices in automotive production operations and have

more sectors including pet products, furniture, automotive

been audited by Volkswagen for quality and efficiency in

and aerospace. We consolidated our first contract in the

line with their standards. We started production for the

automotive industry with Bader. Five years later, Seton

Golf platform in May 2016 and Volkswagen is planning

approached us and we developed a three-year partnership

another visit in April to our facilities to ensure everything

with the company before securing more business with GST

runs to plan. We are finally in the right position to compete

and Eagle Ottawa. Three years ago we chose to become

in the market and are not afraid to invest to improve our

independent and build our own future in the industry. We

operations.

have finally sealed our first contract with Volkswagen supplying the Golf platform, which will open doors to

Q: How prepared is Medina Torres to handle the demand

more car manufacturers.

resulting from its new deal with Volkswagen? A: We did encounter an obstacle in our cutting

Q: What hurdles did you face and what strategies did you

capabilities during our first test run, which caused

implement as you entered this market?

us to delay the start of production. We made sure we

A: It is not easy to enter the automotive industry as

could comply with Volkswagen’s demands with only 20

a new company because most OEMs already have

percent of our production capacity and we still have

partnerships with other suppliers. We have the advantage

the capacity to grow 15-20 percent if needed. Efficient

of already understanding the processes and being

operations will allow us to eventually participate in

ready to demonstrate that we are capable of delivering

other bids for Volkswagen as well as for other OEMs.

excellent quality, which often takes 6-12 months. In 2015

The tender for the new Jetta will happen in the second

we acquired the testing equipment needed, giving us

half of 2016 with that for the Tiguan following in 2017 so

the necessary credibility to participate in the market.

we are already planning to participate. The company is

To become an automotive supplier companies must

starting to develop leather for steering wheels. This is a

participate in a tender and in the most recent we were

more delicate product and we are partnering with TRW

among the two most price-competitive players. We have

to supply the Volkswagen Group. The company currently

acquired the necessary contacts to approach companies

sources this from Italy so it would be advantageous to

and now that we are working with Volkswagen, we have a

have a local supplier. When fully active, we expect our

permanent staff member in Puebla. Also, our sales director

automotive segment to represent 20 percent of our

has traveled to Detroit to meet the purchasing directors of

business. The shoe industry is declining and will probably

Ford and Nissan.

fall to only 10 percent in the next five years, but our pet segment is twice what we manage in automotive. We

Q: How can its shoe background help Medina Torres offer

want to protect our shares in other markets to ensure

added value to its customers?

the longevity of Medina Torres.

VIEW FROM THE TOP

ILLUMINATING THE LOCAL SUPPLY CHAIN OCTAVIO AZCOITIA President and Director General of OSRAM

Q: How has OSRAM made its mark on the lighting industry

technology allow us to cover a whole surface rather than

in Mexico and how do you keep growing?

a particular point and although it might seem a minor

A: The lighting industry had not been challenged by

change, it has major significance in the component’s

technological shifts as much as other industries until the

performance. The technology is still maturing and will

quest for energy efficiency emerged 15 years ago. OEMs in

be restricted to high-end vehicles until it can enter the

Mexico were limited and so were the vehicle models they

Mexican manufacturing market.

manufactured. Today, OEMs engage in constant competition and the number of companies increases every year. The

The main entry barrier for laser and matrix in the NAFTA

demand for higher quality and competitive prices spurred

region is the Federal Motor Vehicle Safety Standard

a push for better practices from OEMs and the supply chain.

108 (FMVSS 108), which regulates automotive lighting,

This included higher expectations for the lighting industry.

signaling and reflective devices in the US. OSRAM has also worked to develop automatic and intuitive lighting, as well

OSRAM has new technologies that are the direct result of

as other applications that directly interact with the driving

its close relationship with the automotive industry. Most of

experience. For example, we have electronic cards that

Mexico’s foreign investment is poured into this segment,

when attached to the engine can make the vehicle’s interior

demonstrated by new projects from Honda, KIA and Audi.

lights follow the beat of the music playing. This specific

Similarly, suppliers like Valeo, American Lighting, Stanley

modality is controlled through the user’s smartphone,

Automotive Group and National Automotive Lighting have

allowing them to control the timing and color of the light.

made their way into the Mexican market, giving OSRAM an opportunity to position its products. We are constantly being challenged by automotive companies to improve the quality of our products and services, which means that we have to continue innovating the technologies that are in the market, as well as those in early development. Q:

What

OSRAM’s

contribution

OSRAM cooperated with Flex and Ford on the F-150 creating the first truck with a full LED forward lighting system

technology

development in the industry?

Q: How does OSRAM generate its solutions?

A: We are the leader in automotive lighting and a key

A: We are developing our solutions in direct collaboration

player in the development of new technology such as LED

with our OEM clients and their Tier 1 suppliers. Traditionally,

modules. Although this technology was developed close

OSRAM’s products are incorporated into other components,

to 25 years ago, it was not commercialized en masse and

which are later added to the final assembly. Companies like

was just recently implemented in the automotive market

ours have the task of ensuring the decisions made by top

with laser and matrix solutions. Despite this, traditional

executives around the world materialize in their Mexican

halogen and xenon technologies remain market leaders.

operations. OSRAM has become a pioneer in technological

Technologies like OLED have not yet achieved complete

advancement, while offering warm customer service to all

penetration in the US market.

our clients. As a result, we are the best lighting provider in the industry with the highest levels of flexibility, able to mold

BMW has implemented a continuous LED in one of its

our procedures to any requirement imposed by automotive

vehicles. It is not unusual for LED lighting to be perceived

companies. A prime example is OSRAM’s cooperation with

as singular points instead of an integrated and robust light,

Flex and Ford on the F-150 launched in 2015. This effort led

and some providers lack the quality this technology needs.

to the creation of the first truck featuring a full LED forward

This is not the case for OSRAM. OLED and continuous LED

lighting system.

111

INSIGHT

SUCCESSFULLY RIDING THE CVT TREND EXEDY’s main products are its torque converters for CVTs, automatic transmissions (AT) and manual transmission

AKIRA ISHII

(MT) clutches. As a subsidiary of the EXEDY Group,

Director General of EXEDY

DYNAX offers friction materials and clutch packs that

DYNAX MEXICO

are essential for all transmission systems. “Through our technology development, we can meet automakers’ demands for better fuel efficiency. Furthermore, EXEDY

112

Continuously variable transmissions (CVT) are gaining

DYNAX’s products can deal with the vibrations caused

ground in the volume automotive market thanks to their

by engines with fewer cylinders, boosting the downsizing

fuel efficiency and performance. These systems need

trend in the market,” explains Ishii. “As CVT solutions

specialized components and Nissan’s leading supplier,

continue evolving in the market, our torque converter

Jatco, found a partner in EXEDY DYNAX MEXICO.

sales will grow proportionally.”

Originally, Jatco sourced its products from EXEDY America Corporation in Tennessee but it came to need someone

The company’s R&D operations are located at EXEDY’s

closer to its operations in the state of Aguascalientes to

Japanese facilities and at EXEDY Globalparts in Detroit,

satisfy demand. The EXEDY Group made the decision to

speeding up the response time for all Japanese and

establish a subsidiary in Mexico in December 2010 and it

North American customers from their initial technology

opened a second facility in April 2013.

development stages. One of Aguascalientes’ biggest advantages, according to Ishii, is its solid human talent base and its pool of available engineers. As is true for most Japanese OEMs setting up in Mexico for the first time, EXEDY DYNAX’s production was mainly oriented to its Japanese clients. However, the company started building strong business relationships with occidental OEMs. Given EXEDY America Corporation’s relationship with

US$60 million in capital and a 31,000m2 manufacturing site

companies in Tennessee, the company’s efforts in Mexico are already permeating the US industry. “There are many profitable opportunities with North American businesses that have manufacturing locations in Mexico,” says Ishii. “Our company’s philosophy is based on quality and Just-InTime operations. The Group’s final goal is for EXEDY DYNAX

The company chose Aguascalientes to put down roots

MEXICO to create a Mexican company with EXEDY’s DNA.”

as it was close enough to Jatco and EXEDY DYNAX’s main suppliers, which include Tohken Thermo, ASC and

The company still sees an opportunity with European

Kyoei. Mexico’s thriving domestic market, its free-trade

manufacturers but their focus on dual clutch transmissions

agreements with 46 countries and its highly skilled, price-

has presented the biggest obstacle. Mexico’s evolution is an

competitive workforce make it the perfect location for

excellent opportunity for the EXEDY Group. Ishii believes

companies managing worldwide exports.

that the global automotive market will see significant growth in the near future and the NAFTA region will play

“We have 42 branches in 24 countries with global net

a crucial role in this process. “Mexico is also expected to

sales of US$2.13 billion at the end of 2015. The EXEDY

keep growing, mainly fueled by its privileged position next

Group operates six branches in the NAFTA market with

to the US mega market, as well as the Central and South

EXEDY DYNAX MEXICO as the most recent one,” says

American regions,” he says. “As a result, we see Mexico

Akira Ishii, Director General of EXEDY DYNAX MEXICO.

becoming a fundamental member of EXEDY DYNAX

“Our workforce totals 17,533 employees, 421 of whom

MEXICO’s development. Furthermore, as many OEMs are

work in our Mexican facilities. We have capital of US$60

moving their operations from the US to Mexico, EXEDY

million and a manufacturing site of 31,000m that we are

DYNAX MEXICO expects to become the group’s biggest

already considering expanding.”

branch in North America.”

VIEW FROM THE TOP

WINNING IN A QUALITY-DRIVEN MARKET ALEJANDRO MENGUAL General Manager at Hoffman Quality Tools Mexico

Q: How have Hoffmann Group’s priorities adapted to

Q: How does Hoffmann Group balance customer service

distribution and manufacturing demand?

strategies with product placement?

A: Hoffmann Group had a global growth of 5.1 percent in

A: Our three-pronged strategy will not be effective

2015, reaching €1.1 billion (US$1.22 billion) in sales. We offer

without excellent customer service, tooling, and logistics

an integrated distribution, manufacturing and services

applications.

portfolio. Our strong logistics concept makes us experts in

multinational companies dominate the market share in

distribution as 99 percent of the more than 70,000 items

Mexico, while the online business is not yet in the position

listed in our catalogue are always in stock and available for

we would like it to be. We operate the best e-shop in our

immediate shipping. Our warehouse in Puebla has more

sector having integrated products into several multinational

than 13,000 products in stock including industrial furniture

entities. We hired an e-commerce specialist to promote our

and is capable of delivering equipment nationally within

brand in the local market. One of the company’s priorities is

24 hours. TÜV, a leading logistics certifier, has evaluated

digitalization, to be our customers’ link to the opportunities

and approved our operations. Our warehouses are fully

arising from the flourishing Industry 4.0 trend.

Powerful

manufacturing

plants

from

automated and source from 500 top suppliers worldwide, to be able to respond swiftly to clients demands. Our

Q: How has Hoffmann Group worked on a human

135,000 customers worldwide include large corporations

development strategy to better target its customers?

as well as SMEs in approximately 50 countries. Hoffmann

A: We train all our employees, from technical engineers to

Group’s specialists can provide technical advice and

sales representatives, on how to approach the customer.

consulting for machining, metrology, work stations and

Our customer service staff is trained to be able to advise

storage. We have the experience to support purchasing

clients as though they were out in the field with them.

departments with our powerful e-commerce tools and

Every Mexican worker in our 3,000m2 warehouse received

through our consulting services.

training from the best employees from our international facilities, and now that we opened a location in the US,

The goal is to be recognized not only by global players

some of our Mexican employees have travelled to be

that already know us from other markets but also by local

trained along with the new recruits on the innovative tools

customers to the same extent. Our exclusive premium

that will appear on the newest catalogue. Certain members

brand, GARANT has made a name for us in the market. Now

of our staff also received specific training in Munich, as we

that we have established our team in Mexico including sales

consider professional development crucial to employee’s

representatives, key account managers, and specialists

satisfaction in their work environment.

in machining, work stations and storage we can provide manufacturing expertise directly to the customer. Hoffmann

Q: As the automotive industry grows exponentially,

Group is the only company in the sector that is also a tool

which sectors or locations represent the greatest areas of

manufacturer. We identified Mexico as a quality competitive

opportunity for Hoffmann Group in the future?

market, rather than price competitive. Therefore, offering

A: In the meantime, our target locations are Nuevo Leon,

good service and superior tools by positioning GARANT

Jalisco, Mexico City, Puebla, and San Luis Potosi, while our

as a choice for customers has secured access to larger

current location in Puebla allows us to be close to German

market shares. Several GARANT products received the

OEMs. The Bajio region is emerging as a buzzing scene

2015 Red Dot Design Award, highlighting their quality and

for the industry and Hoffmann Group already has sales

innovation. In the words of our CEO Reinhard Banasch, we

representatives working onsite with our customers across

are delighted that there is such strong demand overseas

the country. However, we must focus on generating further

for our system-oriented solutions for workstations, storage

business by presenting our tools to customers before

high-quality tools and holistic services.

extending our workstations to other regions.

113

VEHICLE SPOTLIGHT

114

VOLVO 9800 Volvo is known as a leading innovator of safety and driving comfort. That expertise is not limited to light vehicles. The company has years of expertise in heavy vehicles for comfortable rides and Volvo coaches are built with the same characteristics as its light vehicles, ensuring a safe journey for its passengers from beginning to end. Volvo has a long history in the coach segment and its most recent model is a reflection of constant technology development and improvement. Among its safety features, the 9800 includes collision alert with emergency braking and automatic navigation control. The system also offers an electronic stability program, electronic

and

anti-lock

braking

systems,

anti-slip

regulation and engine drag torque control. Volvo included a D13C six-cylinder inline engine compliant with Euro V regulations in the 9800, coupled with selective catalytic reduction and ammonia slip catalyst systems. Not to neglect the environmentally-friendly trends in mobility this coach runs on ultra-low sulfur diesel and is available in two versions depending on the model. For the 4x2 13.2-meter long version, the engine has an output of 460hp and can reach torque of 2,300Nm at 1,050rpm. The 6x2 14-meter long 9800 offers 500hp and up to 2,500Nm of torque at 1,400rpm. In its chassis, the 9800 features a Volvo I-shift transmission available in its AT2412D or AT2612D versions. Both have 12 speeds but the difference is in the torque they deliver. The AT2412 offers 2,400Nm to power the 4x2 model while the AT2612 has an output of 2,600Nm for the 6x2. Both versions include LED interior lighting and a reading kit per passenger, plus independent illumination in the passenger area and LED lighting in the access stairwell. The 9800 has an ACTIA infotainment system with 15inch screens, a microphone for the operator, as well as individual audio and video options. The driver’s space is equipped with an ISRI seat and a fully adjustable steering column. The exterior is finished with stainless steel on the sides and an anti-corrosion treatment on the chassis, which is practical and complements its modern interior features with a clean glossy veneer.

115

INSIGHT

STRENGTHENING FROM WITHIN TOHRU KOHNO Director General of Tohken Thermo Mexicana

116

with

period of time. Control of the atmosphere requires shutting

machining processes. While these are important some

off the air flow during heating to maintain the optimal

materials must be treated before or even after being

mixture of gases, creating a vacuum,” says Kohno. “It is

formed into their final shape to function under stressful

only when these three factors are perfectly controlled that

conditions. Encouraged by several Japanese clients

one can attain a beautiful finish with minimal distortion and

who needed a local partner for their operations, Tohken

a smooth surface.” Tohken Thermo has actively pursued

Thermo decided to move to Mexico in 2012 and become

research into condition-control technologies.

Manufacturing

tends

solely

associated

a heat treatment supplier. The company is one of the few corporations in Mexico capable of offering carbonitidring,

Although its initial target was to cater to Japanese

carburizing,

ferritic

companies in Aguascalientes, Tohken Thermo gradually

nitrocarburizing at low temperatures. Tohken Thermo can

received business proposals and quote requests from

also provide normalizing and annealing services, physical

western companies. According to Kohno, the company is

vapor deposition and vacuum heat treatment.

a supplier for EXEDY DYNAX, Jatco, Mitsuba and Musashi

hardening,

tempering

and

Seimitsu, as well as a Tier 2 provider for Honda, Beyonz, Hardening

and

microstructure

tempering and

physical

processes properties

the

JTEKT and Nagakura. “We are negotiating with Ford and we

ferritic

are also testing products for companies like Linamar, DANA,

change of

metal to increase the hardness of materials and their

Faurecia, Celay, Mahle, Eaton and Bosch,” says Kohno.

resistance to corrosion. Depending on the component, an initial hardening and tempering treatment may be

Tohken Thermo’s goal is to process 4,000 tons of material

required, followed by a machining process and then a

per month working for OEMs, Tier 1 and Tier 2 suppliers.

final carburizing or carbonitriding to improve surface

“To stay abreast of the ever-accelerating technological

conditions. The objective is to harden the surface of the

advances in every field our corporate strategy is based on

material while keeping its interior malleable. This keeps

two concepts. Firstly to rethink our company through ISO

the component from becoming fragile and is primarily for

accreditations and the building of an overseas network, and

gears, axles and other power transmission components.

secondly, to conduct our business under a flexible corporate

“We receive products from our clients, and after applying

philosophy,” adds Kohno. “Although we source our know-

the appropriate treatment, we return them to the customer

how and expertise from Japan, we expect to train Mexican

with the exact same shape. The added value we provide is

technicians soon to take over our operations. Both of these

that these components are improved in terms of strength,

objectives are linked to an ultimate goal of being the first to

hardness and resistance,” says Tohru Kohno, Director

spring to mind for our potential clients in Mexico.”

General of Tohken Thermo Mexicana. There are companies in the automotive industry that The company has consistently modernized and diversified

have in-house experience in heat and surface treatment

its operations to incorporate new technologies, permitting

processes. Kohno explains that for companies just

Tohken Thermo to become a crucial partner for automotive

establishing their operations in Mexico, it is more effective

manufacturing

machinery,

to build a relationship with a supplier with the right

machining tools, agricultural and other industrial machinery

expertise in these processes. Tohken Thermo is ready

sectors. One of the technical difficulties in high-quality

to meet the challenge. While the company operates at

heat treatment is controlling heating, cooling and the

80-90 percent capacity in Japan, Mexican operations

atmosphere. “With heating, the difficulty lies in applying

leave an even bigger safety margin to be prepared for

heat uniformly and evenly to the material. With cooling, it

unforeseen situations and have back-up furnaces to

is difficult to cool the material evenly and within a specified

ensure punctual deliveries.

companies,

construction

VIEW FROM THE TOP

GROWING TO REINVEST ADONAI GARCÍA ESCUDERO Territory Manager of Mirka

Q: How did Mirka establish its presence in the Mexican

Our technology was developed in Finland and is based

automotive sector?

on a net abrasive called Abranet®. While most abrasives

A: We were a distributor for Mirka when we started selling

have a paper or plastic base, Abranet’s base consists

here and our core business was directly with OEMs as

of a dense network of polyamide fabric threads onto

well as Tier 1 and Tier 2 companies. Later we properly

which the abrasive grit is bonded. As almost 50 percent

established in Mexico with our own distribution center

of its surface is empty space, ensuring the product’s

in the city of Puebla and became a subsidiary of Mirka.

effectiveness posed a challenge. Having extracted the

The OEM market accounts for 55 percent of our sales,

dust through the net, we prevented the abrasive from

the Automotive Refinishing Trade (ART) segment is

decomposing due to the residue left after sanding.

responsible for 15 percent and the rest is divided among

This generated even greater cost reductions for clients.

other industries including the aerospace sector. We have

The combination of this net abrasive and our dust-

specialized staff for ART clients and this business segment

extraction equipment makes the sanding process almost

is complemented by the advantage of being close to the

100 percent dust-free. We tested the solution in Nissan

ART sector in the US. ART also is our biggest market

CIVAC against their dust-extraction system and the

worldwide and we are considered to be among the three

results showed efficiency increased sixteenfold with our

biggest companies in abrasives and surface preparation

products. Within the ART segment, our flagship product

internationally. Mirka is a family company and our goal

is called Autonet®. It is based on the same net technology

is to grow and generate revenue so we can reinvest in

but modified to be more aggressive during the initial

our operations. Closing the gap between Mirka and the

material removal stages. This method was developed to

number one company in the market is not in our plans.

cater to Mirka’s ART clients.

Q: What aspects of your operations would lead a client to

Q: What benefits did the Optimized Surface Preparation

choose Mirka over its competitors?

System (OSPS) bring to the ART segment?

A: In addition to selling abrasives, we want to understand

A: After two years of planning meetings with numerous

our customers’ needs and offer a solution that supplements

clients, Mirka and its subsidiaries developed a process that

their short, medium and long-term goals. Every client

could improve the refinishing process time and resource

wants lower production costs and improved final product

efficiency. No standard exists for refinishing activities

quality, which is why we have developed products and

and knowledge is passed from worker to worker, so the

technology that can help achieve those objectives. We

creation of an easy-to-follow system for small and medium

have specialized staff based in the facilities of our clients

repairs was revolutionary. Instead of specifying the grain

who are dedicated to supporting them and building closer

size of each abrasive, we branded them with numbers to

relationships. When our competitors started replicating

follow a certain process. The abrasives are modified at each

our model we already had years of experience under our

step, to offer the best material removing conditions and

belt so we managed to stay ahead of the race.

ensure the quality of any refinishing service. Our system reduces refinishing times by approximately 30 percent.

Q: How was Mirka’s dust-free technology developed and

There are clients that focus on the cost of the abrasive

how does it differ from conventional sanding?

and look for the cheapest products in the market. Since

A: Although various dust elimination systems were already

abrasives represent less than 1 percent of the total cost

available, companies did not use them because they were

of the refinishing process, we strive to improve efficiency

inefficient. Several clients made enormous investments in

instead of simply lowering prices. OSPS is even more

dust extraction systems that remained unused and were

popular in Europe and the US, and is gradually unfurling

pleased when we brought our products to the market.

in the Mexican market.

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VIEW FROM THE TOP

SMOOTHING THE PRODUCTION PROCESS TEBALDO MUREDDU CEO of Klüber Lubrication Mexicana

118

Q: As a multinational corporation, how important is the

As most of the vehicles produced in Mexico are exported, it is

Mexican automotive industry for Klüber Lubrication?

more straightforward to complete these tests in the country

highly

of destination. All our products are approved according to

specialized products for the general industry for more

international standards, so any further adaptation is mostly

than 30 years in Mexico, though we only began targeting

related to the conditions of the product’s application rather

the automotive market in the last 15 years. Particularly

than the nature of the product itself.

Klüber

Lubrication

has

been

managing

in the automotive sector, our lubricants are used in manufacturing equipment and in the internal components

Klüber Lubrication has innovated to make its products and

of the vehicle, rather than mass commercialized products

processes more environmentally friendly. Sustainability is

such as engine or transmission oils. A car needs between

one of our main priorities and that has led us to focus on

20 and 30 specialized lubricants for various applications,

eliminating the use of toxic substances. This is beneficial

which need to be high-performance products to keep

for both the user and the environment. Our R&D centers

these components lubricated for their entire lifespan.

are keen to discover alternatives to heavy metals and other materials, which we have already removed from

We supply our products directly to Tier 1 and Tier 2

our production lines. The company’s processes have

manufacturers, so they can deliver components to OEMs

evolved to reduce pollutants and we always surpass the

with the proper lubrication. We do not have a relationship

regulations established by the federal government thanks

with aftermarket workshops or OEM dealers, since quality

to our compliance with international standards. Delivering

lubricants mean that few components need regular

products that help our clients achieve greater durability

maintenance. In cases where the final client needs one

and efficiency in their processes results in less product

of these parts replaced, our contact is directly with the

consumption. In that sense, our solutions might appear to

supplier in charge of manufacturing the component.

be more expensive but their long-term cost is reduced as they are guaranteed for life.

Q: What advantages can Klüber Lubrication offer its clients compared to other competitors in the Mexican market?

Q: How has Klüber Lubrication’s global network helped it

A: We design our products in collaboration with the

with local clients?

suppliers

all

A: We mainly manage international accounts but we have

components. When one of our customers designs a

entered a niche with local manufacturers. All new OEMs in

new system to open a sunroof the company is already

the country ask some of their home suppliers to migrate

considering what type of lubricant it needs for the system

with them to Mexico while they simultaneously look to

to work correctly. Clients need to take into consideration

develop a stronger local supply chain. This presents a

the compatibility between the material they are using and

unique opportunity for Klüber Lubrication, since we can

the lubricant. This increases the component’s durability

introduce our products along with these companies due

and helps it sustain extreme temperatures and humidity,

to our global presence.

that

are

charge

manufacturing

avoiding erosion due to environmental conditions. Once we determine the right type of product for a specific

Q: What developments does Klüber Lubrication expect

part, the lubricant undergoes several tests to ensure its

in the industry?

functionality following our strictest quality standards.

A: Having become one of our main priorities, we foresee impressive developments in the automotive market over

Our R&D centers are located in Germany, China, Brazil and the

the next few years. Our goal is to become the leading

US. We sometimes have to test our products to adapt them

company in specialized, high performance lubricants,

to regional conditions but this is generally performed abroad.

solving our clients’ needs in the most efficient way possible.

VIEW FROM THE TOP

SUSTAINABLE SOLUTIONS KEY SOLVENT RECOVERY SUCCESS EUGENIO FLORESGÓMEZ Chemicals Division Director at Pochteca

Q: With investment in the domestic automotive industry

A: We have a similar strategy for both established and new

increasing, how is Pochteca positioned to take advantage

enterprises in Mexico since our solvent recovery solutions

and grow?

are still in their incorporation phase. Most companies

A: The automotive industry is the main catalyst for

already in the country do not have a proper collection

Mexico’s economy and it has become a crucial partner for

system for these materials so we are working with them

Pochteca’s development. Enormous investments are being

to improve their organization. Newcomers have a different

poured into the country with more OEMs arriving each

mindset more open toward sustainability but we still

year. We estimate that for each new automaker in Mexico,

need to present the benefits of our system to them. The

300-400 suppliers set up shop. All these companies are

advantage is that they arrive in Mexico set on finding a local

potential clients for Pochteca and we are developing new

supplier to support their sustainable practices. We work

solutions to address their needs. We started with only one

with the top 10 chemical companies in the international

solvent recovery machine and later added three more.

market, including BASF and the Dow Chemical Company.

We plan to install another machine in Monterrey by the

These close relationships help us introduce our new

end of 2016. Forecasts show growth rates of 9-12 percent

products across our international branches.

in the sector, so our goal is to reach 13-16 percent. Our penetration is far greater than any single supplier could achieve as we are present in the entire manufacturing chain. We work closely with paint suppliers, which are perfect candidates for our solvent recovery solutions.

Pochteca invested US$1.6 million in training programs with ITESM

Q: What is Pochteca’s strategy for competing with other leaders in the Mexican chemicals sector?

Q: How will Pochteca’s investment in human capital help

A: Sustainability is a crucial element in our strategy and it

the company achieve its goals in Mexico?

has become one of our main advantages over competitors.

A: Human capital development is no longer optional.

Our technology allows companies to recover and reuse

Between 2014 and 2015, Pochteca invested US$1.6 million

solvents from manufacturing processes and it improves the

in training programs focused on commercial strategies

performance of paint and other materials. In the automotive

and management solutions through a strategic alliance

sector, Pochteca can offer solutions to support almost any

with ITESM. This has allowed us to create more structured

transformation process from metal treatment or coating to

plans alongside our clients and suppliers. On top of

water treatment processes. Many solvents are dangerous

training commercial staff in sales, we provide the same

chemicals for the environment and companies normally

representatives with all the necessary technical training to

have to pay to dispose of this type of waste. But if treated

understand our clients’ operations and provide the best

properly these materials are reusable. We have signed

solution for them. Pochteca’s Virtual University has been an

agreements with several companies to recover 100 percent

invaluable platform in this process, providing information

of these chemicals, treat them and reintegrate them into

about our products across all different industries and

our production. We have four recovery units in Leon,

supported by our four application laboratories focused

Guanajuato that handle the process. Certain automotive

on finding competitive advantages for our solutions.

industry products can be reused in the oil and gas industry.

The company has enjoyed steady growth over the past four years so there has been no need for external capital

Q: How has Pochteca implemented strategies to attract

injections to fund our operations. Our focus has been on

new clients while ensuring quality service for its existing

developing our human capital to better identify what our

client base?

clients require from Pochteca.

119

120

VIEW FROM THE TOP

CONTINUITY FOR GROWTH AND SERVICE VICENTE PASTALLÉ Managing Director of Atotech

Q: What are your plans as the new Managing Director?

breakthrough, cost-effective and sustainable solutions.

A: We want to continue the growth we have enjoyed so

This makes innovation possible in a wide spectrum of

far and outperform the Mexican market. We will strive for

industries.

continuity with the strategy established by Joaquín Tortola in the previous administration, while developing new tools

Q: How is Atotech planning to promote its services and

that will make Atotech more efficient. This will result in

stand out from its competitors?

better customer service. We are working on an expansion

A: Atotech’s strategy is based on technological leadership,

project in our production facilities, including new testing

environmentally sound technology and the best local

laboratories complete with an electronic microscope and

service. This is the promise we give our customers. Our

a tech center devoted to our clients.

product and service portfolio is second to none in the industry. We are present in all major markets and are

Previously, to homogenize our production we had to

always on hand to provide high-quality products and

send components to Berlin, Brazil or the US for testing,

services to our customers.

which meant higher logistics costs and an extended time frame. With this new technology center we will be able

We are now producing components we previously imported,

to perform these operations in Mexico, obtaining Just-in-

reducing logistics and operating costs. Fierce competition

Time results. Mexico will undoubtedly play a key role in

is positive because it pushes us to be better. We have

Atotech’s development and this latest investment is proof

improved our marketing and sales strategies as a result while

of the company’s expectations for the country.

developing training programs for our staff. These courses are compulsory for all employees and professional development

Q: How will Total’s decision to sell Atotech impact your

is continuous, so they can know everything about our

operations in the Mexican market?

products, our processes and the company as a whole.

A: Total supported Atotech’s growth for more than 20 years but in the selling process preference was given to those whose offers are in line with the company’s strategy. We do not expect a change in our operations as it is our core business and the basis of our success. Atotech has more than 4,000 employees globally and its working philosophy has successfully reinforced its operations for

Invests heavily in the research and development of breakthrough, cost-effective and sustainable solutions

many years. We hope new opportunities will arise. Q: How is Atotech strengthening its service network to Q: To what extent has Atotech advanced in technological

offer the best results to clients?

developments of materials used in coating applications?

A: Customer service is at the core of our business and

A: Atotech has made progress but the Mexican market

our goal is to become collaborators. Simply supplying

lags behind global development. Industry players have

products is not enough for Atotech. To stand out, we go

expressed interest in eco-friendly technologies but these

the extra mile. Apart from training our people, we always

new solutions have not yet significantly permeated the

ensure our clients are informed about our products

market. This is both a challenge and an opportunity for

and the best ways they can be used to improve their

Atotech de México. We are confident the Mexican market

operations. This requires good commercial relationships

will soon fully understand the scope and impact our

and excellent aftersales service. We organize training for

products have toward a more sustainable plating industry.

our clients and customer seminars to inform our partners

We invest heavily in the research and development of

about the latest innovations.

121

VIEW FROM THE TOP

INDUSTRIAL QUALITY FOR THE AUTO SECTOR YURI AVITIA General Manager at Ferreplus Refacciones y Materiales

122

Q: What are the key services Ferreplus provides to the

Q: What differentiates Ferreplus from its competitors?

automotive industry?

A: We have been able to establish three brands of our own:

A: Ferreplus has been in the automotive industry for 10

Warden (welding equipment), Blackset (conventional

years and forms part of Grupo Industrial Monclova. The

machines and welding consumables) and Esguard (safety

company was created to provide services to the group’s

equipment). All our products are manufactured following

metal-mechanical companies such as COMMSA Tampico.

NOMs, which means each of our products has a technical

After a year, we expanded into other sectors and companies.

label, instructions and safety precautions.

We offer services to the north and central regions of the country, with 10 strategically located stores. Ferreplus

We are the second largest distributor of the brand ESAB

supplies the industry with everything from machinery and

in Mexico and one of the top 10 distributors of Lincoln

spare parts to raw materials. Our catalog has more than

Electric. There are many different welding brands in the

5,000 products related to cutting and welding processes.

market, which we carefully select to complement our own

We supply a variety of customers from the automotive

brands. A priority for us is to position our brands as leaders

industry throughout the country. Ferreplus has supplied

in Mexico and although they have only been in the local

safety equipment and abrasives to Hyundai MOBIS since

market for five years, we are confident they will continue to

they started their manufacturing operations in Mexico.

grow exponentially over the next few years.

VIEW FROM THE TOP

GERMAN EXPERTISE MEETS MEXICAN CAPABILITY THOMAS SLABIG Managing Director of Nicro Bolta

Q: What has been Nicro Bolta’s evolution in the Mexican

restricted substances that are far more controlled in

market?

Europe than in Mexico, but our focus has always been to

A: The joint venture started 11 years ago with four

maintain that same level of production. As soon as our

companies

General

branch in Germany starts renovating its processes, we

Super Plating and Ecoplating. Bolta wanted to target

namely

Nicro,

Bolta

Werke,

will begin to adapt our own to keep up with its quality.

Volkswagen in the Mexican market but it needed a local

Our waste water system is a good example since it

partner with enough knowledge. Nicro had 40 years of

follows a European standard not required in Mexico.

experience and the right contacts for this partnership, which led to the establishment of Nicro Bolta. Half of

What

are

the

main

pillars

Nicro

Bolta’s

our metallic treatment production is exported to the US,

environmental strategy?

Europe and China. The remaining half caters to domestic

A: We have a department dedicated to environmental

manufacturing needs.

improvement and we invested in our painting line to include a proper afterburner process. This is not

Although Nicro Bolta was founded to supply Volkswagen,

required by law but is something that will reduce CO2

it is now our smallest client. But when Audi starts operating

and other emissions over the next 10 years. We also are

in Puebla state in late 2016, the Volkswagen Group will

looking into products with a focus on protecting the

once again be our main customer. We supply many

environment, especially to reduce scrap and chemical

companies including Mercedes-Benz, the FCA Group, Ford

residue. We are working on the use of trivalent chrome

and Mazda. Nicro Bolta invested US$10 million in 2014 and

instead of hexavalent chrome in our plating process in

US$15 million in 2015 to prepare for Audi's arrival. Our

collaboration with our suppliers in Germany.

painting line, which started operations in April 2016, was specifically designed to support the OEM.

Q: Why did Nicro Bolta choose Puebla when other companies besides Volkswagen represent a larger

We are planning another expansion, which will include

market for the company?

technologies from our sister plants. We want to

A: Puebla has been an excellent location for our

consolidate world-class standards in our production

operations given its location, its first-rate infrastructure

process that are not found elsewhere. Our forecast for

and the quality of life it offers our employees. Markets

the next five years is favorable and an upcoming plant in

change and we have expanded considerably in the past

the US will take our export operations to North America

three years, leading to more client diversity. There is a

so we can focus entirely on developing the domestic

lot of business in Mexico as well as in the US. Even so,

market, Central and South America.

we are strengthening our links with Volkswagen as it introduces more platforms to its operations.

Q: How has Nicro Bolta developed its technology to make it more competitive in the market?

Competition also has become much fiercer in Puebla

A: Nicro Bolta does injection molding as well as

as Audi and its suppliers set up in the region. Skilled

chrome plating and our production ranges from small

positions are becoming harder to fill, from shop-floor

components like buttons or handles, all the way up to

workers, all the way up to management. For that reason,

grills and other components measuring over 1.8m. We

we are starting our Bolta Academy training center in

have a close relationship with Bolta Werke, which means

Germany in 2016, specializing in our own technology.

we apply the same practices as it does in Germany and

The program will target new graduates wanting to enter

at its new operations in the US. It is challenging to

the company and existing personnel. We hope to start

keep pace with European standards. There are several

the first courses in late 2016.

123

HEAVY VEHICLES

Mexico is the fifth largest manufacturer of heavy vehicles in the world and the second most important exporting country. The current consumption of heavy vehicles represents US$696 billion and is expected to generate sales of US$830 billion by 2020. Mexico still has room for growth in the next four years. It is no surprise that 11 heavy vehicle OEMs have established operations in the country, leading to record production of 191,000 units in 2015. Should the trend continue, by 2020 Mexico will produce 269,000 units annually.

Insight from heavy vehicle manufacturers, particularly into the challenges they face with the dollar-peso exchange rate, the changes in carbon emissions regulations and the trends they believe will dominate the Mexican market for buses are the focus of this chapter.

125

CHAPTER 5: HEAVY VEHICLES 127

128

VIEW FROM THE TOP: Miguel Elizalde Lizarraga, ANPACT

130

VIEW FROM THE TOP: Leonardo Soloaga, MAN Truck & Bus México

132

VIEW FROM THE TOP: Renato Villalpando, PACCAR Mexico

133

VIEW FROM THE TOP: Carlos Pardo García, Navistar

136

VIEW FROM THE TOP: Stefan Kürschner, Daimler Trucks Mexico

137

VIEW FROM THE TOP: Ignacio García, Cummins

138

VIEW FROM THE TOP: Enrique Enrich, Scania Mexico

141

VIEW FROM THE TOP: Moshé Winer, Volvo Group México

142

VIEW FROM THE TOP: Harumasa Suzuki, Hino Motors

143

VIEW FROM THE TOP: Hirokazu Maruyama, ISUZU

145

VIEW FROM THE TOP: Jan Hegner, Daimler Buses México

146

VIEW FROM THE TOP: Paulo Andrade, Polomex

147

VIEW FROM THE TOP: Martín Meléndez, DINA

148

VIEW FROM THE TOP: Julián Becerra, Beccar

149

VIEW FROM THE TOP: Ediltron Temporal Gomes, MASA Autobuses

150

VEHICLE SPOTLIGHT: DINA Brighter

VIEW FROM THE TOP

FUELING THE INDUSTRY WILL BE NO EASY FEAT MIGUEL ELIZALDE LIZARRAGA Executive President of ANPACT

128

Q: How will new guidelines for NOM 044 and NOM 086,

trends in other countries that have already introduced

intended to control sulfur emissions and diesel, impact

Euro V and VI technology. There will be a 20-30 percent

the local market?

impact on prices merely because of the exchange rate.

A: The federal government published the NOM-044 in 2016 and plans to implement the new rules during

Q: How ready is the country to supply the right fuel to

the current administration. ANPACT’s proposals stress

comply with the new regulations?

the importance of the European stipulations, Euro V/

EPA 7 and the Euro VI/EPA 13, running simultaneously.

(CRE) published an emergency guideline, which is

Every technological change entails a larger investment.

the foundation of the new NOM-086 regulations. In

Technologies that are more sophisticated also require

this Emergency NOM, the CRE broached regulations,

additional maintenance and products, such as diesel

including those stipulating the characteristics of ultra-

exhaust fluid, filters and exhaust gas recirculation

low sulfur diesel (ULSD).

The

Federal

Energy

Regulatory

Commission

systems. The government should offer different types of incentives to encourage a healthy shift in technology.

PEMEX in the short term is the only enterprise that must

Newer technologies have a lower environmental impact

comply with these characteristics but within two years

but if we consider the cost increases from tech advances,

other players will have to adjust as well. This includes all

as well as fluctuations in the dollar-peso exchange rate,

international fuel companies that plan to participate in

the market will see price increase of up to 30-40 percent

the Mexican market. The Emergency NOM also specifies

in only three years. These figures follow analyses of

the characteristics for imported fuel, clarifying that every

million (ppm) as of July 1, 2016. These types of engines

WHOLESALEAND ANDRETAIL RETAILSALES SALESOF OFTRANSPORT TRANSPORT WHOLESALE VEHICLES thousand of units) VEHICLES(jan-jul (thousands)

are designed to work according to the world fuel charter

vehicle must run on ULSD with 15 parts of sulfur per

but PEMEX cannot yet commit to producing fuel up to standard in terms of cetin and lubricity. Unfortunately,

this forced the lowering of the requirements established by the Emergency NOM.

Q: When is the ideal time for these new standards to

come into force? A: Following the completion of the Energy Reform

program is the ideal moment to start complying with new technology specifications. The Ministry of the Environment and Natural Resources (SEMARNAT)'s costbenefit analysis concluded that supplying diesel of 15ppm was sufficient, but at ANPACT we’d like the ULSD and the

2010

2011

wholesale

2012

2013

2014

2015

2016

retail

Source: ANPACT

NOx reduction agent (urea) to be available nationwide before implementing the new regulation. Otherwise,

Q: What new occurences are evident in the Mexican heavy

we will not see the positive environmental impact for

duty vehicle segment?

which the NOM was created. The standard also indicated

A: Mexico tops the list of heavy vehicle exporters. The

that 11 main infrastructure corridors would be supplied

enforcement of the NOM-086 standard and fleet renewal will

with the proper diesel in Mexico but PEMEX has not yet

be fundamental to our continued success. The government’s

implemented this stipulation 100 percent.

plan to reduce the volume of emissions may be diminished if it cannot prepare sufficient infrastructure to implement

Nationwide, urea availability is essential as every 100L of

the regulations. To encourage transportation companies

diesel requires 5L of urea. Mexico lacks a specific NOM for

to purchase new and environmentally friendly vehicles, the

this agent and we are exploring the best way to regulate

right fuel be secured and economic incentives must play an

it. To guarantee the quality and availability of ULSD, we

important role. SEMARNAT, the Ministry of Communications

need help from a third-party evaluation company that is

and Transportation (SCT), the Ministry of Economy (SE)

not involved in Mexico’s network. ANPACT is working on

and the Ministry of Finance and Public Credit (SHCP) must

the details of this with SEMARNAT.

collaborate on this endeavor to improve the internal market.

129

VIEW FROM THE TOP

BALANCING THE LONG-TERM COST OF OWNERSHIP LEONARDO SOLOAGA Managing Director of MAN Truck & Bus México

130

Q: What are the most significant trends in the Mexican

& Bus will now compete in the Class 8 segment. This is

market for buses?

the second strongest truck segment, and represents 30

A: Each city in Mexico has specific preferences. Trends

percent of Mexico’s sales. However, MAN Truck & Bus also

range from diesel-based engines to natural gas options,

has a product line that ranges from eight to 26 tons, with

vehicles for restricted corridors and different body

engines of between 150 and 540hp and transmissions

configurations, such as low or high-entry buses. MAN

reaching up to 16 gears, both manual and automatic.

Truck & Bus strives to offer several products oriented to different needs. For instance, we have a 60 percent market

We are working to convince the Mexican market that cab-

share in the minibus segment, which made us unequivocal

over trucks offer at least the same benefits as long-nosed

leaders for four years in a row.

units. Cab-over vehicles have significant advantages and our TGX line is fitted with unique technological features

We are investing in new products that address the market’s

that make it highly competitive in the market. The

needs even more effectively, such as the automatic

engines also are extremely efficient because we design

transmissions that are now included in our 17.280 units,

our vehicles with aerodynamic features that enhance

featuring multiple advantages in terms of fuel efficiency

fuel consumption, and maintenance costs are relatively

and consumption. The company debuted three new bus

low. Our primary objective is to convince our clients to

models at the heavy vehicle exposition, Expoforo 2015,

consider not only the initial cost of a unit but also the

including buses fitted with automatic transmissions,

long-term cost of ownership. We feel confident about the

school vehicles for urban and rural applications and a unit

potential of these models to excel in the Mexican market

specifically designed for touristic and executive ventures.

as the public is gradually embracing cab-over trucks.

We want to consolidate our brand as a crucial player in the bus segment. Our privileged position as the only double-

Q: How are MAN Truck & Bus’ segments responding to the

decker coach distributor helps us achieve our goal but

development of Mexico’s heavy vehicle industry?

we would also like to increase our presence in the BRT

A: In 2014, the 10 percent drop in the heavy vehicle industry

segment in the medium term.

was mainly rooted in the truck segment alone falling 13 percent. However, throughout 2015 we saw total industry

MAN Truck & Bus’ product line ranges from eight to 26 tons, with engines of between 150 and 540hp and transmissions reaching 16 gears, both manual and automatic

growth of 6.6 percent, with an increase of 7 percent in the truck segment and 3-4 percent for buses. MAN Truck & Bus closed 2015 with overall growth of 15 percent, mainly driven by the bus segment with a 22 percent gain. Unlike the rest of the industry that sells 80 percent trucks and 20 percent buses, most of our business is oriented to the bus segment at close to 80 percent of our total sales, representing a 14 percent market share. Nevertheless, the truck segment accounts for 30,000 units annually, while

Q: How does the product portfolio of MAN Truck & Bus

the bus sector reaches 8,500 units. Thus, it is easier to

contribute to your growth strategy?

expand our 2 percent market share with trucks, than our 14

A: Our product line covers 80 percent of the market’s

percent market share in buses.

demands, so our priorities target the segments where we see superior growth potential. Having launched our

Q: What kind of technology are you planning to introduce

new Workline family and its 17.230 model, MAN Truck

to Mexico in the diesel segment?

A: Our vehicles already include Euro V technology, even

to 18 percent in the bus segment. This is in line with the

though to date the legislation only requires Euro IV. The

growth strategy established in 2014, which we based on

government is now making changes to NOM-044 that will

three pillars. The first refers to our product portfolio, which

apply to Euro VI technology or EPA13 in 2018 and both

constantly grows according to the market’s demands. The

MAN and the whole industry are prepared for this change.

second focuses on our distribution network, in which we

In fact, we have just confirmed two investments, of

expect to see substantial growth, moving from 11 sales-

US$20 million and US$30 million respectively, to convert

and-service points to 17 by the end of 2016. Four additional

our units and our production line to Euro VI technology.

shops by 2017 and an extra 10 by 2018 will follow the

Nevertheless, a change of this magnitude requires

expansion. Our presence in the country is our biggest area

certainty from the government regarding the availability

of opportunity, which is why we are extending our network

of ULSD across the country and a way to compensate the

to Tijuana, Cancun, Oaxaca, Morelia and Guanajuato, to

significantly higher costs related to this new technology.

name a few new locations.

All industry players, together with ANPACT, are demanding

The third pillar is to increase national content in our

the government establish clear regulations regarding the

manufacturing processes. We may not reach the point of

new norm. Euro VI implies a huge technological leap that

60-70 percent national content but 30-40 percent could

cannot be compared to the change from Euro II to Euro

make a huge difference in terms of competitiveness. An

IV. Our experience in Brazil proved that moving from Euro

exceptional supplier base in Mexico has supported our

II to Euro V pushed production costs up by 25 percent.

growth and we simply need to test the new components

Since neither the manufacturers nor the operators are able

to include them in our process. We are basing our process

to absorb these added expenses, our recommendation

on quick wins in terms of simple components like tires,

would be to first move to Euro V in a transition phase to

batteries and simple metal parts. Furthermore, we are

encourage clients to renew their fleets.

simultaneously

testing

complex

products

for

axles,

transmissions and chassis components that we will Q: What are MAN Truck & Bus’ expectations for the next

produce in the future. MAN Truck & Bus manufactures

two years?

Volkswagen units in Mexico so we expect to reach 2,000

A: Over the next two years, we intend to expand our market

units manufactured by the end of 2017, doubling our

share in the truck segment to 5 percent, while growing

production volume.

131

VIEW FROM THE TOP

MOVING THE HEAVY VEHICLE INDUSTRY RENATO VILLALPANDO Director General of PACCAR Mexico

132

Q: How is PACCAR dealing with the economic challenges

Engineering

resulting from the volatile exchange rate?

manufacturing processes to make our operations more

A: We understand that the volatility of the exchange rate

efficient. Our plastics and metal-mechanics plants in

is the result of instability in global financial markets. We

Mexicali, Baja California, where we manufacture spare parts

help our clients face these adverse conditions by designing

and the basic structure of our vehicles, work according to the

custom-made solutions. Some of our clients have costs and

efficiency model that has always characterized the company.

and

R&D

are

always

involved

our

income in US dollars so are not dramatically affected. But we also have clients whose expenses and revenues are in

Q: Will PACCAR Mexico be affected by new engine and fuel

Mexican pesos or who are dealing with a combination of

regulations?

both currencies. Our job is to make sure we provide the

A: We have the necessary capacity and technology for

necessary solutions to keep their businesses running.

engines that comply with the coming regulations. But compliance is not enough. We need Ultra Low Sulfur UBA

Q: What strategies is PACCAR following to promote its

fuel to be available across the country for these advanced

trucks in the domestic market?

engines. New technologies need to be accompanied by

A: Kenworth vehicles have been in this market for over 56

economic incentives from local and federal authorities to

years, which means our clients are aware of our brand value.

help owners with their fleet renovation.

PACCAR manufactures a wide array of units in Mexico but our T680 and T880 models with the PACCAR MX-13 engine

Natural gas engines in PACCAR trucks are not new. We

are the most innovative trucks in the market. Their design

have been producing these in our plant in Mexicali for

and production quality set them up to succeed the Kenworth

many years. Units with this engine are already being

T660 and T800, which were leaders in the tractor market.

commercialized, although we have only seen symbolic

Our T680 and T880 models not only have the most advanced

sales. Natural gas is a cleaner alternative to other

technologies but they also offer top-quality aftersales

traditional fuels, it is relatively economical and Mexico has

services that distinguish Kenworth from its competitors. We

a reserve that potentially makes the gas the fuel of the

wanted to maintain our traditional service approach with

future. However, the country lacks the infrastructure to

clients, such as the rapid supply of spare parts, in our more

ensure the safety of supply stations. We want to explore

than 130 sites across the country. Another characteristic of

using electric power to move heavy vehicles.

our brand is the resale value of Kenworth trucks. Clients can be sure that even though they are purchasing a used unit it

Q: What is PACCAR’s perspective regarding the behavior of

will provide excellence performance.

the heavy vehicle industry? A: Higher growth rates are preferable but it is undeniable

Q: How have PACCAR’s manufacturing techniques evolved

that the Mexican economy, unlike other Latin American

and what are your R&D practices?

countries, enjoys stable growth. This is reflected in the heavy

A: PACCAR Mexico constantly modernizes its industrial

vehicle sector. In PACCAR Mexico and Kenworth Mexicana

facilities. We invest heavily in manufacturing technology,

we are optimists and alongside the federal government

incorporating high-tech production lines that boost the

and the state industrial development lender NAFIN, we

efficiency of our operations. A robotic cell, for instance,

provide incentives to support transport SMEs as they renew

assembles the cabin of our Premium T680 and T880 models.

their units. PACCAR Mexico has a specific department for

We also have adopted flexible manufacturing that permits

the development of suppliers. We are always looking for

the production of vehicles that incorporate different engine

potential partners with the capacity to produce for our

technologies, such as the EPA-04, EPA-13, EURO-IV, EURO-V

plants not only in Mexico but also abroad. That is a reflection

and gas engines.

of the company’s commitment to Mexico.

VIEW FROM THE TOP

DEMAND GROWS DESPITE UNFAVORABLE EXCHANGE RATES CARLOS PARDO GARCÍA Director General of Navistar

Q: How are Navistar’s new investments impacting the

generates savings that compensate for the increased unit

company’s performance in Mexico?

price. Nevertheless, the government must provide green

A: We recently announced the investment of the One Roof

incentives to encourage the use of newer technologies.

Ground Breaking site, where our suppliers will be able to

The market will not take this step to innovate off its own

establish their operations supporting the logistics chain.

steam. The current fleet renovation program promoted

This will allow us to become more competitive. It represents

by the government has positive aspects but it needs to

an investment of almost US$100 million. Two suppliers

increase the benefits it offers. The program would be more

have already started moving into the compound and we

persuasive if it involved less paperwork for instance.

hope that in the next three years all our main suppliers will have moved to the site. Navistar is attracting production

Q: What are Navistar’s expectations for new releases and

to the country as our plant in Escobedo becomes more

expansion in Mexico?

important. Almost 52 percent of 2016’s production will be

A: Our strategy involves customer retention. Therefore, we

manufactured in Nuevo Leon. Our plant in Ohio is shifting

provide them with all the possible tools and find ways to

part of their production so we will produce more trucks

produce more economical spare parts as part of our added

in Mexico. We expect this shift to expand Escobedo’s

value services to our customers. Navistar has just launched

proportion of Navistar production to 60 percent.

a new vehicle in the US, the International HX. The truck will be available in Mexico at the end of 2017. We also will be

Navistar has also developed a telemetrics tool called

launching our new heavy truck generation in the last quarter

OnCommand Connect, which allows us to perform remote

of 2016. Navistar launched three different vehicles in Mexico

diagnostics procedures and to define action plans for

this year. Our class 6 truck is being positively received,

solving any possible problem. It also maps the position of

gaining a 10.5 percent market share in nine months. We

the truck at all times.

presented our first Integrated Bus in 2016, which is readyto-use, and as part of our anniversary, in Mexico we are also

How

Navistar

vehicles

contribute

the

launching the LoneStar, a top-class heavy truck.

government’s efforts to generate a greener industry? A: We have the facilities to manufacture almost any technological requirement the Mexican market might need. Although we are not troubled by the production of

Navistar expects the market to grow 13 percent in 2016

trucks with low carbon emissions, we are concerned about the market. Within environmental concerns, there is an

There are obvious advantages of having production in

underlying economic problem. To shift to producing new

Mexico, especially costs, but the current exchange rate

units with lower carbon emissions could increase the price

is not an advantage. Since we buy most of our supplies

of every unit by almost US$15,000. Truck manufacturers

in US dollars, we have had to absorb the dollar disparity

need to plan to support clients and soften the impact of

since October 2015. Fortunately, in spite of exchange

the price increases. The whole country also needs to build

rate increases, our product demand has not decreased.

greater infrastructure, including diesel stations for these

We expect that the market will grow approximately 13

kinds of trucks.

percent in 2016, meaning that by yearend the industry will have sold almost 35,600 units. We believe the

Authorities

have

not

yet

defined

which

emissions

increase in the demand can be explained by anticipated

regulations our trucks must comply with but producing

fleet renovation. Our International brand segment is

trucks with Euro VI emissions standards will create a more

growing around 9 percent every year, and we expect

manageable economic impact. The vehicle’s performance

this trend to continue.

133

VIEW FROM THE TOP

HEAVYWEIGHT COMMITMENT TO MEXICO STEFAN KÜRSCHNER President and CEO of Daimler Trucks Mexico

136

Q: What was behind the positive commercial performance

Daimler’s total production in Mexico and 24 percent of

of Daimler in Q1 2016?

exported units. Between 2012 and 2015, US$3.4 million

A: We saw 56.8 percent growth in sold units in the

was invested in plant renovations and training. The facility

first quarter of 2016, which resulted in an increase of

won the National Quality Award, given by the federal

45.1 percent in revenue. From January to July 2016,

government, after a review of the plant’s innovation,

we attained 40.8 percent market share in Classes 6

flexibility, customer service and business plan.

through 8. This is an impressive figure, especially when compared to the 24 percent we reached in 2014 and the

The Saltillo plant in Coahuila State has received US$426

31.9 percent in 2015. We have exceeded our 2016 goal

million in investment since its inauguration. It produces

of 35 percent market share for the year. The results are

200 trucks daily and its full capacity is 50,000 units per

the product of several factors, among them is our state-

year. From 2009 until today, it has produced around

of-the-art technology and the real cost of ownership for

200,000 Cascadias, and in 2015 it was responsible for 78

all our units.

percent of the total units produced in Mexico.

We have an appealing portfolio to customers and a solid

Q: What new technology is Daimler implementing in its

dealer network, combined with an ease of doing business

trucks?

that we offer our clients and suppliers. Our 80 points of

A: One of our most recent technological improvements

sale and aftersales services allow us to offer our clients

is Enlace Freightliner, the first telematics platform in the

a real service experience, by creating efficient processes

country, which aside from having GPS offers strategic

that boost the usable lifetime of our trucks and increase

indicators to optimize the real cost of ownership and

their profitability. We have attracted new business by

obtain the lowest cost per kilometer.

offering test drives, giving potential customers the opportunity to compare the advantages of using Daimler

Unlike telemetry, telematics can analyse every piece of

Trucks including profitability.

data and information the truck’s computer produces and turns them into valuable indicators, which support better

The dollar’s constant fluctuation greatly affects our

decision-making.

industry, since heavy duty vehicles are usually priced

a significant amount annually in R&D. In 2015 alone, we

Worldwide,

Daimler

Trucks

invests

in dollars, creating uncertainty for our clients, whose

invested €1.293 billion (US$1.422 billion).

earnings are in pesos. We created our price list in pesos to offer our clients assurance and allows them to plan their

Q: What impact will the new emissions regulations have

finances throughout the year.

on Daimler’s operations? A: The new regulations establishing the upgrade of

Q: How has Daimler Trucks’ manufacturing operations

technologies from Euro IV/EPA 04 to Euro VI/EPA 10

evolved in the country?

will increase the price of new trucks 20 percent. The

A: Our plant in Santiago Tianguistenco, State of Mexico,

Mexican truck fleet is on average 17 years old and there

is the most flexible of the entire group. It produces the

is no availability of ultra-low sulfur diesel and urea across

whole Freightliner line, including the Business Class M2,

the country. Abruptly changing the emissions regulation

Coronado, Cascadia and Columbia models and all the

would collapse the Mexican transport industry. This is

variations that are commercialized in the US and some

the main reason Daimler supports ANPACT’s proposal to

Latin American markets. The plant produces 160 trucks

adopt Euro V/EPA 07 and Euro VI/ EPA 10 technologies

per day, reaching the 400,000 mark of accumulated

simultaneously,

production by August. It also accounts for 22 percent of

purposes.

adding

one

year

for

transitional

VIEW FROM THE TOP

CUMMINS KEEPS BET ON BUSES FOR LATAM IGNACIO GARCÍA Vice President for Mexico and Latin America of Cummins

Q: How will Cummins’ boost its market share in the bus

and distribution center in San Luis Potosi. The X-BU

segment?

began operations in June 2016 and incorporated the

A: Cummins is still betting on urban buses as it is one

latest technology in logistics operations. This increases

of the main segments that will support the company’s

our storage capacity and optimizes deliveries to our

development strategy in Latin America. We had availability

distributors across the country. Our supply chain is a top

issues for some important projects with OEMs already in

reason we will become a global and fast-paced company.

Mexico and newcomers establishing their operations. Even

We are committed to keeping all vehicles equipped with a

though this prevented us from reaching our 25 percent

Cummins engine on the road for as long as possible.

target in 2015, Cummins reported year on year sales growth of 3 percent. Thanks to our relationship with DINA,

Q: How is Cummins helping its clients achieve their

we both reached a 20 percent market share by the end of

environmental goals?

2015. We are again forecasting 25 percent participation in

A: For more than 15 years, Cummins has followed the

the urban sector for 2016 and we expect to surpass that

strictest environmental standards and used technology

initial target by 2017. During 2017 we will consolidate many

to aid the reduction of NOx and emissions on diesel

projects started in 2014 and 2015, allowing us to reach an

engines. We will start construction of a new Technical

overall 36 percent market share that will strengthen our

Center in San Luis Potosi city in 2017. This will boost our

position in the Mexican market.

remanufacturing operations as we eventually expand the center’s focus to other market segments. Clients can be

Following strict EPA and Euro environmental standards,

certain Cummins’ products are clean, sustainable and

our extensive diesel and natural gas product portfolio will

reliable. The company’s utmost priorities are the values

support this goal. Between 2013-2015, we sold more than

and environmental concerns of any region where it has a

1,500 natural gas engines in Mexico for the urban segment.

presence. Mexico is no exception. Pollution levels in certain

This made Cummins the leading company in eco-friendly

regions of the country worry us.

solutions compliant with EPA 17 and Euro VI standards. The ISX12G engine has become a popular alternative and

Q: What expectations does Cummins have for the new

we are confident that Mexico’s infrastructure will gradually

family of X15 engines presented at the XVI National

evolve to accommodate natural gas units.

Merchandise Transportation Forum? A: We have designed these engines to offer the market a

Q: How did Cummins regain investor confidence leading

more complete and precise portfolio. The new X15 engines

to a 59 percent recovery in its stock price?

comply with Euro IV standards and with Euro V given a

A: Cummins is profitable despite the economic downturn

simple recalibration. These engines were developed on the

with year on year growth of 3-5 percent in Mexico. NAFTA’s

same platform to be used for Euro VI and EPA 17 standards.

decline in the heavy duty truck market is reducing our

Although we are waiting for the government to ensure ultra-

exports to the US but our main strategy is to focus on

low sulfur diesel availability and enforce the emission laws to

our clients' needs and develop solutions that offer product

meet these standards. The engines feature an exhaust post-

support and training. Cummins invested approximately

treatment system including a diesel-exhaust fluid solution,

US$700 million in innovation and development globally in

eliminating the need for variable geometry turbochargers

2015, creating 76 new and improved products. We expect

and exhaust gas recirculation applications. This creates a

to reap the benefits in the coming years.

simpler design with a common rail fuel-injection system and a single camshaft. Our X15 engines will have a significant

As leaders in the truck engine market our growth is

impact on Mexico’s vehicle park renovation as long as there

focused on four directives. Cummins built a new logistics

are strict import regulations for used trucks from the US.

137

VIEW FROM THE TOP

TRUE MOBILITY MEANS MORE THAN JUST BUSES ENRIQUE ENRICH Director General of Scania Mexico

138

Q: How will Scania balance an increase in operations with

graduates and train them in line with Scania’s culture. We have

maintaining a healthy customer service strategy?

arrangements with several universities, including CEDVA, the

A: In a growing Mexican market, the best opportunity lies in

Autonomous University of Nuevo Leon, the Autonomous

maintenance operations either directly with the dealer, with

University of Chiapas and many others throughout the

private service shops or within the clients’ own transport

country. We even transfer people from regions where we do

operations. Our strategy has focused on approaching clients

not have service operations, like Guerrero, to other locations

and offering to perform maintenance on their trucks and

where they can learn about the company. All new recruits

buses. There has been encouraging growth in sales but

must spend a week in our corporate offices in the city of

growth in service operations has been overwhelming. Scania

Queretaro, where they receive intensive training courses on

has always been oriented to the coach segment, but we

technical capabilities and Scania’s values. This is also the

are beginning to implement new marketing programs for

perfect opportunity for them to meet our directors, nurturing

our urban bus and truck division. We spent several years

a more personal connection with the company.

struggling to sell trucks but in 2016 sales recovered and we plan to reach 500 units in several truck fleets by the end of

Q: How have you countered the challenges of staff turnover

2017. This is still a small share for a market of this size but it

within the automotive industry?

will boost our presence here.

A: High staff turnover has been one of the main challenges Scania and the automotive industry have faced but our human resources strategy has been pivotal in turning this around. We also have developed an inclusion program to strengthen the bond with new employees, and our workshop leaders have benefited from a training program that has shown incredible results.

Of Scania’s 116 current vacancies, 40 percent are trainee positions

During the first six months of employment our Human Resources team is in touch with all new recruits, finding out what they need and how Scania can make their transition easier. This helps us attack the small problems and uncertainties that can impact loyalty. We can monitor more closely the evolution of our different service points to be

We are including our Scania Communicator system in

sure they align with corporate expectations. Communication

all our maintenance policies. This solution has improved

has become one of our core values, leading us to organize

our management, time frames and availability. We are

team-building activities like our monthly lunches with all the

working with the federal and Mexico City's Ministries of

service points in the region.

the Environment (Sedema and Semarnat) to promote the advantages of our natural gas units so that clients are

Q: How can universities improve their curriculum to address

aware of an environmentally friendly and cost-competitive

the industry’s needs more efficiently?

alternative to normal diesel units.

A: There needs to be a stronger relationship between industry and academia. Most technicians focus on gasoline

Q: How are you locating the talent Scania needs to continue

engines but there is a considerable deficit in diesel-oriented

growing in the market?

professionals. That is why certain institutions like CEDVA

A: Of our 116 current vacancies, 40 percent are trainee

have asked us to give some of their lectures. Sometimes

positions. We try to hire young people, mostly recent

universities create a certain degree program but neglect to

include the technical side, so the industry’s input is crucial to

suspensions since there is no clear agenda on this matter.

develop better education plans.

These systems offer an improved passenger experience and make the driver, who may spend 8-10 hours in the unit, more

Q: How is Scania planning to maintain its leading position

comfortable. Roads should be better maintained but the

in the market?

implementation of pneumatic suspension regulations would

A: We are planning to open three more service centers in

go a long way to preventing constant repairs.

Veracruz, Hermosillo and Culiacan in 2016. The idea is to integrate the right people as quickly as possible. All recruits

Integral public transportation strategies must help improve

are hired months before starting any new operation and

environmental conditions and the life quality of the general

trained in one of our service facilities.

population. A good transportation network contributes to democratizing all growth opportunities. To date, the vehicle

Changes in the exchange rate have created a complicated

park includes outdated and undersized units following

situation for the company, especially regarding auto-part

inefficient routes without restricted lanes. Prioritizing urban

sourcing. Our strong service-oriented approach and the

transportation over private vehicles should be standard

development of qualified human capital helped us mitigate

in every city. Technological integration is also essential

any negative effects. We are likely to be vulnerable to these

to improve the urban landscape and natural gas units are

fluctuations but we are working to offer clients the best

superior in terms of efficiency and emissions.

solutions. Scania forecast a 35 percent increase in service operations between 2015 and 2016 and more than 25 percent

Q: What would naturally be Mexico’s next step to improve

growth in our total sales.

its environmental and traffic situation? A: Most major cities in the country are already worrying

automotive

about improving their mobility plans and there are now

technological development with sustainable infrastructure

What

opportunities

exist

merge

various BRT lines in different locations. However, only

development?

10 percent of people using public transportation use

A: Accessibility should be one of the highest priorities for

BRT systems. Modernization is inevitable but it requires

urban transportation. Low-entry buses offer swifter boarding,

congruency between government strategies to incentivize

which translates to less idle time for the bus and for any

the use of public transportation and the infrastructure

vehicle waiting behind it. We are also lobbying for pneumatic

development to support these measures.

139

VIEW FROM THE TOP

BRT SYSTEMS AN ENORMOUS OPPORTUNITY MOSHÉ WINER Commercial Director of Volvo Group México

Q: How has Volvo Buses developed its strategy for Mexico

Q: Where has Volvo focused its innovation strategy in the

considering the evolution of urban mobility plans?

coach segment?

A: Electromobility is the best bet to address Mexico’s

A: The company has renewed its business plan for coaches,

mobility

hybrid,

focusing on the development of the new Volvo 9800 and

electric hybrid and electric buses. Several countries are

and

environmental

challenge,

with

on offering chassis to third-party manufacturers. The latter

already implementing various electricity solutions. Volvo,

decision allowed us to participate in market segments

for example, no longer sells fully diesel-fueled buses in

where Volvo did not have a considerable presence. Volvo

Europe and we already have routes with purely electric

products such as the 8300 and the 8300 S suited this

buses. Mexico has an excellent opportunity to integrate

market but were not competitive against our competitors’

this technology but the evolution is not only technical. It

models. We began working with Beccar, Irizar and

needs to be supported with financing solutions. Hybrid

Marcopolo and the resulting portfolio has generated 42

and electric buses require a larger initial investment but we

percent market share for Volvo Buses.

also need to consider the vehicle’s total cost of ownership. The 9800 is the evolution of the previous Volvo 9700. The Q: How does the country’s penchant for oil and natural

new version features a more contemporary style and it

gas, and a lack of supporting infrastructure, impact

has enjoyed significant success in the market. It is lighter

mobility plans?

than the 9700 and it has an adjustable height system

A: Mobility is changing and we cannot allow technological

that lowers the bus as it reaches 80km/h. We also made

development to stagnate — otherwise, we would never

many aerodynamic improvements to the external design,

have created the internal combustion engine. Our systems

directly influencing fuel consumption. The 9800 is also

do not need complex infrastructure and there are already

taller and wider inside, resulting in much greater comfort.

several hybrid buses circulating in the city. Electric hybrid buses are the next step toward fully electric mobility but

Q: What is the foremost advantage Volvo has over its

even including the cost of advanced infrastructure, the

competitors in this segment?

necessary investment would be more than affordable.

A: All our competitors are vastly experienced, which

Mexico is an important natural gas producer but this energy

motivates us to keep innovating and offer the best service

source is not adequate to address its climate expectations.

possible. The 9800 is the only complete coach on the

Having signed the 2015 Paris climate deal, Mexico is now

market since all our competitors work on the chassis and

committed to holding global warming below 2°C and the

outsource all body manufacturing operations. This has

only way to fulfill this expectation is through electromobility.

given us a competitive edge since we began producing the 7550 16 years ago. We are the only OEM offering

Q: How is Volvo participating in Mexico City’s vehicle park

stainless steel and engines that last more than 4 million

renovation strategy?

km. Likewise, safety is an inherent value for Volvo. Our

A: Volvo is Mexico’s leader in BRT technology but this

vehicles are equipped to help prevent accidents but if

segment is only a fraction of the public transportation

there is one, the vehicle is designed to minimize the impact

network. The company still needs to increase its participation

and consequences for passengers.

in the rest of the market. We won a tender in 2015 for the RTP system but we consider BRT systems to be the optimal

Aftersales services are equally important in differentiating

solution for urban mobility. There is an enormous area of

our brand. Our position in the market encourages trust in our

opportunity to develop this technology in Mexico. We are

operations and customers know they can count on us at any

participating in the new Metrobús lines and we have a close

moment. No bus is perfect. The best product is not the one

relationship with operators and the authorities.

that does not fail but the one with the best client support.

141

VIEW FROM THE TOP

HINO KEEPS EYE ON 10 PERCENT SHARE HARUMASA SUZUKI Director General of Hino Motors

142

Q: When does Hino expect to reach its targeted 10

remain important in Hino’s portfolio, as electric units are

percent market share in Mexico?

unlikely to be part of our short-term future.

A: We expect to reach this target by 2020. Hino’s participation remained static at 4 percent from 2012 to

Q: To what extent have its financial services helped Hino

2014. In 2015, the company achieved a 3.3 percent increase,

gain customers and expand its market share?

landing a 7.3 percent overall market share. Although this

A: Financial services have helped the brand immensely and

growth was not considerable, the segment did see a 6-7

Hino has benefited from its alliance with Toyota Financial

percent rise in sales of Class 3 to Class 8 products, helping

Services Mexico. We built this relationship in 2012, leading

Hino secure 45-50 percent internal growth.

to the introduction of financial services for Hino in 2013. We have the most competitive interest rate in the market

Our Class 3 and Class 4 products have the highest selling

at 10 percent per year. Before our alliance was created,

rates, as big players such as PepsiCo, Bimbo, FEMSA and

Hino secured an average of 30 yearly contracts. In 2015, the

Jumex place most demand for these types of models. Hino

company secured 700 contracts. Our financial offer was not

trucks offer better fuel consumption, making our products

the only factor behind this significant leap. Hino’s sales points

perfect for distribution companies. To date, light trucks

have also expanded considerably, with more distributors

represent our biggest source of revenue. PepsiCo operates

across the country helping the company reach the market

200 Hino hybrid vehicle units. Among our other big clients

more efficiently. Our overdue portfolio has remained at

for these units during 2015 were Jumex, Tresguerras,

0 percent during the first three years, giving Hino better

Sigma, FEMSA, Paquetexpress, Nestlé and Unilever.

margins than Toyota itself. Thanks to this support, Hino granted a more competitive interest rate and its distributors

Q: What strategy has Hino employed to expand its

enjoy an opening fee that incentivizes the brand’s presence.

presence in the Mexican market? A: Our first strategy is to expand the company’s product

Q: What are Hino’s principal expansion goals and

portfolio. This year we will enter the 6x2 and 6x4 truck

forecasts for 2016?

markets and that of rear-engine buses, generating

A: In December 2015, Hino added one distributor in

significant growth. Hino already expanded its product

Colima, and we expect to include two or three others in

line in 2015, selling close to 200 front-engine buses. In

Mexico City and Monterrey by the end of 2016, mainly

addition, we are considering immersing ourselves in the

targeting Toyota distributors. Hyundai and KIA’s entry to

small truck segment, to compete with pickups from Ford

the Mexican market affected the profitability of Toyota’s

and Nissan, and the tractor-trailer market, which will help

distributors. These distributors are looking to expand their

us reach our 10 percent market share target much faster.

market segments, for which Hino is the perfect partner.

In 2015, we trained more than 4,300 operators from

Hino’s overall sales since our inception in Mexico hit

900 different companies, completely free of charge.

10,000 vehicles in August 2015. We expect to close 2016

Hino’s technology is already designed to offer high fuel

with a total of 3,000 vehicles sales but our target remains

yields but with proper training fuel consumption can be

conservatively set at 2,800. This will help us reach our

improved by 30-40 percent. This positions our brand as an

goal of 10 percent market share. Our greatest task for the

attractive option for the market. We also perform studies

future will be managing human capital growth and the

on customers’ operations to assess the viability and cost-

expansion of distribution points and product lines. As new

effectiveness of their products. Several companies and

regulations regarding ultra-low sulfur diesel will come into

fleets are showing increasing interest in hybrid vehicles,

force, we have taken precautions to be ahead of the curve,

but not all entities are ready for them. Diesel vehicles

preparing our production plants for new technology.

VIEW FROM THE TOP

NEW MODEL TO BOLSTER PUSH FOR RECORD HIROKAZU MARUYAMA Director General of ISUZU

Q: Which of ISUZU’s vehicles best cater to the Mexican

increase this number. Our vehicles have a number of

market’s needs?

benefits for potential customers including cargo volume,

A: The ELF truck-base buses are popular all around

fuel consumption and maneuverability.

the world. They are market leaders not only in Japan’s domestic market but also in several overseas markets,

Q: How is ISUZU contributing to CO2 emissions

including Mexico.

reduction? A: ISUZU supports the substitution of older, polluting

ISUZU Mexico celebrated its 10 anniversary in 2015 with

trucks for newer vehicles that register better fuel

a record number of units sold at 3,988. We expect to sell

consumption.

5,000 units in 2016, surpassing our record by 20 percent.

sponsored by the government is focused on heavy duty

The 5,000 milestone can be reached with the addition

trucks and there are a large number of light trucks that

of the ELF100 model to our vehicle portfolio, which will

also need to be replaced. The program would be greatly

generate a good balance between big fleets and non-fleet

improved by including a greater range of vehicles, ideally

customers.

from class 3 to class 8. This would provide the government

Unfortunately,

the

Scrappage

Scheme

with a more effective strategy to tackle pollution. The ELF100, which is equipped with the latest emission standards, is intended to be a volume seller in the Class 2

Q: What plans does the company have for the next 10

segment, helping to raise brand awareness. Nevertheless,

years in Mexico?

the ELF 300 continues to be our best-selling model in

A: We would like to expand our market share of diesel

Mexico. Based on customer demand, the Forward series

driven, cab-over and light and medium duty trucks by

was added to the ELF line and we hope it will strengthen

enhancing the added value we present to potential

the line’s sales volume going forward.

customers. Over the last 11 years, we have proved how our products can contribute to the development of the

Q: How have ISUZU’s operations and dealership network

industry and must communicate this to new companies.

adapted to changes in the local market?

We expect to continue our contribution to the country

A: Part of the ELF’s and Forward’s assembly will stay in

and national economy with our product offering and

our plant in Mexico but production decisions are subject

local recruitment.

to change, which could happen if implementation of the TPP alters customs taxes. We have not yet noted any serious change in our local operations but ISUZU will continue to pursue improvement in the life-cycle costs of our products in preparation for potential adjustments. We have identified that a dealership network expansion, both in quality and quantity, will be necessary if we want to provide our customers better aftersales service. We are appointing additional dealers to support more sales volume and current dealers are providing various training courses to improve the quality of our service. ISUZU recently achieved 30,000 accumulative sales and we hope the expansion of the dealership network will

In 2015, ISUZU celebrated its 10th anniversary with a volume record of 3,988 units sold

143

VIEW FROM THE TOP

BUS MAKER SEES UNIQUE NEEDS, EYES UNIQUE SOLUTIONS JAN HEGNER CEO of Daimler Buses México

Q: What role does the driver play in technology

cities. We have been involved in mobility projects such as

development for new bus models?

Metrobús in Mexico City, Tuzobus in Pachuca and other

A: Drivers safeguard the units and ensure passenger safety.

cities such as Leon, Guanajuato and Guadalajara. We have

Therefore, buses are designed to provide comfort that

deployed the best ecotechnology in our products. BlueTec®

favors concentration and with devices that offer a view of

5, for instance, helps make engines more efficient in both

everything that happens inside and outside the unit. There

performance and fuel consumption and incorporates gas-

are many elements involved in the development of new bus

treatment solutions.

models. In Mexico, orography is a main consideration. Due to altitude and geography, our units are adapted to cope

Each city has unique circumstances and needs and one

with the country’s roads and diverse temperatures. Between

product cannot fit all. Mexico City’s population density

2016 and 2017, Daimler Buses Mexico will introduce updated

demands all sorts of BRT units and we recently added the

passive and active safety features, alongside more advanced

Mega BRT, a design-focused product with the looks of a

active systems that will react to risk situations and ensure

high-speed train, wide interiors, a length of 23m and the

safety with the highest precision.

capacity to transport up to 250 passengers. Daimler also unveiled the Future Bus in July 2016, an autonomously

Q: What benefits do your products offer that would make

driven bus being tested in Amsterdam. This unit will

a driver choose Daimler over other brands?

lead the company to the next generation of passenger

A: We deliver design, comfort and safety for all our

vehicles. The demand is not only for better buses but for a

users. Comfort encompasses complete diversity of seat

completely integrated mobility solution. Many companies

configurations, lighting, easy access to the units and

can supply the technology for inner city and coach

overall space. Our Boxer model, for example, is so big that

applications but the concept of mobility that Daimler is

it is a true star of urban transportation. This bus has served

pursuing goes further. We collaborate with our Brazilian

as a mobile unit for the sound transmission of the Ariel

and German colleagues, who are highly experienced in

Academy Awards.

BRT, to create proposals for specific mobility challenges.

Daimler offers the best total cost of ownership and the

Q: What is your position regarding the impact of the No

appropriate financing support through Daimler Financial

Drive Day regulations in terms of sales and availability of

Services. This ultimately gives us a competitive edge in

public and interurban transportation?

the market. Thanks to the launch of the FlexibilidadesMB

A: We believe it is positive to have advanced regulations

campaign in 2016, Daimler Buses can now offer several

and the industry will take part in every initiative to support

product combinations between our chassis and different

a sustainable environment. To succeed, the conditions for

body manufacturers, meeting our customers’ needs and

these applications and their enforcement should be well

consequently ensuring their satisfaction. By the end of

defined. Investment is needed but benefits will be seen

2016 we will introduce the Mercedes-Benz Midibus, which

in the long run. Units will be more expensive but their

will complete our portfolio. This minibus will come to

maintenance and operations costs should be lower. Daimler

Mexico as an option for public transport fleets as they face

offers buses with BlueTec 5 and these are already above

the imminent renovation of their old fleet.

Euro IV requirements. Switching to the next technology will imply expenses for the whole chain including

Q: What are the company’s technology innovations

manufacturers, fleet managers, owner operators and even

toward a complete mobility-focused approach?

passengers. To minimize the impact, authorities should

A: Innovation is in our DNA. As global BRT consultants,

define green incentives to support renewal acquisitions by

we help find the best solutions to mobility needs in large

owners and diesel availability across the nation.

145

VIEW FROM THE TOP

ADAPTING TO EXPAND PAULO ANDRADE Director General of Polomex

146

Q: How likely is the company to reach a 35 percent market

It has provided us with the possibility of market growth.

share, after hitting your target of 21 percent last year?

We tend to market needs and clients by offering greater

A: Polomex’ directors have developed a five-year plan

opportunities to customize the chassis and body of buses

to reach a 35 percent market share. In 2016 we will keep

according to the needs of our clients.

developing our products to fit different chassis, with the goal of strengthening our sales structure. We have

Q: How relevant is the aftersales segment to Polomex?

established offices in Toluca and continue to invest in

A: The aftersales segment is an increasing presence in the

industrial development so we can maximize our production

market through technical assistance and the availability

capacity and minimize lead time.

of spare parts for all of our products. We are working on increasing our proximity to our clients so they can

Last year was a transition year in which Polomex achieved

get to know our new business plan and learn about our

its target of 21 percent market share within budget and

services. We are also implementing a new engineering

according to plan. We now have a flexible business model

structure to make maintaining and repairing our buses

and work with other chassis companies besides Mercedes

easy for clients.

Benz. This allows us to be more approachable to clients. We spent 2015 focused on fitting our products and

Our plan is to continue training our distribution and

developing processes for this new business model.

authorized service network as well as our client base to ensure the best operation of equipment. This permits

Polomex achieved their 2015 market share target of 21 percent within budget and according to plan

clients to know our products and learn to give the best service possible under the established premises of our projects. Q: What are the company’s objectives for production and sales in 2016? A: We have planned the production and sales of 1,800

Q: What challenges has the company seen in the heavy

units for this year, which represents 22-23 percent of the

vehicle market, considering the current exchange rates?

market. This has become a difficult goal as the first quarter

A: The uncertain exchange rate is one of the main

of 2016 was extremely slow. Mexico has been facing a

challenges we face. As a manufacturer, we hope this

recession that has affected our industry. The forecast for

situation stabilizes so our credibility is not hurt and clients

the second half, in contrast, expects a growing market for

feel secure buying our products. The political climate

our segment.

after state elections that resulted in the reorganization of transportation systems in major cities in Mexico has

Marcopolo Mexico offers the greatest portfolio variety in

created uncertainty. This translates into challenges in the

Mexico, from a double-decker to a midibus for city and

heavy vehicle market. Another hurdle we have faced is the

coach segments. Because of our flexible business model,

inventory carried from 2015 in our distribution network.

we have given all our products a facelift, from the Torino

This has forced dealers to focus their efforts on selling

and G7 to models like the Boxer. The change of design

these units instead of more current vehicles.

relates to a depersonalization from Daimler’s style, working Marcopolo’s identity and unique image into our buses. This

Client diversification created more competition but

ample portfolio and refreshed image give us an advantage

Polomex is prepared to face this challenge with our

over our competitors. We are ready to implement BRT in

extensive portfolio and the customization of our products.

Mexico with articulated units and low entry.

VIEW FROM THE TOP

INVESTMENT KEY TO INTERNATIONAL COMPETITIVENESS MARTÍN MELÉNDEZ Director General of DINA

Q: How has DINA moved its manufacturing services

and rural road infrastructure. Although fuel efficiency is a

toward a more efficient and automated approach?

priority, we do not shy away from improvements to safety,

A: We improved our manufacturing quality through

comfort and maintenance costs. We have a 14 percent

precise tooling solutions that offer better results in the

market share in the Mexican bus market and are leaders in

final body assembly process. Our chassis operations also

natural gas engine fabrication and commercialization, with

comply with all the required safety parameters and we are

approximately 1,000 units already on the road.

implementing robotic equipment for certain processes. This allows us to reduce margins for human error to a

Q: What is DINA’s strategy to include more local suppliers?

minimum, resulting in units with a high level of replicability.

A: We need top-notch suppliers who can offer outstanding quality, cost competitiveness and efficiency so we can

Q: What technology has DINA implemented in its new units

to deliver excellent results. This process also requires a

to offer increased efficiency at lower production costs?

strong collaboration among our suppliers and our quality,

A: Having reduced the weight of our vehicles through

purchase and engineering departments. This lowers

structural design enhancements and computer-assisted

production costs and allows us to keep a close eye on our

engineering validations, this led to lower aerodynamic

improvement process. We have financial support strategies

resistances. The use of high-resistance plastic materials

for national suppliers as the only way to manufacture at an

has been crucial in this process of substitut metallic parts.

internationally competitive level and ultimately substitute

Electronic automatic transmissions are also an excellent

imports is through investment in equipment, tooling,

solution

technology, human capital and new business propositions.

for

improving

fuel

consumption.

Regarding

alternative motorization, we have developed natural gas units to replace our diesel-powered vehicles. Similarly, we have

Q: How important are natural gas units for DINA’s

worked on fully electric units connected by pantographs and

commercial strategy and how are you promoting these

diesel-hydraulic hybrid solutions that recover energy from

types of solutions?

braking, saving up to 28 percent of energy used. Our latest

A: DINA has invested in the development of more efficient

venture is battery-powered electric units.

products. We introduced our natural gas units in 2009 back when they complied with EPA 2010 regulations.

We work with the Autonomous University of Mexico (UAM),

The current generation follows EPA 2014/Euro VI, which

the Advanced Technology Center of Queretaro (CIATEQ)

already surpasses Mexico’s EPA 2004/Euro IV regulations.

and IPN's Center of Advanced Studies and Investigation

This

(Cinvestav) in the development of these technologies and

development and energy efficiency, mitigating emissions

we expect to start collaborating with UNAM shortly. DINA

according to goals established by the federal government

is also present at several industry events where students

and the international climate change initiative.

strengthens

our

commitment

technological

and researchers are invited to present their projects. These are analyzed to determine their technical and economic

Our natural gas units do not depend on the availability of

viability for later incorporation to our units, such as a

ultra-low sulfur diesel, making them a more viable choice

new dashboard we incorporated to our Linner 12 units to

for Mexico. As we specialize in these types of solutions, we

improve the driver’s visibility.

become consultants and partners for our clients, carrying out route inspections to determine the most efficient type

Q: How has DINA’s technology development strategy

of unit for each corridor. Our in-house analysis tool helps

helped you attract clients?

us determine the most adequate financial model that

A: Our strategy for technology integration has been to

would allow clients to transform their fleet or even install

consider drivers' needs and the reality of Mexico’s urban

their own compression station.

147

VIEW FROM THE TOP

LOCAL PLAYER STRENGTHENS ITS MANUFACTURING FOOTPRINT JULIÁN BECERRA Director General of Beccar

148

Q: How far along is the construction of Beccar’s new plant

moments in which our installation capacity is not enough,

in Zapotlanejo, Jalisco?

there are others when demand slows. We learned to balance

A: The project is progressing but it is not yet complete.

our production to remain active throughout the year.

We have finished constructing the patios and avenues and we are now starting with the infrastructure. This will be

Q: How involved is Beccar in the maintenance and repair

a 5,280m facility and construction will be completed this

operations of its existing client base?

year. Afterward we plan to begin installing the equipment

A: We have a specific department that focuses on these

to start operations by the end of 2016.

operations directly with clients and follows their specific

schedule. Each unit has to be checked at least every six Our production is planned to satisfy the demand of our

months unless the client calls first to request a special

current models. We do have a couple of new units in the

revision. Our direct clients are OEMs and distributors but

pipeline, one of which is larger than any other bus in our

we always offer our services to final users. With every fleet

production line. This unit would be for the coach segment

composed of 10 to 20 units, we always offer a lecture on

and will probably be released at the beginning of 2017. The

the most important mechanical and maintenance issues,

other unit is a minibus and we already have some clients

particularly for powertrain components. This has helped

interested in acquiring it.

us gain our customers’ trust as we adapt to affect their operations as little as possible.

Both

the

URBUS

and

the

URVIABUS

have

been

consolidated in their design. These models are now third

Q: How do chassis and powertrain renovations at OEMs

generation, featuring some changes to the front and rear

affect Beccar’s operations?

and a new type of assembly. Our previous designs were

A: Every time a company changes its powertrain

somewhat square, so we are moving back to a more curved

technology and dimensions, our own models have to be

approach. This offers a cleaner and smoother image,

adjusted accordingly. This proves to be an advantage

which also makes our clients’ cleaning and maintenance

for Beccar as all our design and engineering capabilities

operations easier.

are managed in-house. We do not depend on external suppliers. This allows us to adapt to our clients’ time

Q: What are Beccar’s plans for technology and automation

frames. Nonetheless, growing demand represents more

integration in its new plant?

work for Beccar, resulting in extended delivery times. This

A: Beccar is about to receive a new laser-cutting machine

is positive because it shows guaranteed business for a

to replace our old equipment. We are implementing a tool

certain period, even though it limits our capacity to attract

dispenser system to ensure punctual processes. This is

new customers.

similar to a system that many automotive OEMs already manage, where each employee can access the system with

Q: How does this process relate to the renovation strategy

their ID number and get the materials they need for their

of each fleet manager?

operations. This will help us be more efficient by controlling

A: We have established relationships with companies that

time and resources spent at each stage of the process.

manage their renovation process progressively, updating their entire fleet within an extended time frame of

We are striving to increase production volumes to between

approximately 10 years. Annually, these customers acquire

1,100 and 1,200 units and expect to close 2016 with a total

100-150 new units, which we can program throughout the

production of 1,000 vehicles. There are certain initiatives

year. Apart from these projects there are also tenders and

still in the pipeline but these are projects we have not yet

business directly with owner-operators, but we have seen

developed. The market is cyclical and just as there are

an emerging trend toward more organized renovation plans.

VIEW FROM THE TOP

RECONNECTING TRANSPORT WITH USERS EDILTRON TEMPORAL GOMES Director General of MASA Autobuses

Q: What changes are needed to improve Mexican urban

Companies sometimes use private buses to transport their

transportation and what obstacles stand in the way?

blue-collar workers but top executives have no interest in

A: Urban transportation has lost touch with the final

these units because they do not offer anything extra for

user, focusing more on revenue by reducing fuel and

them. That is why new solutions like Uber are so popular.

maintenance costs. MASA’s goal is to change this

Although the service is a bit more expensive they offer

model and offer a different product with added value

added value to the customer. In my opinion, the only

for all the players in the transportation chain, including

segment in Mexico that has really advanced is the coach

company owners, operators, the government, passengers,

division, where service quality is vital. Many other countries

pedestrians and society in general. But this is difficult to

still have a long way to go in this transition but we are

achieve with vehicles that do not meet the specifications

slowly detecting changes with technologies in Mexico,

for

such as low-entry buses and the use of diesel-exhaust fluid.

the

Mexican

market.

Furthermore,

our

current

transportation system is far from comparable with systems in other countries, which also makes tourists wary of using

Q: How will MASA manage its distribution network

our vehicles.

according to its new strategy? A: We did not want to build our own distribution

Our job is to show companies how they can improve

network because we would have had to invest heavily in

without depending on third parties. We connect our

infrastructure, just as KIA is doing. Therefore, we decided

users with financial institutions so they can go through

to outsource production and distribution to an established

this transition smoothly. This requires trust from financial

company, namely Volvo Group. Volvo’s experience in both

institutions and turning an owner-operator into an

the aftersales and aftermarket segments allows us to offer

established company is a difficult process. Therefore, we

the best possible service to our clients. However, to have a

need the government to understand there is a need to shift

different offering from Volvo or any other OEM in Mexico,

from simple concessionary operations to fully established

we had to define our strategy in terms of our product,

transportation entities. All companies need to take their

sales and financing solutions. Thus, MASA’s strategy is

obligation to offer good quality service onboard and

completely oriented to the dealer and to helping them

source efficient and relatively new vehicles that comply

generate strong business links and excellent revenues. Of

with all regulations.

course, this requires an investment from both parties. This is a challenge as well, since we have to make sure that our

Q: How is MASA developing better technology for both

network can manage the business independently, which

the passenger and the operator?

is why we slotted ourselves under the wing of a company

A: Accessibility has been a priority. To make it easy for all

that knows all the potential pitfalls.

passengers to board more comfortably, MASA eliminated the step up into its vehicles. We have worked hard on

Q: What are MASA’s goals for the Mexican market?

developing rear-engine units, which offer several benefits

A: In terms of sales volumes, we want to achieve a 10

over front-engine vehicles. Even the window design

percent market share by 2019. This year we are closing

contributes to a more pleasant ride, increasing light and

with approximately 300 units and next year we expect

allowing for a cleaner unit and more relaxed users. Safety

another 410. In terms of private transportation, we have

is a high priority, such that all units now include on-board

an excellent product but the market is still focused on

computers that measure the amount of fuel used on each

number of seats rather than number of passengers. Each

trip, the operator’s driving style, the number of people

person has different needs and all buses have to adapt

on the bus and every stop made en route. This makes

to these requirements, whether they are related to safety,

maintenance operations easier to foresee.

comfort or even entertainment.

149

VEHICLE SPOTLIGHT

150

DINA BRIGHTER Car buyers choose their vehicle’s features according to personal taste, but buyers for mass transport companies do not have this luxury. A bus must satisfy the needs of the driver and also be attractive and comfortable for passengers. Fortunately for the growing BRT segment, DINA has hit the nail on the head with its Brighter model. The Brighter's double-carriage has 38 seats and an overall capacity of 165 passengers, including a designated area for wheelchairs next to the front entrance. All units have onboard air purifiers for the comfort of their passengers. The vehicle’s interiors are finished with plastic and glassfiber reinforced plastic (GFRP), while the handrail is made of stainless steel. The plywood floor is treated against humidity and covered with linoleum for the heavy use that characterize cities' public transport systems. The interiors are LED illuminated, including lights on every step and one for the operator. The exterior sides are finished with galvanized sheet steel and GFRP on the front and the back. The bus features two left-side doors per wagon with electro-pneumatic mechanisms, plus two pantographic emergency exit doors on the right. For performance, DINA included a Cummins ISM 10.8-liter, six-cylinder engine, offering 380hp at 1,600rpm and torque of 1,620Nm at 1,400rpm. This unit is certified according to Euro V standards, runs on diesel and has two plastic 210-liter tanks. The chassis holds a six-speed, automatic Alisson transmission with one reverse gear and an integrated retarder. This is supported by an independent doublesystem, pneumatic brake system and brake disks with anti-lock braking in every wheel, offering all-round driving safety. Its handling has electronically controlled air suspension including two airbags, two shock absorbers and a stabilizing bar. The mid ECAS suspension features four airbags and four shock absorbers just like the rear system, plus a stabilizing bar. These are coupled with a hydraulic TAS 85 TRW steering system, providing a smooth and comfortable drive. As BRT lines continue populating cities, filling a gap in the public transport market, the DINA Brighter bus offers an option that is 100 percent Made in Mexico.

151

COMPETITIVE MANUFACTURING & EQUIPMENT

The unrelenting demand for increasingly efficient manufacturing processes is pushing companies toward Industry 4.0. Advanced electronics and connectivity are taking center stage on global manufacturing lines. While relatively new to Mexico, these high-tech innovations are expected be the norm in just four or five years. The inclusion of automation and robotics into manufacturing processes generates improvements not only in terms of costs and efficiency, but also in delivery-times and quality. Industry 4.0 also poses a challenge for the country. It must develop skilled human capital to operate the machinery in an increasingly automated industry.

Here, industry leaders give their perspective on the benefits new technological trends bring to the manufacturing process, the use of software for operating machinery and the possibilities connectivity offers manufacturers and end-users.

153

154

CHAPTER 6: competitive manufacturing & equipment 156

VIEW FROM THE TOP: Juan Manuel Kuri, Siemens Industry Software

157

VIEW FROM THE TOP: Bernd Schreiber, FESTO

159

VIEW FROM THE TOP: Fabio Negrao, Atlas Copco Industrial Technique Division

160

VIEW FROM THE TOP: Rafael Funes, LOVIS Holdings

161

VIEW FROM THE TOP: Pedro Garza, Epicor Latin America

163

VIEW FROM THE TOP: Armando Ávila, Nissan Mexicana

164

VIEW FROM THE TOP: Víctor Fuentes, Mitsubishi Electric

Omar Esparza, Mitsubishi Electric

165

TECHNOLOGY SPOTLIGHT: Quality Support from a Home-Grown Team, SIMSA

167

VIEW FROM THE TOP: Sergio Bautista, ABB México

168

INSIGHT: 4.0 Industry Practices for the Automotive Sector, Bosch Rexroth

169

ROUND TABLE: Hector Lozano, BINZEL

Michael Nuessler, TRUMPF Mexico Mauricio Torres, Aqua Machinery

170

VIEW FROM THE TOP: Manuel Uriarte, Numalliance México

171

VIEW FROM THE TOP: Ricardo Martínez, SIMSA

172

VIEW FROM THE TOP: Bruno Pinotti, IMI Precision Engineering

173

VIEW FROM THE TOP: Ernesto Sánchez, Seeräuber Automotive de México

174

PROFILE: Clemente Hernández, SMW Autoblok

175

VIEW FROM THE TOP: Marcos Sepúlveda, SCHUNK Intec

176

VEHICLE SPOTLIGHT: Mazda CX-9

178

VIEW FROM THE TOP: Fidel Guajardo, Fronius Mexico

179

VIEW FROM THE TOP: Alejandro Silva, Renishaw

180

VIEW FROM THE TOP: Armando Bravo, CeDIAM

181

VIEW FROM THE TOP: Monica Flores, ManpowerGroup

155

VIEW FROM THE TOP

LEADING THE INTELLIGENT MANUFACTURING REVOLUTION JUAN MANUEL KURI Vice President and Country Manager Mesoamerica of Siemens Industry Software

156

Q: How is automation expected to boost the development

is vital between all levels and across borders. Our

of the national automotive industry?

technology allows OEMs to keep in touch with all suppliers

A: Automation is crucial in all manufacturing systems.

regardless of their position in the production chain. The

For a company to be competitive, quality and price are

elimination of all possible delays in product development

pivotal factors. The country’s automotive industry is at a

creates flawless synchronization between those involved.

turning point since many OEMs and suppliers are moving

Platform lifecycle reduction is desirable for any industry

into engineering operations. This means that apart from

and this level of integration is the only way to manage it.

being a cost-competitive manufacturing country, Mexico

Siemens is the leading company offering these solutions

is also becoming a low-cost engineering location. For this

and the standard provider in 65 percent of the industry.

change to be successful companies need to keep lowering their production costs and investing in technology to

Between 2000 and 2010, many Mexican companies

optimize all processes.

realized the only way to compete with their Asian counterparts was to either lower base salaries or invest

Regarding the Industry 4.0 trend, virtualization and

in automation. The millennial generation has pushed the

predictability are the bases for all engineering and

industry toward technology at an accelerated pace. This

manufacturing operations. Initially, only design processes

has resulted in automation being more widely welcomed.

were virtual but migrating that knowledge to the production

Siemens has recognized the importance of the SME

level will result in intelligent manufacturing sites. All

segment in Mexico and we have adapted our solutions to

processes need to generate and gather information to be

the needs of this particular sector.

collected by the company’s decision-makers. This relates to the Internet of Things and to how equipment and devices

Q: What is Siemens’ biggest challenge to continue

can communicate to deliver data more efficiently.

innovating in its solutions? A: Infrastructure is the biggest area of opportunity in

Q: How can Siemens change the mindset of its clients

Mexico. Internet bandwidth is still insufficient to support

from a low-cost labor, short-term benefit approach to an

major developments for the Internet of Things. There

automation-based, long-term gain vision?

have been cases where we limited our offerings to clients

A: Certain companies prefer to hire an extra person rather

because of a lack of available infrastructure. Internally we

than investing in an automation solution that could benefit

are focusing our efforts on developing better solutions

the company in the long term. The adoption of technology

catered to Industry 4.0. Digitalization, data collection, and

has improved considerably in Mexico and the younger

the Internet of Things have become our priorities and will

generations have made this process even easier. The

define our strategies in the years to come.

technological evolution of cars also has been a contributing factor. Most salespeople focus on the digital and electronic

Mexico has amazing opportunities in the manufacturing

features of a vehicle rather than its mechanical advantages.

sector. Investments continue to be made throughout the

To include them, companies need to implement digital

country’s supply chain and several reforms are boosting

manufacturing processes that would foster a suitable

the country’s growth. Companies must understand how

environment for the adoption of technology.

to take advantage of these circumstances and make the right investment in necessary technology. Technological

Q: What can Siemens offer in integration of processes

integration is a complicated process and even though

between OEMs and suppliers?

Siemens is a leader in quality and development, our local

A: One of the main challenges in the automotive industry

support has been a defining factor to ensure the correct

is the number of links in the supply chain. Communication

implementation of our systems.

VIEW FROM THE TOP

A FOOTHOLD IN INDUSTRY 4.0 BERND SCHREIBER Director General for FESTO

Q: How is FESTO maintaining its position among the

developing seminars that support this technology

leaders in automation in the Mexican market?

trend, together with companies that have an important

A: We compete with Siemens, Rockwell and Pepperl+Fuchs

foothold in technology development, is crucial for our

among other companies across a range of technologies.

operations and the integration of Industry 4.0 products

FESTO has evolved from managing a portfolio of 6,000 to

to the Mexican market. Companies are constantly trying

7,000 products solely directed at the pneumatic sector to

to gain competitive advantages over their counterparts

handling 30,000 products ranging from PLCs to electric

and Industry 4.0 is the next technological surge that

axels and sensors, to name just a few.

will accomplish this. More advanced and controlled processes will allow companies to work around the

One of FESTO’s strengths is the development of its

clock, increase productivity and quality and lower costs

workforce.

substantially.

channel

resources

toward

acquiring

and training the right people and since we develop our own hardware, it is easier for us to create alliances with

Our client portfolio includes multinational OEMs including

universities. FESTO has adapted its branches across the

Audi, Volkswagen, Bosch, KIA and BMW but smaller

country with individual training areas and groups, which

companies within the supply chain remain a concern.

allows us to pinpoint deficiencies and immediately look for

Multinationals have the resources to invest in their own

ways to correct them. Through training centers we have

training centers, which ease technological transitions,

been able to better understand the processes of specific

but smaller companies have more difficulties transferring

industries to support our customers more efficiently.

technical knowledge to their workforce. That is precisely

Each industry is different, not only in terms of processes,

where FESTO’s support and services can make a significant

products and knowledge, but also in terms of mentality

difference. For the industry to become more efficient,

and language. Therefore, our sales force must adapt

everyone involved must evolve, so our focus cannot be

communication to clients.

limited to major companies.

FESTO’s didactic division trains clients to use our products,

Q: How does FESTO hope to develop its auto activities

as well as other technologies, such as CNC, hydraulics

in Mexico?

and mechatronics. This division’s portfolio includes close

A: The company will experience growth in 2016, as the

to 35 seminars that help improve productivity, which

automotive industry will continue to expand to cater to

is FESTO’s primary goal. The automotive industry is

US demand. FESTO is already working with KIA, supplying

relatively homogeneous in terms of processes. FESTO

equipment for its training center. We also have established

develops products and solutions that fit several industry

close relationships with Audi, GM and Volkswagen. We

players. Subsequently, minor modifications can be applied

have discussed a bilateral agreement with BMW as well,

depending on peripheral factors such as standards in the

and FESTO is already supporting them to improve their

production process.

processes

and

technology

implementation

through

Industry 4.0 strategies. Q: How is the company pushing the boundaries of innovation to integrate better solutions into its systems?

The fluctuating exchange rate will add pressure and, as a

A: FESTO has built a broad network in Germany, increasing

result, the company is undergoing changes in its logistics

our R&D capabilities. Although we invest heavily in

model. Nonetheless, we have the initial hardware to

these projects, the company also has agreements with

accompany the transition to Industry 4.0 as well as the

multiple enterprises, such as the Universal Technical

seminars that will transfer the knowledge. We predict that

Institute, SAP and Siemens. Creating partnerships and

2016 will be a profitable year for FESTO.

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VIEW FROM THE TOP

INDUSTRIAL LEADER CONSOLIDATES THROUGH INORGANIC GROWTH FABIO NEGRAO Director General of Atlas Copco Industrial Technique Division

Q: How has Atlas Copco’s global development evolved and

the start. We implement this process in all our customers’

influenced expected growth going forward?

facilities, regardless of their global location.

A: Atlas Copco is present in 183 countries with approximately 43,000 employees. By the end of 2015, the company

Q: What was behind Atlas Copco’s recent acquisitions,

generated US$12 billion in total revenue with an operating

including Synatec and Saltus, and how have these

margin of 19.3 percent. Internationally, Atlas Copco earmarks

operations impacted the company´s strategy?

9 percent of its revenue for R&D activities, in line with its

A: Atlas Copco’s strategy is focused on enhancing the

commitment to sustainable productivity. Our goal is to keep

value we bring to our customers. The main goal of Saltus

investing in our people, our service and our installations to

and Synatec is to offer new technologies and extend our

exceed our global forecast for 8 percent growth in 2016.

product portfolio to better cover the complete needs of our customers. When we acquire a company we align our

Q: What new products is Atlas Copco positioning in the

operations, so human capital and infrastructure grows.

market and how do they compare to competition?

Specifically, our Industrial Technique business area added

A: Atlas Copco is launching the Power Focus 6000 in 2016.

employees in marketing, sales, R&D and customer service.

This is a unique assembly system and one of our most

There was also significant investment in innovation centers

important product launches. It is an innovative product,

to meet growing demand for assembly solutions. Synatec

integrating our established hardware focus with a modern

focuses on bringing a solid software integration platform to

software platform, contributing to the increased productivity

modern production plants whereas with Saltus we now offer

of our clients. The Power Focus 6000 provides customers

additional quality assurance equipment and accessories.

with a lean environment containing fewer physical controllers by replacing them with virtual stations. Overall, this new

Q: How have these acquisitions pushed your Industrial

generation of products is lighter and smarter, offering more

Technique business area to evolve and offer better services?

flexible line rebalances, shorter cycle times and improved

A: We see greater need for quality, productivity, flexibility

ergonomics. This, we are sure will have a great impact on

and ergonomics on automotive production lines for both

assembly lines throughout Mexico and the world.

OEMs or suppliers. These demands push us to create advanced tools and systems, resulting in increased focus

Q: What is the company’s approach to working with all new

on bringing better service to our customers’ plants.

OEMs and suppliers in Mexico?

Automotive clients, and the industry in general, demand

A: Atlas Copco has a strong global presence with global

more software-integrated solutions. Synatec has been an

key account managers assigned to different customers and

excellent addition to our portfolio in this regard. Saltus is

segments. Our local sales and service engineers are in close

a line dedicated to ensuring quality through its vast line of

contact with our customers as well as our global team. Our

torque wrenches.

motor vehicle division is divided into five main segments, The Asian and Western final assembly divisions focus on

Q: How have these acquisitions helped Atlas Copco attract

the main automotive OEMs. Our Tiers and Powertrain

investors to the company and develop business?

segments target the main suppliers in the industry, while

A: By offering complete solutions and not just tools, our

the Heavy Trucks & Buses area supports all heavy vehicle

customers are involving us earlier in their processes,

companies. When an OEM decides to start a project in a

even during development phases. The result is significant

new country, we work directly with their headquarters to

savings for our clients and more business for Atlas Copco.

make sure we meet their needs on timelines for start of

Our investors are big supporters of our recent acquisitions

production etc. This allows us to reduce the consolidation

as they align perfectly with our strategy, resulting in added

time of the new plant, resulting in increased efficiency from

value for our customers.

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VIEW FROM THE TOP

AROUND THE CLOCK TECHNOLOGY AHEAD OF ITS TIME RAFAEL FUNES Executive Chairman of LOVIS Holdings

160

Q: What has been your experience breaking into the

Q: What is the difference between your EOS and

Mexican technology development market?

traditional enterprise resource planning (ERP)?

A: Twenty-seven years ago, the DynaWare brand entered

A: ERPs require each client to individually assemble and

the Mexican market for the first time. DynaWare created

adapt the solution to fit their needs. This is not only time

an enterprise operating system (EOS) concept, which

consuming but may also drain financial resources, and the

enhances a company’s transactions and operations

end result is less predictable. Our EOS solution was built

by improving its processes. In 2003, following new

to factor in the needs and variations of different sectors.

technological advancements we transferred our solution

It is as configurable as ERP without requiring adjustments

to the cloud, DynaWare Online. Our EOS concept is

to the original line of coding. The result is a universal,

divided into software solutions, consultancy services

configurable and scalable enterprise application ready for

and human development. Breaking into the technology

every company, regardless of its size, sector or country of

development market has proven to be difficult because

origin. Operability is another huge differentiator between

Mexico is not yet perceived as a competent provider of

both solutions. ERPs halt for an average of five days to

highly advanced technological solutions, which is why

perform monthly closing processes, while EOS accounting

we decided to relocate our operations to London. As we

is automatic and runs around the clock. If our solution is

introduced DynaWare to Mexico, we opened LOVIS’ first

not available at any given point, our clients are exempt

Mexican subsidiary, becoming a Mexican company settled

from payment. LOVIS has focused on product availability

in the UK, but consisting mostly of Mexican capital. We

and operational continuity, regardless of a clients’

intend to relocate our software development processes

geographical location. Our cloud solution allows users to

to the UK from Spain, while our administrative operations

access their platform through any device, which responds

remain divided between Mexico and the UK. We also work

in real-time to operation modifications.

in Ireland, Canada, Australia, New Zealand, Chile, Peru and Ecuador, and are planning to expand our presence into

Q: How has the EOS approach directly influenced the

Asia and Central Europe after properly assessing each

automotive industry?

region's possibilities.

A: Advanced manufacturing sectors such as the automotive and aerospace industries are particularly important for

Q: How is LOVIS helping to change the market’s mindset

LOVIS. As these sectors continue their global growth,

regarding Mexico’s IT development capabilities?

companies need EOS solutions that can help them control

A: Mexico is well branded as a manufacturing country

costs and expenses, inventory and component delivery in

but not as an R&D and engineering center. Design and

a high-paced industry. Our solution was ahead of its time

technology developments are imported and we simply

when we first launched our DynaWare software and it

follow trends instead of leading them. The problem with

took the market nearly 10 years to catch up with LOVIS.

this attitude is that Mexico misses out on the biggest

We are still many years ahead of trends. For example, one

opportunities because value generation comes from

of the biggest ERP companies recently announced a new

product development and national integration. In that

technological advancement in which the complete database

sense, LOVIS has created high-value advanced technology

in the Random Access Memory (RAM) is processed. What

but the world’s perception does not match our reality. To

seemed to be an industry breakthrough had been a LOVIS

change this, we positioned LOVIS as a British company

operation for over 12 years. The biggest problem we face

that owns DynaWare software and technology. Thereafter,

is slowing down our innovation process to run parallel to

we introduced it to Mexico and expand our market share

market expectations. Some of our solutions are 4 years old

so that eventually we will be able to position Mexico as an

but will not be made available for at least another three

advanced technology developer.

years, when the market will be ready to recognize the value.

VIEW FROM THE TOP

DATA ACCESSIBILITY AT EVERY LEVEL PEDRO GARZA Director Solution Engineers at Epicor Latin America

Q: What is the scope of Epicor’s presence in manufacturing

suppliers of production rhythm and product consumption

processes and aftermarket services?

will improve an enterprise’s operations. Companies will

A: Epicor has positioned itself as an automotive supplier for

be able to deliver provisions automatically through an

Tier 2 and Tier 3 enterprises. Incorporating best practices

open contract, bypassing the need for purchasing orders.

that focus on the automotive industry has helped our

Eventually, the value chain will be managed interactively.

consolidation. We have a detailed e-catalog that features car parts, producers and distributors. Merging electronic

Epicor wants to promote technological development

data interchange into our services is part of our strategy

that can lead to green enterprises. We have developed

as they are used for demand and purchase planning, and

software called Mattec, which helps enterprises become

purchase contracts. Epicor is aiming for cloud service

more efficient and sustainable. Mattec measures the

generation with a hybrid physical component to ensure

company’s impact on the environment through their

purchases between enterprises and their suppliers are

carbon emissions and energy consumption.

safe and transparent with an adequate level of encryption. This hybrid cloud would allow enterprises to determine

Q: What challenges does Epicor foresee in developing

levels of transparency for their information, making sure

innovative techniques?

that sensitive data such as financial information is secured

A: Like all ERP sellers in the Mexican market, we constantly

in their own servers. Epicor also offers a service model

face the challenge of updating and maintaining tax-

for enterprises that do not wish to invest large amounts

related components in our software. Tax regulations

in hardware and software but need to start operating to

in Mexico change every year so updating a software’s

fulfill client demands. Additionally, our Enterprise Resource

fiscal components becomes a priority. These updates

Planning (ERP) services comply with the highest quality

are complicated by the numerous free-trade agreements

standards. Epicor has implemented aerospace standards

that allow production to be externalized. Clauses must

in the automotive industry, vastly increasing our product’s

be included in the software

quality. Our technological solutions combined with an

automatically

extensive portfolio have become popular among our

operations abroad. Another challenge we face is making

targeted Tier 2 and 3 enterprises in the automotive industry.

sure our products work on mobile devices. Usually our

for the system to adapt

corporations

decide

outsource

clients review their company reports and documents Q: What differentiates Epicor from its competitors?

on their smartphones or tablets so we need to provide

software

solutions that facilitate immediacy of information. Epicor

is developed on a .net framework that most college

has developed several mobile tools and will continue

graduates know how to operate. Offering open-source

improving the functionality of its current products.

standards facilitates interaction with any IT platform. Part

We need to keep updating mobile solutions to ensure

of our software’s added value is its focus on manufacturing

compatibility with iOS, Android devices and any new

processes and its user-friendliness. The total cost of

platform launched by major industry players.

Information

standardization

in Epicor’s

ownership is competitive as it includes software licensing, consultancy services, hardware, implementation and maintenance services. Q: What characterizes Epicor’s vision for product and service innovation? A: Epicor is working on the automation and digitalization of

information.

Cross-docking

systems

that

inform

Information standardization in Epicor’s software is developed on a .net framework that most college graduates know how to operate

161

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VIEW FROM THE TOP

MEXICO A GLOBAL BENCHMARK FOR NISSAN ARMANDO ÁVILA Vice President NMEX MFG of Nissan Mexicana

Q: How is Nissan balancing its manufacturing operations

A: Nissan Mexicana operations are based on the Douki

across its locations?

Seisan system, which synchronizes our vehicle production,

A: Nissan Mexicana is the top producer in Mexico with

internal engine, stamped and plastic parts production, as

four production lines. We accounted for 26 percent of the

well as the integration of parts from external suppliers.

country’s car production in the first half of 2016, producing

That helps us achieve high competitiveness in terms of

155 cars per hour. Our A1 plant in Aguascalientes is Nissan’s

inventory control, damaged material and highly accurate

fastest production line worldwide with a capacity to

production times, synchronizing our vehicle shipments to

manufacture 65 cars per hour on a single line. Together,

all our dealers and the final customer.

Nissan’s A1 and A2 plants are producing one vehicle every 37 seconds. Besides final assembly, A1 also has a powertrain

Our whole production chain is integrated and connected.

plant that completes one engine every 17 seconds for the

Since materials are shipped to site, we track their position

cars produced in A1, A2 and Cuernavaca, Morelos, in addition

and time of arrival. We keep track of imported components

to engine components that are exported mainly to Japan,

at all times to foresee probable interruptions on their way to

the US and Brazil. We manufacture 11 different products

the plant. Working intensively with our suppliers has allowed

in Mexico. The flexibility of our plants in Cuernavaca and

us to have the same language in terms of synchronization,

Aguascalientes allows us to balance the production among

supported by logistics training we give all our suppliers. Our

both sites according to market tendencies in the US, Mexico

Mexico operations are the international benchmark for the

and South America. Our products are exported to 30

countries in which Nissan operates, with 99 percent precision

different countries mainly in North and South America. In

in our production schedule. The automotive industry in

A1, we manufacture five different models, while the CIVAC

Mexico offers an important investment opportunity and we

plant produces six models including the New York Taxi and

want to make sure that our employees are ready to work

the NV200 that are not commercialized in Mexico.

through the constant innovations of the industry.

Q: What infrastructure needs does Nissan Mexicana

Q: What is Nissan Mexicana's approach to human capital

foresee to maintain operational growth?

development?

A: Mexico is set to produce at least 5 million units in the

A: Nissan Mexicana is investing resources in training. The

next five years. Nissan will play an important role through

Nissan School program started in 2001 to attract specialized

its new Aguascalientes production site COMPAS that will

technicians and engineers. Students can develop a project

start operations in November 2017, manufacturing premium

within Nissan for six or 12 months, strengthening their

vehicles for both Infiniti and Daimler. The government

academic background by following actual industry needs.

has increased road infrastructure but there is room for improvement due to new facilities in the area surrounding

Q: What are the company’s sustainability objectives?

Aguascalientes. For the industry to continue growing,

A: Our sustainability strategy is based on the global

improving infrastructure needs to be a joint objective.

Nissan Green Program. Its main pillars are carbon

Connecting key points by train such as Manzanillo, Colima;

footprint reduction, waste reduction, recycling and water

Aguascalientes; and Piedras Negras, Coahuila would mean

consumption reduction. Over 50 percent of the energy

shorter routes for production sites in Mexico and the US.

used in our plants is clean and free of CO2, coming from

Hence the importance of making connectivity a priority.

renewable sources such as wind parks and biogas. We have reduced the CO2 emissions at our plants 57 percent

Q: How has the integration of Industry 4.0 procedures

since 2006, we recycle 100 percent of our waste and our

into

water treatment plants allow us to reuse water for internal

Nissan

Mexicana

modernized

and

improved

manufacturing, communication and connectivity?

consumption in green and services areas.

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VIEW FROM THE TOP

SIMPLIFYING THE LINK BETWEEN HUMAN AND MACHINE Víctor Fuentes Director General of Mitsubishi Electric

164

Omar Esparza Sr. Manager – Global Key Accounts, Automotive, MX/LATAM at Mitsubishi Electric

Q: What strategies has Mitsubishi Electric implemented

make our technology available to anyone in the supply

to gain greater access to German and American brands?

chain and are the only provider in the market that can

OE: Japanese technology is highly regarded, enabling

offer a three to five-year product warranty.

us to expand our strategies and penetrate non-Japanese markets. From a technological standpoint, Mitsubishi

Mitsubishi Electric invests an estimated US$2 billion in

Electric developed technology compatible with several

R&D every year. We engage in different training courses

communication protocols at an industrial level to support

and technical seminars with specific companies and

global customer needs. Our products can be used with

automotive clusters to reach Japanese, European and US

multiple automation brands either by annexing processes

companies.

and installed platforms or installing a superior solution to gather information from existing systems.

Q: What is the company’s focus regarding Industry 4.0 in the automotive manufacturing segment?

VF: We need to comply with the quality Mitsubishi Electric

VF: As technology advances, it becomes more complex.

has established for Asian clients across all markets

Mitsubishi Electric has worked for many years to develop

worldwide. The company has already differentiated itself

solutions that increase the linkage between user and

in the Mexican market by jointly developing solutions

machine. We provide clients with the highest level of

with customers. The reliability offered by our solutions

technological quality that can be effortlessly adapted

encourages prospective customers to turn to us to solve

and is easy to operate. There is no point having excellent

their technological needs.

technology that is difficult to use, so we develop software tools that follow the same logic. Our products

Q: How does Mitsubishi Electric help its clients choose

balance technological quality and price. As specialists in

the best automation and communication tool for their

programmable logic controllers (PLC), we must transfer

operations?

our knowledge to our clients and final users.

OE: It is our job to understand client requirements before we become their technology providers. Companies are

Q: How can Mitsubishi Electric help clients address their

experts in their production processes, making them an

connectivity needs?

essential partner in the creation of the right solution. We

OE: The industry emphasizes the importance of having

find a way to help clients achieve their goals with a robust,

free and transparent access to information on PLCs.

safe and quality process.

Mitsubishi Electric has been working to close the technological gaps created by technology that only links

Mitsubishi Electric invests an estimated US$2 billion in R&D every year

to products from the same brand, offering a powerful automation platform to our customers to achieve the openness the market needs. Making the production process more agile while enhancing monitoring and traceability is one of the biggest challenges the manufacturing industry in Mexico is facing. VF: The connectivity our technology offers to communicate

VF: The automotive industry is extremely demanding in

with German and US technologies in line with their specific

terms of logistics, safety, quality and repeatability. We

standards puts us above our competitors. To comply with

can integrate that into a single solution. The competitive

client requirements, Mitsubishi Electric’s guidelines are

advantage our equipment offers is simple operability. We

set by final users. This allows us to fit the market’s needs

and opens windows of opportunity to companies that

Q: What are Mitsubishi Electric’s goals in the automotive

may be limited in their technological options.

environment in Mexico? VF:

The

automotive

market

has

been

the

pillar

Q: How has Mitsubishi Electric developed its technology

of Mitsubishi Electric for many years, which has

to adapt to the needs of smaller automotive providers?

consequently allowed the company to increase its

VF: Mitsubishi Electric channels a portion of its profit

market

toward

emerging

segment. Thanks to the market’s ongoing vitality, we

market needs. The automotive industry in particular has

have been able to stay on top of emerging tendencies.

developing

new

technologies

for

within

the

technology

development

always demanded equipment that is faster, safer and more flexible. Introducing Mitsubishi Electric solutions

OE:

to a client’s operations translates to better costs for

consolidation stage in the Mexican market. We are a

Mitsubishi

Electric

their clients as processes are improved from within. The

well-known brand in the Asian market and we hope

durability of our products has left a positive impression on

to consolidate our brand in Mexico by continuously

clients as their investments last longer than the three to

developing technology in a fast-paced market while

five-year warranty.

evidencing

quality

communication

expansion

and

operability.

Mitsubishi Electric is projecting it will become a strong, Q: How does the e-F@ctory focus influence your

high-end provider focused on tailor-made solutions.

philosophy of creating accessible technology?

We operate under our motto, “Global Presence, Local

VF: E-F@ctory helped us align different visualization and

Support.”

process-control concepts to improve our processes and energy consumption mechanisms. The e-F@ctory concept

VF: From a regional standpoint, it has been gratifying

enables us to compile client information on production

to know that Mitsubishi Electric can offer high-end

processes and use it for future decision-making so that

technology alternatives at competitive prices, which the

our clients at managerial and operational levels can make

regional market previously had limited or no access to.

better decisions. What cannot be measured cannot be

Mitsubishi Electric Global believes product availability

controlled. If we can find ways to increase client operation

must

efficiency as a result of our analysis, we have a better

customers are the best advertising. When we are referred

chance of generating customer satisfaction and brand

to as one of the top three suppliers in the automotive

loyalty.

industry, we know the company has the right focus.

homogenous

every

market.

Satisfied

TECHNOLOGY SPOTLIGHT

QUALITY SUPPORT FROM A HOMEGROWN TEAM Mexico’s proximity to the US, its logistics infrastructure

because of its unavailability in Mexico so it is expected to

and skilled workforce make it ideal for global companies

be widely popular as it will save the cost of sending pieces

looking to establish manufacturing outposts. But the

outside for repair.

country is still in need of local support services, especially for

machinery

reconstruction,

equipment

updating

SIMSA represents several high-end brands, including

and spindle refurbishment of high-end technology and

Landis, Giustina, Cincinnati and Bryant in the grinding

precision machinery. SIMSA de México helps fill that need.

machinery segment. It also has a working relationship with Liebherr, NTC - Komatsu, Gehring, Etxe-Tar and

SIMSA’s mission is to offer quality support services with an

IMPCO.

entirely home-grown team. Its services include maintenance and complete upgrades of existing equipment. Established

As foreign entities continue pouring into Mexico, SIMSA

24 years ago, the Mexican company now has 18 production

is a local option for reconstruction, refurbishment and

sites in 12 states, and a manufacturing plant renowned

auxiliary equipment. It is also a pioneer, having introduced

for its quality and productivity. Filling another hole in the

these services to the country, which it says would have

market, the company is adding spindle refurbishment to

never happened without the contribution of the skilled

its catalogue. The procedure is usually performed abroad

engineers and technicians here.

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VIEW FROM THE TOP

NEW CARS NEED NEW MANUFACTURING SOLUTIONS SERGIO BAUTISTA Local Division Manager of Discrete Automation & Motion and Local Business Unit Manager of Robotics at ABB México

Q: How are technological innovations expected to

lower its speed or come to a full stop if a person enters

impact automotive OEMs?

the safety zone. This means people can be as close as

A: Trucks and buses will maintain their traditional

possible to the robots while ensuring both safety and

manufacturing approach until an integrated mobility

productivity. ABB identified an area of opportunity

strategy demands disruptive innovation in light vehicle

regarding high-load capacity robots, leading us to

production. Aluminum will replace steel as the heaviest

develop the IRB 8700, which puts us ahead of the

material in a vehicle as carbon fiber and plastics penetrate

competition. This system is capable of lifting 800kg with

the industry. Synthetic and recyclable fibers will become

the added value of a larger speed range.

more common as electric vehicle manufacturers begin lobbying for lighter materials. All these new materials

With SafeMove2, a robot can lower its speed or come to a full stop if a person enters the safety zone

will require new joining methods and more flexible and adaptable automation solutions. Instead of using large equipment, we might evolve to a more compact and modular type of process, which will also be more efficient. All these changes will trickle down from manufacturers to equipment providers like ABB. The BMW i3 is an example of modern manufacturing. Parts are becoming smaller and new materials are being used in vehicles. With time, companies are shifting from investing in large presses, specific manufacturing equipment and paint shops that might still use solvents.

Q: How does ABB intend to include these innovations in the company’s refurbishing strategy?

Q: What new trends is ABB detecting in the robotics

A: Our refurbishing efforts are focused on enabling Mexico’s

market and how are you applying them to the

SMEs to introduce advanced technology at a manageable

automotive industry?

cost. A solution as sophisticated as this would require a

A: Global investment in the country is pushing the

company to elevate its entire production equipment to the

industry forward, creating a need for specialized robotic

same level, implying a large investment. Benefits of quality

solutions. As vehicle technology keeps evolving, all

and productivity would temporarily cause a company to

automation providers have the responsibility to continue

sacrifice any competitive cost advantage.

innovating

and

adapting.

Collaborative

robots

are

among the most in-demand technologies for assembly

The goal of our refurbishing program is to introduce

applications. These solutions can be installed next to a

advanced technology to these SMEs. We want to help

human operator’s post without the need for a cage or a

our customers make the journey from analog to digital

larger working space. ABB developed the YuMi robot to

production so they can remain competitive in the market.

fill this niche and acquired the German company Gomtec

Renovation cycles are becoming shorter. The eight years

to expand the company portfolio and to carry larger

it used to take SMEs to receive new technology will

payloads.

shorten to no more than four years. Automation platforms are unlikely to evolve as fast as mobile communication,

Our SafeMove2 platform has been a focal point for

but technology will certainly start to change faster. If

human-machine integration. This system defines a safe

cars continue to change platforms frequently, robots will

area around the robot for a specific application, so it can

need to evolve.

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INSIGHT

4.0 INDUSTRY PRACTICES FOR THE AUTOMOTIVE SECTOR As advanced electronics and connectivity become an

Ferrer, the future is a stronger combination between

increasingly essential part of manufacturing, Bosch Rexroth

electronics and hydraulics or pneumatic systems.

is positioning itself as an industry leader, both in production

168

technologies and as a go-to consultant for improving and

Bosch Rexroth’s services go beyond hydraulics to include

modernizing industrial processes for the vital automotive

software such as affordable plant-licenses that allow every

industry in Mexico. Electronics, connection and programing

person in a plant to download Bosch Rexroth’s software

services are part of Bosch Rexroth’s strategy to implement

free of charge. The company has also designed an open

4.0 industry practices, also known as “cyber-manufacturing,”

platform for drivers and motion controls called Open Core.

which are just starting to take hold in Mexico. Salvador Ferrer,

With four years in the market, this platform allows users

FA Division Manager at Bosch Rexroth, says that in four or

to connect and obtain information from their company’s

five years the Mexican industry will be highly competitive as

equipment. “It simplifies connection and programing

it integrates systems like factory sensors and cloud-based

services,

analytics systems for the data gathered.

from remote locations, or to control machinery from an

permitting

operators

move

equipment

iPad or a web browser,” says Ferrer. “This connectivity

Electronics, connection and programing services are part of Bosch Rexroth’s strategy to implement 4.0 industry practices, also known as “cyber-manufacturing”

service gives Bosch Rexroth’s clients the opportunity to design the solutions they need.” Most of Bosch Rexroth’s products are ready to work with Industry 4.0, and it is in the process of creating workshops to inform clients of the benefits of the new technological trends, Ferrer explains. Bosch Rexroth’s solutions offer infinite possibilities but there is still work to be done to convince companies of the benefits of implementing new information structures in line with 4.0 industry practices. Once corporations are convinced of the benefits, the modernization process

Around five years ago, the automotive industry began to

becomes easier.

include more electronic components in their engines, an evolution which Bosch Rexroth has led. “We used to have

The company’s commitment to the environment is

a variable pump with an alternating power engine but now

set in its goal to reduce emissions at plants. Bosch

we are innovating with servomotors, leading to energy

Rexroth has developed a product called Sytronix, which

savings, emissions reduction and more efficient control

supports energy and cost reductions by combining

of our hydraulic power units,” says Ferrer. “This change

hydraulic systems with electric components. “It can help

allows us to provide better quality service for our clients.”

reduce energy consumption by 35-40 percent, lowering

Electronics and sensor technology are at the center of

pollutants. By manufacturing equipment with less friction

automation systems, resulting in more information to

on linear bearings, Bosch Rexroth contributes to lowering

design preventative maintenance tasks. Electronics-based

pollution,” says Ferrer. The control area equipment it

appliances make Bosch Rexroth proactive, rather than

manufactures uses regenerative technology allowing it

reactive, regarding system flaws.

to generate energy when brakes are applied. The energysaving solutions the company offers imply a significant

Bosch Rexroth’s experience in the automotive industry

initial investment but the total cost of ownership as well as

puts it ahead of competitors, Ferrer says. The firm offers

maintenance costs make its products cost-effective.

management systems in the sector ranging from stamping, assemblies,

transmission

Mexican enterprises are chasing international standards

manufacturing operations. Even as the company is taking

body-in-white,

engine

and

but manpower continues to be a significant selling point

a leap forward with the design and manufacturing of

compared to labor costs in other countries. This particular

electronic components, hydraulic and pneumatic systems

condition has caused companies to avoid embracing

are still part of its core business with several applications

automated processes. Says Ferrer: “for Bosch Rexroth it is

for the automotive industry. Both systems can significantly

important to train workers to use new technology, hence

benefit from electronics, since they help them become

its commitment to training people internationally on the

better integrated with the manufacturing process. For

use of new and different technologies.”

ROUND TABLE

SHINING A LIGHT ON CUTTING TECHNOLOGY Fire and Water. The two major elements have an integral

The three share a common experience embracing the

place in the automotive process and companies like BINZEL,

unrelenting advances of technology and the challenges

OEM Lasers and Laser Systems and Aqua Machinery are

of implementing the latest innovations in a highly

among the innovators that are putting those elements to

demanding industry. Here, they discuss their views on

work. BINZEL is a leading welding company with more

the impact new technologies have had on their sectors,

than 30 subsidiaries worldwide, TRUMPF is a top global

the latest innovations being made with laser and water

supplier of industrial lasers and Aqua Machinery paces the

technology and the products that have resulted from

international market for water cutting techniques.

these advances. 169

HL: We specialize in high-performance welding torches. The automotive industry is dabbling with the use of lighter and thinner materials, which require the use of hybrid welding techniques. Laser technology allowed us to improve our welding procedures to the point at which we can now perform remote laser functions. This process allows the laser to be up to 50cm away from the piece and still perform an excellent welding job. These procedures are the result of new materials so we must always consult our customers’ engineering departments to ensure the desired outcome is achievable. The welding industry has particularly Hector Lozano Managing Director at BINZEL

benefitted from this evolution but the fuel efficiency of vehicles has also been positively impacted.

MN: At TRUMPF, analyzing industry trends and technological innovation in the sector has been fundamental. We try to stay one step ahead of industry requirements. When hot stamping was implemented in OEMs we only had versatile laser-cutting products. In response, we developed the TruLaser Cell 8030. We optimized our multi-axis laser-processing machine by adjusting the product to make it faster and easier to maintain. All laser processes in the industry have advantages depending on the industry’s requirements. Laser procedures Michael Nuessler Regional Sales Manager México, OEM Lasers and Laser Systems of TRUMPF Mexico

are fast, precise and machinery suffers no tool wear since they have no physical contact with the material. But laser cutting is not needed for every process. Here at TRUMPF we help our clients evaluate which is their most appropriate option to fulfill their machining needs.

MT: The versatility of our machinery allows users to cut mechanical seals, fabrics, insulating materials, rubber, steel, glass, plastics and titanium with a precision up to 0.001 inches. Our water jetting machines can cut a thickness of 12 inches, which reduces time and production costs. Its software will even automatically calculate the optimal number of sheets it can stack and cut simultaneously. The main advantage of our machinery is cold-cutting. Hot cutting can alter the material’s mechanical properties, changing the customer’s specification and making a refinishing procedure unavoidable after machining the component. However, cold Mauricio Torres Operations Director of Aqua Machinery

cutting maintains the materials’ properties, allowing for quicker, more efficient and cheaper processes. The software we use is unparalleled, user friendly and it is free of charge for customers.

VIEW FROM THE TOP

SOLUTIONS IN PARALLEL WITH PRODUCTION MANUEL URIARTE General Manager of Numalliance México

170

Q: What are the most important characteristics of

automotive parts require secondary operations to shape

Numalliance México’s solutions?

them into their final form, including stamping, machining

A: Numalliance builds CNC machinery for tube and

and welding. Numalliance México also takes care of

wire forming, namely machines that bend tubes of any

these processes and our solutions run parallel to, or are

diameter from 4 mm, used in breaks and air conditioning,

integrated with, our customers’ production systems. We

to 228 mm, used in aircraft such as the Airbus A380. We

mainly work with Tier 2 and 3 auto parts manufacturers,

have operations in 33 countries, although our machines

helping them transform raw materials into products that

are present in over 70. Every component in our machines

will be assembled by a Tier 1 or an OEM.

is European, with close to 80 percent coming from France. We design our solutions to adapt to the processes and

Sometimes, companies are not up to date with specific

needs of each specific customer and there are occasions

technology advances, so our solutions must adapt to their

when we specifically target the automotive sector. This

personnel. In terms of our engines’ precision, our users can

industry is known for its efficiency and high-production

control the equipment’s position at all times with encoder

volumes, making it distinct and more complex than

and resolver systems, configured to stop the machine should

most other sectors. Furthermore, to maximize space

it fail to reach the expected position within the correct time

and reduce fuel consumption, the geometries of most

frame, allowing a tolerance of only 0.01 degrees.

VIEW FROM THE TOP

REFURBISHING THE MANUFACTURING LANDSCAPE RICARDO MARTÍNEZ President of SIMSA

Q: To what extent has SIMSA influenced the Mexican

We are certain that our current offering can service any

automotive industry?

engine or transmission component. Liebherr, for example,

A: SIMSA has been operating in the automotive industry

makes gear shaving and grinding machines, whereas

for 23 years. I introduced SIMSA to Mexico to support the

Gehring works with honing technology for cinderblocks

automotive industry and all metal-removal companies

and connecting rods. Etxe-Tar manufactures crankshaft

here, specifically focused on transmission and engine

machines for oil holes and ends milling, while IMPCO

manufacturing. In 1992, we started our sales operations,

deals with polishers for crankshafts and camshafts.

adding our service area shortly after. At the time, few

Micro Poise Balance Engineering, however, focuses on

companies had any support in terms of maintenance or

balancers, again for many components like crankshafts

repairs, so it was innovative to employ a service technician.

and prop shafts, leaving NTC with machining centers and

We gradually built up this division, which to date has seen

transfer machines for cylinder heads and blocks. We help

the most growth since we entered the country.

customers choose the best company from our portfolio and we have made sure there is no overlap between our

Most OEMs are near one of our four locations, in the cities

different brands.

of Saltillo, Chihuahua, Aguascalientes and Queretaro. Our Queretaro branch services General Motors Toluca and

Our connection with the client has always been our

Silao, Volkswagen Puebla and Silao, as well as several other

biggest strength, as 65 percent of the company covers

companies based in the Bajio region. Our Aguascalientes

post-warranty customer support. GM and Chrysler call

branch has specialized Japanese-speaking technicians for

us anytime they have a new project or if one of their

NTC who cater to almost all the Japanese plants located

machines needs spare parts. The maintenance services

in central Mexico, including Mazda, Honda, Nissan and

offered to these clients by our technicians mean that they

Jatco. Our branch in Saltillo caters to GM, FCA, Linamar

never hesitate to request our support.

and MACIMEX, while our branch in Chihuahua supports Ford’s operations.

Q: What are SIMSA’s near-term goals and expectations? A: Our first goal is to grow in line with the booming

Q: What led to the creation of SIMSA’s refurbishing

automotive industry in Mexico. As Ford is growing in Mexico

business in Mexico?

and Toyota has announced its entry into the country, we

A: It was an especially important step for us. Before, our

must be ready to produce all engine and transmission

biggest competitors were companies that were refurbishing

components for these OEMs. Our ultimate target is

SIMSA’s equipment. We focused on new equipment for

for SIMSA to be present in all engines, powertrains and

many years until repeated suggestions encouraged us to

transmission components manufactured in Mexico. We

start our own refurbishing operations. We received positive

also hope to expand into the aerospace industry, as some

feedback and continued to refurbish highly technical

of the machines we manage are transferable, including a

machines. A Mexico-based company that can refurbish

gear hobbing machine that Snecma’s plant in Queretaro

grinding, balancing and polishing equipment to the correct

has already welcomed.

machining standards is invaluable and we expect this business to double our company’s growth rate, or better.

In terms of future expectations, as technology evolves every year, we must be ready to tackle any new opportunity

Q: Why has SIMSA decided against including new brands

in the market. As new technology often comes from the

in its portfolio, despite customer suggestions to do so?

US, the UK, Japan, Germany and Italy directly to our

A: We are not adding new brands because we believe

company, we ensure that we offer the latest innovations to

that it would cause us to lose focus on the customer.

our customers in Mexico.

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VIEW FROM THE TOP

LEAN MANUFACTURING FOR SMART ENGINEERING BRUNO PINOTTI General Manager of IMI Precision Engineering

172

Q: How are you adapting your portfolio to meet the needs

We have some of the most complete engineering solutions

of the automotive and infrastructure industries?

in the Mexican market for the automotive industry including

A: We try to stay close to our customers to understand

die design, tooling simulations and pressing solutions. Local

their needs and to develop the best solutions for them. Our

competition creates certain pricing challenges but offering

competitors sell standard products instead of developing

a complete solution gives us competitive advantages. Some

something specifically tailored to client expectations. Most

of our clients in Mexico are investing in engineering solutions

products need to be adapted in countries like Mexico or Brazil

but many perform in-house engineering, which incurs high

to meet local energy and overall equipment requirements.

fixed costs. We can offer a lower cost solution while clients

This should be a priority for all companies in the market.

can focus on their core business.

We have a very broad portfolio of products in contrast to most of our competitors. This is a great differentiator, as our

Q: What opportunities have you found for your products

customers can purchase a complete solution from a single

in Mexican industry?

company. This aligns with market trends as companies try to

A: The oil and gas sector is struggling due to low oil

reduce the number of suppliers they deal with.

prices. Strong players like PEMEX are seeing their budgets cut as the government adopts a low-expense

Q: How have market preference for higher-quality

strategy. We have been affected as several projects

products or low-priced solutions influenced IMI Precision

have been put on hold. This volatility has attracted more

Engineering's priorities?

private companies to the market, which expands resource

A: In markets oriented to general automation, low prices

availability and employment. Competition is good for the

are vital to remain competitive. But sectors that demand

industry to obtain better processes, prices and quality. It

traceability and predictability such as the automotive

also opens an opportunity for us to work with companies

industry, value our products’ higher quality. Most OEMs and

that were already IMI Precision Engineering partners in

Tier 1 suppliers prioritize efficiency and productivity as their

other regions.

main concerns so they do not mind investing in a solution that will eventually help them reduce operational costs.

Q: What goals and partnerships do you need to establish to achieve your projected development in Mexican industry?

Q: How have you lowered your production costs to deliver

A: Mexico is one of the main priorities for the company.

more cost-efficient solutions?

We are investing in our physical presence and developing

A: IMI Precision Engineering has a lean manufacturing

our people to improve employment opportunities in

strategy targeting reduced costs and more efficient

Mexico. We want to develop our local structure as

production. Many lean strategies are being implemented

much as possible, focusing on local engineering and

and improvements are being made in our plants around

production. We developed a five-year strategy for IMI

the world. The best practices are widely shared within the

Precision Engineering in 2015 wherein we identified key

group in our communication platforms. Another initiative

developments for every market in which we are present.

the company is now working on globally is to improve

In line with that plan, we will launch pneumatic products

our supply chain and invest in local production to reduce

for the industry automation market in 2017. We are already

logistics times and costs.

working with most automotive Tier 1 companies and OEMs in the market but we now wish to establish closer

Q: How popular have your design and 3-D engineering

relationships with new automakers. In the infrastructure

services been in Mexico?

sector, we are focusing on the oil segment and now that

A: We have a sound integration with our engineers in Brazil

the industry is open, we will try to get closer to new

and North America, who help nurture our resources in Mexico.

private companies.

VIEW FROM THE TOP

HANDLING ELECTRONICS EXPERTISE REMOTELY ERNESTO SÁNCHEZ CEO of Seeräuber Automotive de México

Q: How has Seeräuber Automotive evolved in the Mexican

Q: How does Seeräuber work with its clients to decide

automotive industry?

which processes are better to outsource?

A: In its first year of operations in Mexico, Seeräuber

A: We visit our clients’ facilities to understand their process

Automotive invoiced a total of US$2 million. In our second

since they may be operating highly complex operations

full year in the country we expect a total income of US$8

that are beyond our current capabilities. If the company

million by October 2016, representing 300 percent growth.

is interested in outsourcing part of its production we

Our mission is to simplify our clients’ manufacturing

send our commercial team and our engineers to analyze

operations by taking care of processes that might be using

alternatives and offer the best solution to the client. We

valuable human capital or logistics resources. ZF Services

offer a turnkey service incorporating everything from

for example, is tripling its size and needs to outsource

material sourcing and human capital training to inventory

certain processes, including material purchasing and

management, assembly operations and final product

inventory management.

transportation.

We began with basic manufacturing operations but we are

Q: How does Seeräuber plan to include design and

now moving into precision machining and CNC applications.

engineering services in its service portfolio?

We do not have a direct commercial relationship with OEMs

A: We are just starting a technology business unit and we

but these companies need to certify our processes. Although

hired our first optic inspection and pattern recognition

the manufacturing processes we handle are outsourced,

engineer. The first project we are tackling in this division

we are responsible for any defects in the final product. We

is automated inspection based on artificial vision and

established a relationship with a technical university to train

pattern recognition. This will be applied mainly to our

our people in these services, leading to interest from several

internal production but the final goal is to offer the service

clients. We are integrating assembly, welding and stamping

to our clients.

activities. This is an innovative approach in the automotive industry that no competitors are imitating yet.

Q: What strategies is Seeräuber implementing to attract the attention of newcomers here?

Q: How is Seeräuber adapting its facilities to satisfy the

A: Our goal is to help new companies establish stable

needs of its clients?

operations in Mexico. Many companies are limited to having

A: We renovated our plant in Guadalajara to cater to local

only a virtual presence in the country so they outsource all

companies like ZF and Continental. The facility has been

their processes to us. We have approached several clients

operating since 2014 but its refurbishment allowed us to

that are still not convinced about entering the country to

include more operations. Logistics costs heavily affect our

explain that we can handle all their processes, purchase

overheads and the automotive industry in general, hence

all the equipment, train their people, even invoice their

our interest in moving closer to clients. It is highly probable

customers and only charge them for our services. This is

that we will inaugurate another facility in 2017 but we are

common practice in the electronics sector and represents

still deciding on the best location between San Luis Potosi

a very efficient model to tackle any new location. A similar

and Silao, Guanajuato. Both Silao and San Luis Potosi

idea is the shelter program that many developers offer, but

forecast tremendous growth in the short term, making

they do not manage any kind of production. In these cases,

them the most viable locations for our own expansion. We

the company needs to send its own engineers to organize

also considered the north of the country for a new plant

and oversee the process. Seeräuber can handle everything

but we are receiving several tenders and believe those most

remotely and our clients only need to visit the operation

likely to win are in San Luis Potosi, Aguascalientes and the

sporadically. We have not finalized any project of this kind

Bajio region.

yet but the response from the market has been positive.

173

PROFILE

PRECISION MANUFACTURING AND MARKETING “Mexico is a valued

team members are responsible for directly contracting large

manufacturing hub, not only

of a small distribution network, it contributes significantly to

for the high-quality products

clients, while the distributors focus typically on SMEs. In spite the growth and results of the company.

it exports, but also for

There is always room for improvement, and SMW Autoblok’s

producing first class

competitiveness. Polishing the company to greatness must

human talent”

development of sought-after human capital. An employee’s

174

Clemente Hernández, General Manager of SMW Autoblok

goal is to enhance internal operations to boost the company’s not be limited to processes and innovations but also the talent and interest in engineering and design are always encouraged and supported by training for all employees once a year in the German and Italian facilities. International

The largest manufacturer of machining chucks in the

cooperation is not restricted to training. Whenever there

world, SMW Autoblok has high regard for Mexico’s

are international product launches, personnel from the

operations. The company’s Mexican division has worked

company are integrated to its international team to spread

extensively to emulate the style and facilities of its German

understanding of the new offering. One of the factors that

counterpart. Working with large machining companies,

is mostly valued by companies such as SMW Autoblok is

to whom it offers its services, is a reflection of the high-

the young population of working age in Mexico, especially

quality products manufactured by SMW AutoBlok. These

for companies in the engineering division.

can be as small as a 1.5 micron, which is the width of a human hair. Such precision has allowed the company to

SMW

grow in the Mexican market. The merger of the company’s

Investments in R&D allow it to constantly evolve. The

German, Italian and Mexican operations has benefited the

Mexican market is enjoying sustainable growth but

global enterprise. International collaboration allows SMW

manufacturing companies will continue to require financial

Autoblok to be one of the few companies in Mexico that

investment, especially to continue leading the sector.

can boast the newest technology in the industry.

For instance, the machining industry has slimmed down

Autoblok

continuously

promotes

innovation.

from transfer machines measuring 15 or 20 meters to This international nature is one of SMW Autoblok’s main

units measuring three to four meters that can be easily

competitive advantages in the automotive industry. To

accommodated at a maker’s facility. This has made

compete, it must not simply understand its own products,

tooling and part machining much more flexible. Autoblok

but also those of its eight or nine local competitors

has invested to stay up to date in these areas and to

and those that are based outside Mexico. The company

remain a strong link in the supply chain. This helps the

has been able to identify and communicate its main

company to develop workshops of excellence in Mexico

competitive advantages through openness to new ideas

and manufacture parts that are superior to the standards

and innovation processes. The products manufactured

demanded by its headquarters.

by SMW Autoblok have a wide range of uses and the automotive

industry

opens

opportunities,

especially

Contrary to expanding its client base to work with newly

among indirect suppliers. The company’s products tend to

arriving companies, offering even greater quality service

be used in winches, thus its applications are relevant to

to its already existing clients is SMW Autoblok’s priority.

transmission and crankshaft manufacturing plants.

Several areas of opportunity emerge via these clients, who play an important role in recommendations. That is why the

The Mexican machining niche is of great importance to the

German-Italian company has appointed a series of regular

company, as it has the most direct contact with OEMs. One

visits to existing clients, to get to know their present needs

of its strategies to cultivate a greater presence in the Mexican

and create solutions that meet their current expectations

market is the focus on direct sales to machining companies

SMW Autoblok is committed to the Mexican supply chain

and distributors. The company’s dealer network is also

and reaffirms its desire for continuous local growth. For

crucial to its marketing strategy, allowing SMW Autoblok

the European chucks manufacturer, Mexico is a valued

to adopt a much leaner business model. Having placed

manufacturing hub due to the high-quality products it

representatives in several locations across Mexico, these

exports and for producing first class talent.

VIEW FROM THE TOP

GRASPING TECHNOLOGY THAT GOES BEYOND CLAMPING MARCOS SEPÚLVEDA Director General Mexico and Latin America of SCHUNK Intec

Q: How has SCHUNK pushed to improve the quality and

Q: What role does the human element play in your

technology of its products through innovation?

operations?

A: SCHUNK has been innovating across all product lines.

A: Operators hardly intervene in machine operations

The company’s uniqueness is based on mixing mechanics

but this does not remove the need for human capital,

and electronics to create a more advanced solution. Having

as many believe. Operators have the opportunity to

acquired several leading companies in the market, the

train in a much more advanced area of the industry, to

SCHUNK conglomerate has integrated each corporation’s

program and manage intricate instruction sequences for

specialty into its product lines. Our closest competitor

machines. We are concerned that this assumption could

on chucks simply cannot compete electronically with our

lead to Mexico losing competitiveness if companies do

product, which offers wireless communications regarding

not banish the fear that increasing technology with lead

pressure, wear and grip of the part. With our technology,

to jobs cuts. SCHUNK’s products aim to help companies

a simple magnetic lifter becomes an electromagnetic

produce more efficiently and become more competitive

arm, which communicates with a robot to pick up a

in the global market, which will consequently create more

specific piece with such precision that it could potentially

employment opportunities for the Mexican population.

manufacture a collet chuck. Our technology converts

SCHUNK has several machines in its own facilities that

equipment into much more than a clamp machine as it

can be programmed to produce a piece and be left to

also senses the pressure and the way in which it holds a

work on it until the operator returns to collect it. These

piece.

processes would be targeted at supporting the industry focused on time-intensive manufacturing rather than mass

The industry has reacted to client needs to make their

production.

processes more efficient. Industry 4.0 makes companies work more closely with their clients to sell solutions

To extend the life span of our products we ensure our

rather than specific products. SCHUNK’s products must

customers are informed of their potential and strength. We

act as part of a precise system that speeds up efficient

stay in contact with end users to advise them accordingly

manufacturing for our clients’ operations.

and offer improved products or upgrades when available. This process is often accelerated when a client realizes

Q: How has the company responded to increasingly

their equipment’s true potential, leading them to search

stringent needs in terms of tolerances and manufacturing

for higher levels of efficiency. Clients independently

speed?

A: The advances in software have demanded companies

acquiring more, as they recognize the advantages this will

produce better computer systems that can process the

afford to their productivity.

latest software. The synergy between the market’s needs, available clamping solutions, machining equipment and

Q: What role does Mexico play in SCHUNK’s global

the product has had to change drastically in recent years.

strategy in manufacturing industries?

We had to evolve to offer greater cutting speeds and

A: SCHUNK is a German family company that covers

machining conditions had to become more efficient down

different product lines, namely tool holding systems

to the primary molding of each piece. As speed increases,

and stationary clamping systems, magnetic clamping

manufacturing

forces

technology, lathe chucks, chuck jaws and hydraulic

companies to be more demanding when sourcing their

tolerances

are

narrower.

This

expansion technology. The company began operations in

tools. SCHUNK ensures our machines meet the torque

Mexico in 2006 to target the local market. We installed

requirements to comply with new expectations and offers

facilities here that cover Mexico, Central and South

an extended usable life span for each product.

America, with more than 30 employees.

175

VEHICLE SPOTLIGHT

176

MAZDA CX-9 The movement of a wild animal, and the instant it pounces, is the hallmark of Mazda’s KODO “Soul of Motion” philosophy. This design approach, and a clear emphasis on sophistication, is visible in the renovated Mazda CX-9. The SUV crossover provides an intimate experience and incorporates the Jinba-Ittai philosophy that focuses on the driver’s comfort. Controls are accessible through natural motion, causing no physical strain. Passengers will also be more comfortable in the redesigned three rows of seating. Shorter and wider than its previous model, the CX-9 has an athletic and more stable appearance for a sportier feel. Its compact LED headlights, large hood and wheels highlight its size, while lateral lines from the headlights to the trunk create the illusion of continuous movement. The refreshed approach goes deeper than appearances. The Mazda CX-9 incorporates innovative structures and materials that ensure safety and strength while reducing weight by 120kg. The use of insulating materials also reduces noise and vibration. The CX-9's chassis has been optimized for performance through a redesigned suspension that increases the caster angle, improving stability at high speeds as well as comfort. Friction-minimizing front shock absorbers were added and rear shock absorbers were aligned to the suspension’s movement. The new CX-9 features the Mazda Connect system. Through an 8-inch touchscreen it offers access to the driver’s cellphone functions such as making calls, managing contacts and changing the phone settings. It also displays music information and allows users to access apps such as Stitcher and Aha. The screen also offers access to useful information regarding the vehicle’s performance such as gas mileage and allows drivers to schedule maintenance services. A SKYACTIV-G 2.5T engine provides some bite under the hood, with a power output of 250hp at 5,000rpm and 420Nm of torque at 2,000rpm. This engine has a lower fuel consumption, emits less CO2 and improves overall performance. With the SKYACTIV-DRIVE 6-speed transmission, fuel yield improves by 7 percent compared with its predecessor while presenting an effortless driving sensation. The Madza CX-9 commits to driver and passenger safety with the i-ACTIV AWD predictive system that optimizes traction in all four wheels by analyzing road conditions.

177

VIEW FROM THE TOP

TECH ERA PUTS MORE SOLUTIONS IN REACH FIDEL GUAJARDO Managing Director of Fronius Mexico

178

Q: How has Fronius’ TPS/i technology impacted the

industry and academia. Mexico has enough resources for

automotive industry?

the industry to succeed, but a stronger support network

A: TPS/i has been wonderfully received. Guarantees on

between technical centers, training centers, academic

powertrains and other vital components have become

institutions and companies must be established. Fronius

essential and new ideas involve the materials we use. The

collaborates with Monterrey’s largest academic institutions

US market developed a new technology for employing

and is creating a link with Puebla and Tlalnepantla to

galvanized steel for structural components that requires

develop solutions. Countries like the US and Germany

unusual welding processes to protect the metal. To

have succeeded in developing students’ problem-solving

cater to these needs, Fronius released its TPS/i line of

abilities. Now it is our responsibility to create the right

products, featuring an intelligent system that reacts to the

springboard for Mexican students to improve these skills.

properties of these materials, achieving better welding and generating higher-quality products.

Over the next 10 years, Mexico will continue to be regarded as a qualified human capital developer and we might

Galvanized materials are essential in the manufacturing

start making a case for the country to become a stronger

processes for vehicle parts. TPS/i applies an exact amount

R&D center. We have detected that local companies need

of heat to minimize its negative impact on zinc, without

certain product adaptations to suit the country and we

compromising the component’s strength. A number of

have received so many orders that Mexico may soon be

our Mexican clients have already implemented this type of

considered the market with the biggest projects for Fronius.

technology in their processes and, while OEMs have very specific welding requirements, Tier 1 and Tier 2 suppliers

Q: How has Fronius modified its technology to make it

have the most specific needs. For every welding machine

more user-friendly?

found in an OEM manufacturing plant, we see 100 more

A: The tech era has put more solutions within our reach.

at suppliers’ locations. Our highest sales volumes are with

The information that we have access to has made for a

Tier 1 and 2 companies.

broad and interesting transformation in technology solutions that, consequently, has forced society to adapt.

Q: How has Fronius integrated its solutions to meet the

Our machinery is designed to meet specific industry

rising trend toward automation?

needs, while also making sure that we cover the gap

A: Fronius is flexible regarding the needs and preferences

between novice users and experienced technicians in

of its clients. We can adapt in terms of industrial robots that

welding processes. We strive for systems that are as easy

many companies work with, and to the programming tools

to operate as a smartphone.

and communication networks with which they operate. To address expressed needs, we developed a wide range of

Q: What are Fronius’ growth expectations in its Solar

solutions. Close to 80 percent of the products that Fronius

Energy division?

commercializes in Mexico are related to automated

A: Mexico’s geographical position is enviable in terms of

systems. We provide packages that allow customers to

energy creation, as the country has exceptional fields for

integrate automation solutions to our equipment.

wind and solar power, so we expect the market to fully open up. Last year, the government put a number of

Q: What steps do SMEs need to take to be part of this new

initiatives in place that are very attractive on paper and

automation wave?

that touch upon the Energy Reform and the manufacturing

A: Mexico’s academic system should refocus on market

segment. Our task is to create and control energy and we

needs. The country is a growing automotive manufacturing

are applying our technology to the fields in which Mexico

hub and the government must act as the link between the

needs it the most.

VIEW FROM THE TOP

REVOLUTIONARY 3-D TECH SLOWLY FINDS ITS PLACE ALEJANDRO SILVA Director General of Renishaw

Q: Why hasn’t additive manufacturing, or 3-D printing,

joint ventures or credits for companies that want to

caught on yet with manufacturers?

update their equipment. No other company in additive

A: At the moment additive manufacturing is more

manufacturing is doing anything similar.

expensive than alternatives. Depending on the material used and the overall process, 3-D printing can increase

Q: What new technology is Renishaw introducing to the

manufacturing prices two to fourfold. The process is not

market and what are your goals?

yet mature enough to be convenient for every project but

A: Industrial metrology has always been Renishaw’s main

it does complement traditional manufacturing.

pillar. We are a worldwide reference especially in probe heads, engaging and calibration systems for quality

Eventually, though, 3-D printing will be seen as a

assurance. Renishaw is able to provide unique services

revolutionary technique just as semiconductors were

such as Revo, a five-axis measurement system that can

in the ‘60s. Some manufacturers are joining forces with

measure an infinite number of points 10 times faster

technology giants such as Apple and Google to develop

than any other solution in the market. This translates

a new 3-D printing file program that will even provide

to an increased throughput in terms of measurement,

color. The technology has existed for over 20 years, yet

a reduced operations cycle and essentially the analysis

it is only now finding a place in manufacturing. It still

of more parts. We have invested in local infrastructure

requires a certain level of programing knowledge but

and will begin to collaborate with local academia and

it will eventually be simplified, perhaps in the next 10

research centers to build our solution centers. We are also

or 20 years. New 3-D printing technologies are being

increasing our presence globally and expect to secure a

developed with different materials and Renishaw has

larger market share in 2016.

developed

processes

with

stainless

steel,

cobbled

chrome, titanium and aluminum.

We hope that by the end of 2016 or the beginning of 2017, we will be able to move into our new facilities in Nuevo

Q: What is Renishaw doing to bring 3-D printing into the

Leon, which will provide full onsite subsidiary support

mainstream?

to our entire Central American market. These facilities

A: Renishaw is building several additive manufacturing

will introduce our full production capabilities in additive

solution centers around the world. We plan to eventually

manufacturing to Monterrey and allow us to showcase

have offices in the Asia-Pacific region, Canada and the

our entire product line in industrial metrology, medical

US, including Chicago and Dallas. We hope that also

and mining manufacturing, marine and scientific research.

leads to a branch in Mexico. Our goal is to bring 3-D

This also will allow us to offer Renishaw’s broad range of

printing closer to our clients by generating user-friendly

solutions to customers in the automotive and aerospace

methods.

sectors.

We also are developing technologies to make our

Q: How has your interaction with customers evolved

machines faster and to lower production costs. At Expo

through the years?

Manufactura 2016 the company presented the Renishaw

A: We have to ensure that all processes are done and

AM250 and the recently launched RenAM 500M. This

inspected to perfection and that they correlate to ISO

latter product is a 3-D printing machine designed for

standards. Renishaw measures and tests parts but it also

the manufacturing industry that automatically recycles

approaches customers with possible solutions to improve

unused powder. It is fast, presents a lower initial cost and

these parts. Offering this to clients requires a large

is useful both for R&D and manufacturing. Our solution

amount of resources and engineering power, which we

centers can provide many financial options through

have both here and in the UK.

179

VIEW FROM THE TOP

CEDIAM ADAPTS COURSES TO ENGINEERING VISION ARMANDO BRAVO Director of CeDIAM

180

Q: After 10 years, what impact has CeDIAM had on the

event that CeDIAM oversees is the Annual Automotive

auto industry?

Industry Congress, which is a spin-off from the original

A: The top executives who make up our Board of Directors

AKJ Automotive Congress in Germany. After 2010, we

are Chief Engineers to some of the main OEMs and Tier 1

decided to extend beyond production, logistics and

suppliers in the industry, including Marcos Pérez from Ford,

quality to include engineering and design companies, in

David Rojas from GM, Cari Leslie from FCA Group, and

line with CeDIAM’s overall vision.

Arturo Cortés from Nissan. Together with the government we have worked to define a plan for ITESM and have

Instead of suppliers exhibiting their own products, our

become the official trainers of Nissan and GM in Mexico.

stands are reserved for OEMs and Tier 1 companies that want to expand their national content. Some attendees

Mexican Tier 2 and Tier 3 companies are not yet suited to

have the necessary certifications to supply large companies

competing with international players, ultimately leading to

but smaller players might not have the technological

many imports for Tier 1s and OEMs. We want to substitute

capabilities, knowledge or infrastructure to cover projects

these imports with local products by developing our

of such magnitude, which is where CeDIAM can offer

supply chain. To this end, we organized a multicampus

assistance. Close to 70 percent of CONACYT’s budget is

meeting at Campus Puebla in 2008, with the participation

destined for the automotive industry, demonstrating the

of Hermosillo, Chihuahua, Aguascalientes, Querétaro, San

government’s commitment to the development of this

Luis Potosí, Puebla and the State of Mexico, and designed

sector.

our Supplier Development Program as well as a new academic plan for automotive design engineering.

Q: What are the main skills engineers must have nowadays to participate in the auto industry?

CeDIAM is part of two groups organized by AMIA. The

A: When we sketched out our automotive design

first centers on automotive clusters while the second

engineering program, we collaborated with Volkswagen,

focuses on universities and research centers, allowing us

Ford and Chrysler to determine the current industry needs.

to connect with all other players in the industry and not

As a result, close to 35 percent of engineers working for

solely focus on teaching. We manage R&D and consulting

Ford are ITESM graduates. We also started adapting other

operations since we can offer laboratories, infrastructure

academic engineering programs to meet the automotive

and specialized professionals who cater to the industry’s

industry’s needs. Our graduates speak English and some

needs. Our strategy is to adopt Mexico’s 2013-2018

speak German as well, they are well-trained in CAD/CAE

National Development Plan of the Automotive Industry,

software and many have taken part in exchange programs

collaborating with AMIA, INA and all other automotive

with major OEMs.

associations. ITESM already offers certifications in different areas such as Q: How have you promoted CeDIAM’s services to Tier 2

Six Sigma, Project Management, Quality Process Analysis

and Tier 3 companies?

and SAP in Finance, as well as Logistics and Manufacturing

A: We guide small providers toward opportunities to

modules. In the future we must develop research

enter the market through two important events. The first

and engineering by including experts in autonomous

event is Expo Partes, which began in Aguascalientes with

technology, interconnectivity systems and infotainment.

Nissan’s suppliers. After its success, we repeated the

From a mechanical standpoint, the trend is to make lighter

process in Hermosillo to support Ford’s suppliers and in

vehicles by improving the existing materials used. CeDIAM

San Luis Potosi to target GM’s providers. The 2016 edition

is researching new plastics and composites and passing

will target suppliers for both GM and BMW. The second

on requests from industry experts to our university.

VIEW FROM THE TOP

FINDING THE RIGHT FIT A CHALLENGE MONICA FLORES President LATAM of ManpowerGroup

Q: Technicians and engineers are on the list of top 10 most

Q: How are you molding your services to satisfy the

difficult positions to fill. How is Manpower helping its auto

industry’s need for specialists?

clients overcome the deficit of these professionals?

A: Growth expectations in manufacturing have remained

A: ManpowerGroup is involved in multiple initiatives,

high since 2013, when the segment peaked at 26 percent

encompassing associations with academic institutions and

growth during the first quarter. We believe this trend will

technical schools. In addition to private institutions, we

continue for years to come. The automotive industry needs

also have partnerships with governmental branches, such

people who can adapt and change quickly. This means

as municipalities and boroughs. We inform them about

learning how to use new technology on a regular basis to

the set of skills that manufacturing industries need from

keep up with the rapid pace of the sector. Teaching and

their workforce, pinpointing the deficiencies the industry

polishing a professional’s skillset on the job is another trial

detects in the training given to young professionals, as

the industry is facing, as both operational activities and

well as the changes that they could implement. Finally,

the number of job positions are decreasing.

we support them in the creation of new academic plans that cater to the needs of the industry. ManpowerGroup

Q: How can ManpowerGroup suport Mexico in its

and its partners also develop short training courses that

ambition to become an advanced manufacturing hub

fit the specifications of available job positions. By creating

with sufficient workers with the right skillset?

a clear plan of action in collaboration with its clients,

A: We encourage linkup programs between the private sector

ManpowerGroup is able to define the new requirements of

and academic institutions, such as internships or professional

the industry, predict future needs and supply customers

practices. Nevertheless, our input is limited and we cannot

with well-prepared professionals.

change Mexico’s educational system. Effective change must come from collaboration between the government,

Q: What new tendencies have you detected that will help

private companies, academic institutions and individuals

Mexico boost its automotive industry?

to raise the level of standards and competitiveness in the

A: Companies have become much more demanding when

training of young professionals. Moreover, there are deficits

it comes to creating their desired employee profiles.

in areas such as mechatronics, robotics, automatic system

Although our clients require applicants to have both

maintenance and plastic manufacturing, where there are

technical knowledge and professional experience in

insufficient graduates to fill the available positions. We have

their sector, candidates who possess soft or transferable

not been able to incentivize these professions, leading to

skills are also in demand. These skills give employees

complications for the industry. If we want to potentiate every

the flexibility to learn new technologies and techniques.

opportunity, we must develop Mexican students according

Manpower connects them with virtual workshops that

to the demand for professionals. The German dual education

have a global reach, which is particularly useful since

system is an interesting approach to the development of an

much of the automotive industry’s investment comes

appropriate workforce for the manufacturing industry and

from abroad. Moreover, the majority of top managerial

it is becoming increasingly respected in Mexico. However,

positions are filled by foreigners, requiring applicants

true change can only be achieved if this model is in place

to speak a second language, understand different

from the earliest stage of a child’s academic development,

professional cultures and have the ability to adapt to the

which requires a radical change of mentality among families

working styles of numerous countries. This also applies to

and schools. ManpowerGroup is an official Certification and

the most skilled technicians because they tend to travel

Evaluation Entity of the National Skills System (CONOCER)

the most. Geographical mobility allows them to learn new

for transferable skills that are relatable to any industry, an

techniques and share their experience with their national

achievement that may be a halfway house to the dual

and foreign counterparts.

learning system.

181

INDUSTRIAL INFRASTRUCTURE

Mexico’s competitiveness in the automotive industry can be partly attributed to its prime geographical location and the infrastructure that links it to the US. Industrial parks have stepped up to provide the space necessary for companies and their suppliers to establish a presence here, lowering logistics costs in the process. Although the construction of industrial sites has encouraged new companies in the country, there are still many opportunities in terms of infrastructure. The construction of efficient and safe roads and railways across the country, for example, is necessary to ease the logistics headaches companies can face.

With the growth of the automotive sector and its implications in mind, this chapter offers the analyses of industry leaders on the current state of infrastructure in Mexico, areas of opportunity and the benefits improvement would bring.

183

CHAPTER 7: INDUSTRIAL INFRASTRUCTURE 186

VIEW FROM THE TOP: Sergio Argüelles, FINSA

187

INSIGHT: Need Grows for Industrial Parks, AMPIP

188

VIEW FROM THE TOP: Alejandro Lara, American Industries

189

VIEW FROM THE TOP: Manuel Barreiro, Advance Real Estate

191

VIEW FROM THE TOP: Javier García, IOS OFFICES

192

ANALYSIS: Control and Treatment for Industrial Water Cycles, Hydrocon

193

VIEW FROM THE TOP: Andrew Auns, Williams Scotsman

194

VIEW FROM THE TOP: Gilberto González, Marabis Desarrolladora

195

VIEW FROM THE TOP: Luis Manuel Quiroz Echegaray, Guanajuato Puerto Interior

196

VEHICLE SPOTLIGHT: Mercedes-Benz Paradiso 1350

198

VIEW FROM THE TOP: Marco Ramón, Amistad

201

VIEW FROM THE TOP: Alejandro Rosas, CH2M

202

VIEW FROM THE TOP: Roberto Cantú, Roca Desarrollos

203

INSIGHT: Meeting Rising Infrastructure Demands, Parque Industrial Querétaro

204

VIEW FROM THE TOP: Luis Salazar, Columbus McKinnon de México

205

VIEW FROM THE TOP: Michael von Keitz, ThyssenKrupp System Engineering

206

VIEW FROM THE TOP: Luis Gerardo González, Fire Service Plus Mexico (FSPM)

185

VIEW FROM THE TOP

SELF-SUFFICIENT, STRONG INFRASTRUCTURE FOR THE INDUSTRY SERGIO ARGÜELLES President and CEO of FINSA

186

How

global

economic

and

exchange

rate

Cities such as Monterrey, on the other hand, see plenty of

fluctuations influence FINSA’s long-term planning?

industry diversification. KIA has channeled large volumes

A: Our sector has always been dollar dominated. Practically

of investment to the city creating a new dynamic. Saltillo

every lease quote operation is in dollars. This consequently

and the Ramos Arizpe corridor, home to Chrysler, GM and

impacts structuring and transactions for the retail and office

Freightliner, have done exceptionally well. Tijuana remains

sector as well as the industrial sector as a whole. In terms of

the main market on the western coast due to its proximity

investments, when FINSA collects dollars from US pension

and solid relationship with California, while Mexicali is

funds they expect returns in the same currency. Mexico’s

close behind. Juarez has now rid itself of the stigma of

industrial sector has the ability to offer this possibility

being a lawless city and is recovering rapidly as a fruitful

and we are enthusiastic this trend will continue. Through

production base.

Mexican, US or private pension funds, FINSA has raised enough capital needed to run its operations. Today, the

Q: How does FINSA evaluate the states in which its clients

company has 25 industrial parks spread across the country

should set up shop?

servicing key locations for Mexican industrial development.

A: With such a strong network of industrial parks, building a close relationship with the government to secure sufficient

Q: The amount of growth you can achieve as a result of

complementary infrastructure is inevitable. Government

existing customers opening new locations is capped. Is

entities are extremely important. Whether on a local, state

there a rebalancing in FINSA’s growth strategy?

or federal level they are key in promoting the location to

A: About 50 percent of FINSA’s new business opportunities

investors. Communication and cooperation is essential to

come from existing customers. Due to ongoing referrals,

present the best viable solutions to our clients. We rarely

this trend will continue in the near future. As companies

demand the availability of local infrastructure as we can

grow and diversification continues FINSA’s strategy will be

develop our own more freely. FINSA’s industrial expertise

contingent on its performance and track record. We have

permits the company to establish its own water treatment

developed over 100 million ft2 of building space, most of

plants and electric substations, for example.

which is thanks to renewed contracts in Mexico. Q: What are the key factors needed for FINSA’s success Because of our diversification efforts, only 43 percent of

given increased competition over the last three years?

our portfolio covers automotive companies, down from

A: We must offer better and more advanced solutions

60 percent of our clients five years ago. We now have a

to our clients. We have the capital to service any type of

large margin for continuous growth. The remainder of our

project, from a simple warehouse facility to sophisticated

business comes from the electronics, metal stamping and

metal stamping operations. FINSA only takes part in

logistics sectors.

LEED certified product projects and investors welcome this stipulation with open arms. Our newest parks offer

Q: How do industry dynamics differ between northern

and central Mexico, as well as the booming Bajio region?

complemented by housing and retail projects.

integrated

solution

for

industrial

developments,

A: Northern border towns will continue to encourage US companies’ interest in setting up shop in Mexico to enjoy

Q: How does the company generate capitaland how does

labor and production cost savings. As Mexico becomes

it expect to spend its funds in the short term?

more integrated in the investment networks of OEMs,

A: We have a number of international partners that have

regions like Bajio become more important for the industry.

helped us raise capital. For instance, AIG Global Real Estate

New OEMs in Mexico have attracted a large number of

was one of FINSA’s main US partners, having invested in

suppliers into the country.

the Latin American market through the real estate arm

especially in Mexico. GE Capital is another partner that has helped us tremendously. Walton Street Capital, an extremely active real estate fund in the US, is crucial to our operations and retained exclusivity with FINSA in Mexico.

Over 100 million square feet of building space

Due to the high demand for new products, we have been tapping into additional sources of equity. Real estate is capital-demand intensive to cover both the equity and debt side of the equation. Therefore, FINSA is always working on ways to raise funds and keep bank availability to ensure capital sources needed for market growth. We make a point of keeping top-notch infrastructure at

sound investment hub and the market has become less

all times by constantly renewing buildings and roads.

dependent on oil and gas. Mexico also proved it can thrive

Systematic investments to improve our parks are an

even under the worst circumstances.

essential part of our operations. Q: What are FINSA’s midterm goals and how would it like Q: How would the company organize energy supplies in

to develop for 2020?

its multiple industrial parks?

A: FINSA measures its success in the Mexican market by

A: Our huge client base demands high electricity

combining our own performance with the performance of

volumes. One of our main objectives is finding a source

our clients. We have been successful as a direct result of

to supply them at a stable and competitive price. There

our clients’ prosperity in Mexico’s manufacturing industry.

are various groups developing projects involving solar and cogeneration. However, FINSA is still evaluating how it can

We expect FINSA to be much bigger by 2020. We will

best offer these solutions while ensuring added benefits

have a larger number of locations than other industrial real

to its clients. We have evaluated the possibility of owning

estate developers in the country. Expanding into Central

power generation infrastructure but have not yet solved

and South America is another project we have planned and

the question of distribution. The federal government

we expect to cater to emerging demand in those markets.

has adapted Mexico’s structural reforms and we now

If we intend to achieve the growth targets that we have

have a good base for future planning. The country is a

set for ourselves, we must move beyond Mexican borders.

INSIGHT

NEED GROWS FOR INDUSTRIAL PARKS The steady growth of the Mexican manufacturing industry

security protocols. These standards serve as a reference

and the increasing number of foreign companies is

for the architects and engineers designing industrial parks

generating greater demand for industrial space. One of the

and enhance the quality of their plans. When the industry

main drivers for the development of these spaces is the

complies with these regulations and standards, this gives

automotive industry, says Claudia Ávila, Executive Director

their clients, suppliers and manufacturers the ability to

of the Mexican Association of Industrial Parks (AMPIP).

carry out more efficient processes.

According to Ávila, there is no official description of what

Mexico must interpret the construction of industrial parks

constitutes an industrial park in Mexico. Therefore, industrial

as a tool to attract foreign direct investment into Mexican

developers united through AMPIP to create a standard that

industries. Not only does Mexico have an extensive list of free

defines what an industrial park is. A committee created in

trade agreements and a geographical position that enables

1999 established a standard for industrial parks including

it to easily trade with NAFTA countries, it has a growing,

the usage and acquisition of land, regulation compliance,

talented workforce of young engineers who are able to

feasibility of utilities, internal administration and by-laws.

support industries such as automotive and aerospace. These

This standard requires a land audit, as well as compliance

industries require spaces that facilitate their Just-In-Time

with some of the basic international standards, such as

and Just-In-Sequence processes, keep their suppliers close

access to electricity, water and waste infrastructure and

to save on inventory costs and have increased accuracy in

the inclusion of a certain percentage of green areas and

terms of timing the delivery of products to the end user.

187

VIEW FROM THE TOP

REPLICATING QUALITY A SECRET TO GROWTH ALEJANDRO LARA Director General of American Industries

188

Q: What are the most important industry developments

Q: How is American Industries differentiating itself to

that American Industries has observed?

target new players in the market?

A: Many new companies have entered the Mexican market,

A: Our company promotes the diffusion of information

following in the footsteps of large OEMs, especially in

about what it is like to manufacture in Mexico, including

the Bajio area. There have been several plant expansions

the costs and challenges as well as the benefits reaped

in the north thanks to the recovering US economy.

by establishing facilities here. We offer support in terms

Importantly, the exchange rate has been encouraging

of site selection and organizing forums and seminars to

for foreign companies evaluating Mexico as a strong

educate potential clients about each location. Building a

investment location. Improving security conditions in

sense of trust with potential investors allows us to keep

the north has also boosted companies’ confidence to

attracting a growing client base.

establish new plants and operations, allowing them to take advantage of the peso’s depreciation. Our clients’

Our former and existing clients are the best source

expenses are managed in pesos and more often than not

of reference for new business. We strive to offer the

their income is tied to the US dollar. Consequently, many

highest quality customer service so they feel compelled

have seen their profit margins increase and their capital

to continue recommending us. Replicating the quality

expenditure requirements drop due to the currency

customer service we offered in the past is our utmost

devaluation.

priority. This is homogenous across all companies that are branching into other markets.

Q: How is American Industries ensuring the availability of human capital to offer its services?

We are one of the few companies that complement real

A: We are actively designing programs with companies

estate with a shelter program and vice versa, which has

long-term

helped strengthen our market position. Our aim is to be

employment much more attractive. Companies may

retain

human

capital

making

flexible and offer in-depth customization options. As we

address this subject through economic incentives

turn 40, we are now one of the longest-standing players

such as anniversary bonuses, social events on special

in the market, affording plenty of experience supported

occasions, quality transport services or career planning

by a robust system and work practices to attend the

within the company. Multinational projects offer great

needs of our clients.

opportunities for Mexican talent. While it is difficult to generalize, most international companies can offer

Q: What do you consider American Industries' largest

competitive salaries and benefit plans so our clients

areas of opportunity for the automotive sector?

rarely struggle to attract interested workers. Mexico has

A: We believe we are well placed for any company

a young and eager population, such that there is always

entering the Bajio region and we have worked extensively

demand for new positions. An agreeable work climate

on building up our presence in Queretaro, San Luis

is often the most important factor related to staff

Potosi, Guanajuato and Jalisco. We continue operating

retention. We always try to emphasize this point with

in our traditional markets near the US border so there

our shelter clients. Also, working closely with investors

is no immediate need to expand our portfolio. American

and explaining known cultural differences and values

Industries has extensive land reserves plus the necessary

of the Mexican workforce is paramount. The numerous

human and capital resources to expand rapidly.

Asian companies being welcomed here must translate their large investments into an active respect of our

Having witnessed increased trust in Mexican manufacturing

customs and law. Simultaneously, local workers have to

operations among US customers and other export markets,

adjust to newcomers.

we are optimistic about the industry’s future.

VIEW FROM THE TOP

FLEXIBLE SOLUTIONS FOR COMPANIES OF ALL SIZES MANUEL BARREIRO Managing Partner at Advance Real Estate

Q: What are Advance Real Estate’s main solutions and

flexible and fully capable of adapting to existing real

how can they present a competitive advantage to your

estate demand. Although we manage more automotive

clients?

clients,

A: Advance Real Estate is an industrial development firm

aerospace sector is gradually catching up due to all the

based in Queretaro that operates with Mexican and foreign

new activities in the area.

especially

Guanajuato

and

Puebla,

the

capital, offering two main products. First, we provide industrial parks and industrial buildings primarily for the

Q: What would you define as the primary hurdles for

automotive, aerospace and logistics industries. Second,

Mexican industries and how does Advance Real Estate

we offer business parks designed to target the needs of

support its clients addressing these?

Mexican SMEs. These companies represent approximately

A: The automotive industry is facing a problem in terms of

70 percent of the manufacturing activities in the country yet

infrastructure, especially in terms of electricity. Not enough

they are mostly ignored by the larger players in the industry.

infrastructure, high prices and an unclear regulatory

For Advance Real Estate, however, it is important to support

structure create entry barriers for many clients who wish

them through uniquely designed services. These parks have

to expand into Mexico. To support our clients, we invest

been well received by the industry and there are a few large

in the development of the entire electric infrastructure of

automotive companies that have certified SMEs in our parks

our parks.

that can become their suppliers. Availability of qualified human capital has also been Our regional operations include Mexico City, the State

a challenge. While certain states are developing large

of Mexico, Queretaro, Guanajuato, Leon, Aguascalientes

quantities of qualified professionals, companies in other

and San Luis Potosi. While central Mexico has recently

states are struggling to find operators. Advance Real

become popular as an industrial hub, we have been

Estate has a social program in place to support education

operating in the area for over 15 years accumulating

in local communities, in which college graduates enroll in

experience and knowledge. Advance Real Estate is

a teaching program to provide better education for junior

growing quickly and in the next five years we want

and high-school students in rural areas.

to own 750,000m of gross leasable land. To achieve 2

this, we formed an alliance with Equity International,

Q: What challenges has Advance Real Estate faced

a company involved in many sectors of the Mexican

regarding land availability?

economy. They support us mostly in our capital structure

A: Our clients are now much more capable of identifying

and many of our clients feel confident working with such

their own needs, instructing us on how to address them.

a strong and transparent institution. We also recently

They are now able to choose a specific location considering

started collaborating with a large Canadian pension

not only their budget but also the local economic and

fund. Both of these relationships give us the funds and

regulatory climate.

the capacity to develop industrial parks and industrial buildings, which is our main advantage over companies

Nevertheless, it is hard to find land with all the required

that only operate as investment funds and those who

services and permits and even harder to find good prices

only contribute to infrastructure development.

in a market as dynamic as real estate. However, our list of international clients and state-of-the-art fully operational

Q: What do the automotive and the aerospace industries

parks catering to the automotive, aerospace, logistics,

represent for Advance Real Estate?

food and technology industries have helped us show land

A: Advance Real Estate is taking advantage of the

sellers and local authorities the benefits of these projects

development of these two sectors. Our parks are highly

for the local economy.

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190

VIEW FROM THE TOP

TURNKEY SOLUTIONS FOR QUALITY WORK SPACES JAVIER GARCÍA Director General of IOS OFFICES

Q: What challenges has IOS OFFICES faced and how

We decided to offer products directly targeting companies

has the company overcome them to expand its business

that request facilities for part-time or short-term staff, as

offering?

well as companies with more than 100 full-time employees.

A: Few enterprises change their offices regularly, which

To do so, we offer virtual and part-time offices, co-working

means most do not have extensive experience identifying

spaces, communications and messaging services, meeting

the best equipment and services for their facilities. One of

rooms, as well as working environments for 10, 20 or more

the challenges we have identified is altering the industry’s

people. In the automotive industry, for example, focusing

mindset that rent is the only cost companies need to pay

on being a mobility solutions provider rather than a car

to have a good-quality working environment. Usually, rent

manufacturer has helped designers move from older cars

only represents roughly 30 percent of overheads that a

to their current models. IOS OFFICES keeps informed of

company must cover for its offices. Our goal is to make

the customers' new needs via focus group sessions with

more companies aware of the large share of office costs

our members.

that are unrelated to rent and how they can make better use of their resources.

Q: What role have international companies played in your business strategy?

The use of virtual solutions has changed the term “work”

A: Companies with international operations represent

into an action rather than a physical location. Virtual offices

our largest customer base since IOS OFFICES can offer

and co-working spaces have grown as companies allow their

turnkey solutions that are well-designed and suitable

employees to work in places other than the headquarters.

for foreign enterprises’ needs. We are proud to say that many clients find better solutions through us than via

Q: How does IOS Offices select the best facilities and staff

providers in their countries of origin. On a national scale,

to offer ideal solutions?

few companies are able to offer competitive working

A: For IOS OFFICES, the human factor is extremely

environments with the technology and safety that IOS

important. Fifty-eight percent of our staff has been

OFFICES provides.

recommended by another member of the team and two years ago we decided to stop receiving traditional

Q: What are your expansion expectations for the coming

curriculums and start asking for videos instead. This

years?

strategy allows us to more efficiently filter the more than

A: We have operations in Mexico City, Monterrey,

300 applicants we receive annually.

Guadalajara,

Tijuana,

Cancun,

Puebla,

Villahermosa,

Queretaro and Merida, and have plans to expand our Our selection process for facilities and equipment is

business to new locations that will be announced in

exhaustive. We perform intensive audits on buildings before

upcoming months. We aim to contribute to operational

acquiring them, as well as on surrounding neighborhoods.

productivity, rather than be seen as another expense.

Our philosophy is to generate more value and not to

Thus, we plan to take our solutions to other corporations,

simply save money. Every detail of a workspace, down to

changing the mindset of professionals in Mexico at

the fragrance, lighting and coworkers’ attitude has a direct

companies of all sizes. Work represents an important part

impact on the employee’s wellbeing.

of our lives, as 60 percent or more of an adult’s time is spent in work spaces. If employees are unsatisfied with

Q: How do you adapt your services to different market

their work space, this unhappiness can lead to lower

segments?

productivity. We are proud to provide Mexican employees

A: Offering good quality services is the only way to cover the

with solutions that allow them to enjoy their work and

needs of enterprises working in different market segments.

improve their company’s profitability.

191

ANALYSIS

CONTROL AND TREATMENT FOR INDUSTRIAL WATER CYCLES Hydrocon’s Total Water Management concept helps

and maintenance services, Hydrocon incorporates all

companies

cycles.

aspects into one service. The company is also investing in

Industrial water management is complex because usage

a chemicals production unit to control the quality of the

is fragmented across processes. Hydrocon starts at the

products used in their processes.

improve

their

industrial

water

source, where water intake is prepared for industrial needs.

192

Control of water usage is necessary across the production

Its partnership with GE Power & Water is an important

process including heat exchanger equipment, cooling

asset for Hydrocon, giving the company privileged access

towers and heaters. Wastewater treatment is the last area

to GE’s top-notch equipment and services. GE places great

Hydrocon usually addresses. Discharging the water in

emphasis on technology, which is reflected in its Power &

compliance with environmental norms or reusing it are the

Water division. All its water management processes use

best scenarios.

cutting-edge technology, in which GE is a leader thanks to the company’s large annual investment in R&D.

The integration of different disciplines into one service is Total Water Management’s distinguishing advantage.

Hydrocon employs 180 people and continues to enhance

Hydrocon assists companies in the design and construction

business processes and quality systems. Hydrocon targets

of water treatment plants adapting water intake to their

industries that consume large amounts of water. The

processes. The same approach is needed for wastewater

company uses a productive unit model made of commercial,

treatment facilities. The operation and maintenance of

services and administrative segments. This allows every

specialized equipment also require knowledge that can

unit to be specialized, self-sufficient, independent and

be difficult to find in-house. Companies need to use the

replicable. The company’s services and sales processes are

right chemical products to optimize water treatment

certified under ISO 9001:2008 and it is implementing ISO

processes. Unlike some companies that either focus on

14000 and Occupational Safety and Health Administration

selling equipment and chemicals or providing operations

(OSHA)’s guidelines.

VIEW FROM THE TOP

360° APPROACH, ADAPTABILITY CREATE SUCCESS ANDREW AUNS Director General of Williams Scotsman

Q: How has Williams Scotsman adapted its solutions to

standards and regulations from the US market so beyond

the Mexican market?

securing cost competitive, high-end services, clients also

A: All markets can enjoy the advantages of temporary

get peace of mind through our specifications. We are

space solutions and the potential value we can provide

truly a one-stop shop for building services associated

to OEMs and their supply partners. Considering the local

with project developments. Our 360° Service, which

context in which information sharing could become a

focuses on getting units ready for customers with any

security liability, Williams Scotsman’s standing has helped

furniture they require has been wildly successful since its

it weather the challenges. For instance, our previous

launch. Several major companies have shown interest in

relationship with BMW in the European market has eased

this solution.

Mexico’s solution transition. Creating ties with OEMs and domestic construction companies is of the essence, as

What

types

innovations

have

pushed

the

we allocate an entire team to this endeavor. The booming

boundaries of Williams Scotsman to cater to recent

automotive sector is revealing new opportunities and our

market trends?

company is working hard to reap the benefits.

A: Clients want good customer service and timely high quality solutions at competitive rates. Timing is one of

Q: Supplementing its relationship with OEMs, what

the most critical aspects in our line of business. Solution

projects has Williams Scotsman developed with Tier 1 and

providers are assessed rapidly and project development

Tier 2 suppliers in Mexico?

must happen within a tight schedule. We push our

A: Normally companies within the supply chain require

modular designs to the limit, exemplified in our AS Flex

the same type of service as OEMs but on a smaller

and Redi-Plex solutions. Our buildings' design makes

scale. Although we try to contact OEMs, Tier 1 and Tier 2

minor modifications easy to implement on the go, at low

companies directly, in some instances we are obliged to

operational costs.

deal with local project coordination intermediaries first. Each operation runs differently so we must adapt our

As we grow, reusing buildings’ skeletons becomes

designs and specifications accordingly. More advanced

projects usually require other types of services, such as

Williams Scotsman has designed innovative two-story

training rooms or additional office spaces. Our job is to

buildings with dormitories, kitchens, as well as office

take the weight off our customers’ shoulders and allow

and conference space in the same area, which can be

them to focus solely on their line of business.

deconstructed within 48 hours.

The size of our operations and our large product portfolio,

Q: What projects is Williams Scotsman most proud of in

set us apart both in Mexico and North America. Williams

the Mexican market?

Scotsman has strong operational infrastructure which,

A: Our biggest growth has taken place in central and

coupled with strategic partnerships can expand its

northern

capacity. By working with OEMs we can begin to permeate

footprint in the southern region is quite strong so we

the whole supply chain.

are pleased. The company has worked with KIA, Audi

important,

Mexico.

guaranteeing

Nevertheless,

product

Williams

availability.

Scotsman’s

and BMW, among other OEMs and companies in the oil Q: Has Williams Scotsman experienced significant

and gas, academic and retail segments. We supported

competition from local industrial developers?

Formula 1 while in Mexico with small modular solutions

A: We have detected three local competitors and a

and will continue to work with them in 2016. Our Toluca

handful of regional companies with whom we directly

branch alone developed over 100 custom units in October

compete. Williams Scotsman follows pre-established

2015 to celebrate the return of Formula 1 to Mexico.

193

VIEW FROM THE TOP

PREPARING THE WORKFORCE FOR INDUSTRY MOMENTUM GILBERTO GONZÁLEZ Director General of Marabis Desarrolladora

194

Q: Which new projects have contributed most significantly

the initial development period for its first stage and now

to the growth of Marabis’ Industrial Parks?

that the established companies started operations we

A: Castro del Rio Industrial Park in Guanajuato has been

have reached 80 percent of the park’s total capacity.

operating for nine years but our greatest growth has been

Furthermore, many logistics companies are arriving in

in the last three years after Honda and Mazda established

the area and outsourcing warehouse space that can

their operations in the state of Guanajuato. These OEMs

be dedicated purely to manufacturing. By early 2016,

laid the groundwork for their suppliers and other investors

we expect five companies to be up and running at the

have followed suit. We expect the same to happen after

Abasolo Park.

Toyota’s announcement. The government has estimated that approximately 200 new projects are still pending.

The natural gas infrastructure has to improve in several

Of the 76 Japanese companies already legally registered

regions but the latest Energy Reform has created a highly

in Guanajuato, 37 are located in Marabis’ parks. German

bureaucratic system that requires constant attention

investments are also increasing in response to Audi and

from the government. Companies will continue to invest

BMW’s new projects in Mexico. Some companies have

but the truth is that few industrial parks have sufficient

decided to set up shop in the city of Leon because of the

infrastructure to support that growth, which is where

direct access to San Luis Potosi state, where BMW will

Grupo Marabis can help. The number of companies in the

be located. Many consider Castro del Rio’s location to

region, its logistics infrastructure and its geographical

be privileged given its proximity to Daimler, Nissan and

convenience make Guanajuato state a strong contender

the newest Japanese OEMs. However, Marabis Abasolo

for new companies.

Industrial Park’s location neighboring the industrial corridor on Highway 45 is attractive to avoid excessive commutes for employees.

Q: How successful has the National College of Technical Vocational Education (CONALEP) been in developing human capital with targeted education in Castro del Rio?

The results of INEGI regarding gender equality in areas

A: CONALEP has been incredibly successful and we

of severe migration shows that the women-to-men ratio

are thrilled with its progress. The institution's alumni

has changed from 56:44 to 60:40, as men migrate to find

is 60 percent female. Companies can employ students

work. Silao, Guanajuato for example, has seen considerable

as apprentices for several months, hiring them after

industrial growth, but 80 percent of workers including

acquiring enough experience in their field. Most students

professionals and blue-collar workers, commute daily

graduate into secure jobs in technical careers and

from the city of Irapuato. Fortunately, our Abasolo project

in general the courses have been so successful that

is expected to prevent the migration of almost 400 people

several graduates have been inspired to continue with

in its initial stages. The government of Guanajuato can see

their engineering degrees. Consequently, employers are

the need to begin preparing the local workforce for the job

collaborating not only with CONALEP but also with the

opportunities created by new companies.

Superior Technical College of Irapuato, the Polytechnic in Silao, the University of Guanajuato and ITESM. Students

Q: What are Marabis Abasolo and Marabis Comonfort

are being offered the opportunity to travel to places such

parks’ competitive advantages in terms of development

as Japan, Romania, China and Germany to learn and

and companies attracted?

share their experience with their counterparts in those

A: Marabis Comonfort is in the final stages of planning

countries. The German dual education system was the

and design. The basic skeleton is already in place and

key to CONALEP’s triumph in Irapuato and now other

additional properties are being acquired to ensure future

Abasolo technical schools are interested in replicating

growth. In Abasolo, 65 percent capacity was met during

this system in their community.

VIEW FROM THE TOP

PUERTO INTERIOR SHOOTS FOR SMART CITY STATUS LUIS MANUEL QUIROZ ECHEGARAY Director General of Guanajuato Puerto Interior

Q: What are Puerto Interior's operational targets and

are enterprises such as Vesta, Vynmsa and Prudential.

what growth has it achieved?

Pirelli’s plant is one of the largest in Puerto Interior at

A: Puerto Interior’s logistics platform is supported by

160,000m2, followed by DENSO and Volkswagen. The

an airport, an expanding container platform, one of the

automotive industry has seen the largest participation in

state’s civil protection centers, a multimodal railway

our facilities.

terminal and enviable highway interconnectivity. We also have an interior customs office and one of Mexico’s most

Q: What expansion plans does the company have as more

sound industrial parks. As a result, close to 96 percent of

OEMs and suppliers enter the region?

Puerto Interior’s industrial area is occupied. On average,

A: The fact that regional demand is rising does not mean

50 percent of a land parcel can be built on with the

we will tamper with our internal processes to cover it.

remaining 40 percent and 10 percent allocated to parking

First and foremost is Puerto Interior’s responsibility to

space and green areas respectively.

provide the best service for decades to come. Therefore, 200,000m2 will be added to the existing 1.2 million m2 by

If land allocation regulations had not been put in place,

the end of 2016. We are an organized community with well-

Puerto Interior’s daily influx of 8,000 vehicles could not

traced norms, which we intend to uphold. As a municipally

be sustained, nor could its 15,000 day workers and 2,000

authorized facility with self-management practices, the

IPN students. Having a Polytechnic campus is yet another

government secures property taxes while Puerto Interior

differentiator for Puerto Interior, teamed with its own

manages the land, including its maintenance quota.

hospital, hotels and daycare services. Puerto Interior is also supported by Guanajuato’s Coordination, Command,

Q: What are the specifications of Puerto Interior’s project

Control, Communications, and Computing Center (C5),

developments?

managing all 46 control centers with over 3,000 security

cameras and access arches. This allows us to reach the

infrastructure project in Mexico and Latin America. The

army, federal and state law enforcement, firefighters

airport’s goal of reaching 1.5 million passengers by 2020

and the Red Cross from a single point of contact. We

was reached in 2015, making it the fastest growing airport

are targeting the Smart City status so we must secure

in Mexico. We also have the largest customs platform in

appropriate technological installations. Puerto Interior has

the country fitted with the latest designs and processes.

an 11-story, high-tech building and an in-bond facility is

IPN covers five engineering specializations, and a sixth is

scheduled for construction next to our airport, supporting

due to follow. Out of the five inner industrial parks, almost

shipping routing for all container sizes. Furthermore,

100 percent have been pegged for their great quality

while companies establish their operations we offer a

service and operations.

Puerto

Interior

unprecedented

logistics

soft-landing building to ease their process. Besides becoming a Latin American operational reference, Q: How has Puerto Interior contributed to Guanajuato’s

our community tops our agenda. An average of 4,000

development?

housing developments, home to approximately 20,000

A: In 2015, 26,000 containers were shipped and we foresee

people, lack paved roads or water availability and may suffer

that by 2017 that number will reach 45,000. Guanajuato’s

from high illiteracy rates. Linking up students from local low-

exports rose by 23 percent between 2013 and 2014. This

income families with IPN is one of our most significant goals.

increase generated a total of US$20 billion with the city

Puerto Interior’s social development center’s academic

of Silao contributing 62 percent of this amount. We have

approach is the first of its kind and has proudly seen 1,500

secured business from 100 premium companies, 74 of

students graduate so far. This has improved quality of life

which have consolidated their operations. Among them

and contributes to the state's development.

195

VEHICLE SPOTLIGHT

196

MERCEDES-BENZ PARADISO 1350 Ahead of embarking on a long trip, the top passenger priority is comfort. Mercedes-Benz goes the extra mile with the Paradiso 1350 bus so both passengers and driver can look forward to their time onboard. The bus features an innovative and aerodynamic design on the outside with a modern, comfortable and sophisticated look on the inside. The Paradiso 1350 has 50 executive-class seats measuring 106cm by 43.5cm, with soft Marcopolo finishes, foot and arm rests for both aisle and window seats and magazine holders.

197

For drivers, the key touches include an Isringhausen 5000 385-HUN65 hydraulic seat and full thermoacoustic isolation of the engine compartment, ensuring a comfortable and pleasant drive. There is also a cabin for an additional driver. Passengers can enjoy the four 15-inch flat-screen monitors while the infotainment system includes AM-FM radio, a CD and DVD player, USB connection and an interphone between the operator and the cabin. The bus is LED illuminated including blue nighttime LED lights on the upper luggage compartments. Paradiso’s exterior features LED headlights and two additional fog lights. For a smooth ride, the 1350 is equipped with an OM 457 LA six-cylinder engine capable of producing 428hp at 2,000rpms and torque of 2,100Nm at 1,100rpms. Mercedes-Benz included a ZF ASTRONIC 12-speed automatic transmission and a ZF 8098 hydraulic steering system for efficient handling. The chassis’ front axle is a ZF RL-75/E with a load capacity of 7,100kg. This is supported by an auxiliary ZF RL-75/EC axle with 5,750kg payload and a rear Mercedes-Benz MB HO 6/6 DCL(s)-13 axle that can carry 12,000kg. The Paradiso’s front pneumatic suspension has two airbags

and

two

high-performance,

double-action

telescopic shock absorbers coupled with a similar auxiliary system and a rear suspension with four airbags and

four

high-performance,

double-action

shock

absorbers. Both the front and rear suspension have stabilizing bars to support the chassis. Although it is performance-driven, the coach manufacturer kept the environment in mind. The bus is Euro V compliant and features three modular 200-liter fuel tanks over the rear axle, plus a 59-liter AdBlue diesel-exhaust fluid tank to improve its fuel efficiency.

VIEW FROM THE TOP

FAMILY BUSINESS PUTS CUSTOMER SATISFACTION FIRST MARCO RAMÓN President of Amistad

198

Q: What are the advantages of being a family owned

such as childcare, 24-hour security and sustainability

company?

generate added benefits to our operations and give us

A: The family business is run by six out of seven siblings,

an edge over similar companies.

each performing different tasks within the company. In addition to our real estate activities, we have a

Q: What changes have you seen in client requirements

construction company that takes care of Amistad’s

over the last 20 years?

operations and serves clients individually. Our shelter

A: The quality of the end product has gone through

operations provide assistance to start-up programs.

the biggest changes in automotive. Clients in Mexico

All three divisions fall under the Amistad umbrella.

expect to receive the same quality of service they would

The company has been successful over the years with

in the US, Europe, Japan or Korea. Multimillion-dollar

third-generation family members getting involved in

investments require quality infrastructure. The market’s

operations.

standards have increased dramatically, and so have our clients' expectations. We have also seen Japanese

There are few family owned and family operated

and US industrial park developers entering the Mexican

companies in our segment and we believe that this

market, which has forced domestic companies to raise

offers a competitive edge over larger, more bureaucratic

their standards.

institutions. This has positively influenced Amistad’s relationships with its clients. They know the company’s

Following the new Energy Reform, companies like

philosophy

their

Amistad can now supply customers with energy. Some

contact with us. In addition, the availability we offer is

issues have emerged that Amistad must clarify before

second-to-none. Clients can call us directly rather than

moving forward as the Energy Reform’s secondary laws

a fund in Mexico City or New York. We have a history

are still unclear and are hindering our efforts. Some

of over 40 years in the industry giving us stability and

European companies are presently offering partnerships

permanence.

with solar farm developments and although it makes

will

remain

constant

throughout

financial sense for us to partake in this, Mexico’s legal Q: What are the main drivers for clients to begin

framework prevents it. This is an interesting business

operating in one of Amistad Industries’ parks?

opportunity for Amistad and clients are attracted to this

A: We put our clients where they need to be. The

type of service for the long term.

company is not keen on entering urban areas. We prefer to stay on the outskirts of towns to facilitate logistics.

Q: What main national and international parameters

Our infrastructure developments are obviously top

you take into account for long-term planning?

class, but location is the deciding factor in our line of

A: The parameters are the same as 10-15 years ago. We

business, second to amenities. Additional services

need to make logistics as efficient as possible, which translates to easy highway access and proximity to

Chiapas’ labor costs are almost 25 percent lower than northern states

airports. Infrastructure must be secured for energy and water supplies. Real estate developers must create a bond with local communities. If they are not on board it will raise red flags. The most important element in any operation is its workforce, so we must ensure the right talent and professional expertise are available locally. Therefore, we focus on cities where we can find a rising industrial culture.

When OEMs announce their plans to enter the Mexican

60 percent of Amistad's portfolio is automotive, 40 percent is aerospace and electronics

market, real estate companies engage in a battle to extend their sphere of influence within a certain state. Before a decision has been made as to where they will establish their operations, we make an assessment and try to triangulate the geographical position. Celaya, Guanajuato has multiple OEMs in the surrounding areas including GM, Nissan, Ford, Mazda, Toyota and BMW. Unless companies are Just-In-Time suppliers, there is no need for them to be right next door to OEMs. Saltillo, Coahuila is an example of how establishing an

To offset time constraints in automotive, we develop

industrial park in the middle of their operations works

many standard spaces that are not tailored to specific

effectively. Logistically and financially, we look for

clients but that comply with industry standards. We

something in between.

prepare ahead of time and build these facilities so companies can begin operations immediately.

Q: What are the most promising locations you are developing?

have

improved

our

construction

times

and

park

understand clients’ requirements as a result of ongoing

development in the Apaseo El Grande, Celaya and

communication. We can guarantee occupancy within

Queretaro area. The Saltillo and Ramos Arizpe corridor

five months, which is record breaking. This gives clients

is extremely interesting as it gives access to major

more than enough time to install their machinery and

markets like Monterrey and Mexico City while covering

begin operations.

Amistad

starting

its

third

industrial

an important OEM region with companies such as GM, Chrysler, Freightliner and Fiat. Hidalgo is the next region

Amistad would also like to increase its portfolio and

that we plan to expand to. The state is pushing for

service the aerospace industry. The segment is growing

investments and because it makes sense from a logistics

steadily and opportunities emerge as we diversify. Our

standpoint. Its proximity to Puebla, Guanajuato, Mexico

core business is and will remain automotive but based

City and Veracruz will bring many interesting business

on projected double-digit growth I would predict that

propositions.

the logistics industry will surpass other sectors.

Our sights are also set on the south of Mexico. The federal

Q: To what extent do Amistad's clients return as repeat

government is promoting industrial developments in

customers?

the states of Oaxaca, Chiapas and Veracruz. We have

A: An estimated 70 percent of clients are new and 30

already evaluated certain cities in Chiapas and Veracruz

percent are returning customers. Client satisfaction

and see tremendous potential in them. The Chiapas

is extremely important as those customers refer new

state government will offer large incentives to attract

business to us. Amistad’s existing client base is responsible

new companies, infrastructure has already been secured

for the company’s organic growth. Repeat business and

and labor costs are almost 25 percent lower than in the

referrals are extremely important for us.

north. Even though logistics may seem troublesome, trucks can reach Mexico City in as little as five hours.

Amistad will measure its success in 2016 by customer

Veracruz has an increasing need for warehouses and

satisfaction. We have a strong relationship with all our

manufacturing facilities, which is a direct result of the

clients and understand how important it is to make

Energy Reform.

them feel comfortable and taken care of. Success could be measured in square footage and industrial

Q: After your success in the automotive sector, is

park developments but keeping a clean record of

Amistad looking to expand to new sectors?

accomplishment is much more important for our

A: Sixty percent of our portfolio is directed at the

reputation. That is precisely why we consistently ensure

automotive industry while the remaining 40 percent is

our products and services are top quality.

mostly divided between the aerospace and electronics segments. We foresee an increase in the automotive

We have programmed the construction of 1.5 million ft2

industry’s dominance over our operations. There are

in 2016 in sites across the country to also expand in size.

multiple specialized areas in the sector. Allocating

The company is preparing for further growth and we are

companies in the right region is of the essence.

excited about what the future will bring.

199

200

VIEW FROM THE TOP

GLOBAL LEADER UNDERPINS SUPPORT FOR NEWCOMERS ALEJANDRO ROSAS Operation Director, Industrial and Advanced Facilities of CH2M

Q: How does CH2M approach newly arriving OEMs and

benchmarking. Our economic park analyses are always

automotive suppliers?

well received by our clients.

A: The new OEMs and suppliers coming to Mexico need support to reduce investment risk, which is our specialty.

Q: What is CH2M’s involvement in urban development

CH2M offers clients multiple services for the lifecycle of

projects?

their project. We help our clients with consulting and

A: While most of our clients are in the private sector, we

pre-construction services to expedite a soft landing and

provide assistance to the public sector with very specialized

mitigate their risk through services such as site location,

services such as traffic studies, risk-reduction assessments

environmental

engineering,

and intelligent transportation systems. Our participation in

procurement and project or construction management.

transportation and infrastructure is one of the best in the

In over 20 years, our team has helped make more than

world. We are participating in several projects in Mexico.

500 new plants safer in the automotive industry and other

Among the most important is the New International

sectors.

Airport of Mexico City (NAICM) and the Atotonilco Water

services,

due

diligence,

Treatment Plant, which is the biggest plant of its kind in Not only do we provide support for risk reduction on

Latin America. CH2M has also participated in projects like

investments, we also have engineering expertise and

High Speed Rail Systems and Bus Rapid Transits in Canada

business acumen, with which we provide to help all

and the US.

newcomers. CH2M has broad experience in plant design in several countries, which we reflect in our designs and use of resources. Since our foundation in 1946, we continue to improve our lean engineering services and resource and utility planning. We advise our clients on how to reduce the

In 20 years CH2M has helped to make over 500 new plants safer

frequency of plant servicing and increase their revenue. When we participate in projects involving the public sector Q: Which CH2M contributions to infrastructure have

we make sure they are top level with an important impact

benefited the automotive industry and what challenges

on local communities. This justifies our participating in

have you faced?

the development and construction of the NAICM and

A: In addition to the industrial sector, CH2M participates

Atotonilco’s Water Treatment Plant. We believe they

in transportation and oil and gas. We design and help our

will have a prolonged impact beyond their immediate

clients build highways and airports as well as midstream

communities, similar to the Panama Canal, which we also

infrastructure such as pipelines and cogeneration plants

supported. Our commitment to the community is deep-

that are part of the main infrastructure used by industrial

rooted and we take our commitment seriously when

parks and for OEMs' greenfield plants. Our company has

designing, managing and participating in projects with the

contributed to developing technology and innovation

public sector.

parks throughout the country. CH2M has contributed to the design of economic and technical zones as well

We are also one of the top environmental firms in the

as advanced manufacturing science and technology

world. Our environmental services include site analyses,

parks, most of which are in the Middle East and South

remediation, phase I and phase II studies, environmental

America. The main challenge we face is the coordination

impact assessments, risk studies, technical studies and

of many areas and business groups to provide the

permits. We are proud that CH2M is ranked by different

specific services that new high-tech parks might require.

organizations as one of the World’s Most Ethical

We also offer master planning and technology park

Companies.

201

VIEW FROM THE TOP

LACK OF LAND AND RISING COSTS BLOCK DEVELOPMENT ROBERTO CANTÚ Director General of Roca Desarrollos

202

Q: How did Roca Desarrollos emerge as a key figure in the

this entails, putting Mexico behind international standards.

Mexican market?

Some companies like Roca Desarrollos are making key

A: During 2015 Roca Desarrollos was able to penetrate

investments to turn this around. We make a great effort

several key states, including Tamaulipas, Nuevo Leon,

to keep costs low so users feel more comfortable joining

Queretaro, Chihuahua and Baja California, by purchasing

the movement. Investing in key locations that can bring

plots of land to meet the demand for industrial buildings.

logistics and transportation costs down is a measure that

The task for 2016 is to set up buildings so our clients

we can take to balance the overall costs of their operations.

can begin operations as soon as possible. Our Reynosa, Monterrey and Silao industrial buildings are already

Q: What does Roca Desarrollos ask of the government

running but construction in Ciudad Juarez and Tijuana is

regarding secondary infrastructure to offer better-quality

still underway.

products and services? A: The industrial real estate segment needs energy

Q: How is Roca Desarrollos working with the government

availability. Mexico is still lacking investment to supply

to encourage land development that meets industry

industrial zones with enough energy at a higher rate. We

requirements?

may be able to find land plots but if the infrastructure is

A: That cycle takes much longer as secondary infrastructure

not present to accompany the operations they become

must be secured to comply with sector requirements.

unfeasible for us. Sometimes constructing the right energy

The company is channeling its attention to land parcels

infrastructure can be more expensive than buying the land.

with services installed. We have strong ties with the

As the Federal Commission of Electricity (CFE) is a publicly

government but our relationship is primarily focused

owned company, it is the sole responsible authority for

on the promotion of our services. Companies usually

this. There is no question that the government needs to

contact state governments to evaluate the incentives

improve its offering and push for advanced investment

they can offer. This communication provides us with the

capabilities from public agencies. We also suggest the

opportunity to offer and promote part of our portfolio that

development of an open market where public investments

caters to these companies’ needs.

can tackle the increasing demand of our segment.

Roca Desarrollos constructs its buildings with generic

Road infrastructure remains a shortcoming. Permit filing

characteristics that can be easily adapted. Once a client

is one of the biggest hurdles and needs to change rapidly.

decides to establish their operations we can customize

The permits take too much ime to obtain and several

any extra requirements. The company has access to an

permits can be needed for a single operation. As a result,

investment fund through an alliance with Gava Capital

ROI for our users takes longer, lowering their interest and

allowing us to offer our clients a more effective and

commitment to the state.

malleable response. Q: What are Roca Desarrollos’ short-term goals for its Q:

How

much

focus

has

the

company

given

portfolio?

sustainability?

A: Our primary goal for 2016 is to consolidate our

A: We must keep sustainability in mind at all times.

operations in markets we recently entered. Secondly,

Although the industry has begun to focus on that specific

Roca Desarrollos is looking to expand its presence in

area, its penetration in Mexico has not been substantial.

Mexico City, Guadalajara in Jalisco and San Luis Potosi.

There are some industrial firms that invest in certifications

We plan to close 2016 with the construction of almost

but the broader spectrum continues to fall short. Around 95

1,000,000ft2 of new buildings, which will bring a whole

percent of users are not willing to pay the additional costs

new dynamic to the company.

INSIGHT

MEETING RISING INFRASTRUCTURE DEMANDS As money continues to pour into Queretaro’s automotive

Rapid growth, however, comes with challenges. “Companies

sector, one of the state’s biggest industrial parks is banking

in various industrial areas or hubs suffer from water and

on a bigger slice of the market. But a major aspect may

energy shortages due to insufficient infrastructure,” said

pose a challenge: infrastructure.

Mena. The park has created two energy plants and two electric substations powered by three different lines. The

For foreign manufacturers looking to establish a foothold

two substations are interconnected to ensure a constant

in Mexico, the state offers attractive conditions, including

supply without surging. “We are also starting a clean-

good security and a prime location in Mexico’s central

energy industrial project that will create 20MW from solar

region. Víctor David Mena, Director General of Parque

energy and 40MW from a combined cycle plant,” he adds.

Industrial Querétaro, believes the biggest hurdle Queretaro

On top of road infrastructure, the park is developing a plan

faces is having a functioning infrastructure to address

to offer housing and other services for the park’s workers.

ongoing growth. An important element to accelerate the industry's expansion is connectivity, he says, citing roads and railways. This would give the park the ability to handle larger cargo operations to supply the US, the main recipient of automotive exports. “The park has a prime position equidistant to all the

One of the most important industrial parks in Queretaro, representing 10 percent of the state’s GDP

important assembly plants in the region, giving it a competitive advantage in logistics,” Mena says. “Having

Parque

an efficient park management that provides comfortable

ambitious plans to keep growing. It is targeting an

Industrial

occupies

about

650Ha

and

has

and convenient installations is important to attract new

additional 75 hectares by 2016 and another 100Ha by

companies to our facilities.”

2017. “We have been working arduously to ensure our park has the necessary infrastructure and services to support

Most auto-related manufacturers export their products,

such a large conglomeration of companies,” Mena says.

mostly to the US. The park collaborates with local

The park has a commuter transportation service on site,

companies and the state government to find methods of

which reduces the number of cars in the surrounding

optimizing logistics and manufacturing operations. These

area. A 25km bicycle lane has also improved mobility.

include providing optimal security, garbage disposal and

“The industry has worked in harmony with local authorities

water management services. Roads are also an issue. To

for the past 25 years and together we have done a great job

solve its traffic problems, the park is designing a new road

promoting growth,” says Mena regarding the cooperative

plan with the government, wherein redtape has posed

success attracting new players into the Mexican market.

a challenge. “Coordinating the construction with three different government levels is an intricate process,” says Mena. “Normally, we do not have important participation in these types of projects but we do play an important role in the planning process and in the definition of the needed infrastructure.” Mexico’s

industrial

and

manufacturing

sectors

are

growing, underpinning the country’s GDP. The biggest contributor among states last year was Queretaro, which surpassed growth expectations in 2015 with 8.8 percent GDP. Grupo Financiero Banamex had forecast a 5.8 percent rise. With over 135 companies in place, Parque Industrial contributed about 10 percent of last year’s figure. The park houses companies that are ranked among the top 500 international enterprises, giving it the largest concentration of international corporations in the state.

203

VIEW FROM THE TOP

LIFT, STACK AND GROW LUIS SALAZAR Commercial Director North Latin America of Columbus McKinnon de México

204

Q: How did Colombus McKinnon evolve to serve the

Q: How can you ensure the maintenance quality of your

Mexican automotive industry?

equipment at client facilities?

A: We are one of the few companies whose product

A: Of our 67 distributors, 17 are certified service centers that

portfolio is broad enough to cover manual, electric chain

can guarantee all our clients receive continuous customer

and electric wire rope hoists, pulley slings and rigging of

service and equipment maintenance. Our service centers

all kinds to support heavy weights. One of our products

receive annual audits and can offer advice regarding piece

has even been used to lift and maneuver the Space Shuttle.

renewal or complete replacement when necessary. Our

This specific product stands out because its fiber does

maintenance is carefully documented and stamped on

not damage the unit being maneuvered. In Mexico we

our clients’ equipment to ensure a record of each piece’s

began as Endor, founded by a Swiss citizen who migrated

last check. To ratify this, we certify our technicians with

and began the company in 1967. Columbus McKinnon

medals from bronze to platinum regarding which pieces

was operating in the US at the time and, having identified

of equipment they can service from general products to

Endor as the only provider of that specific product in the

crane maintenance.

country, acquired 40 percent of the company’s shares and merged the two companies.

Q: What is Columbus McKinnon’s primary strategy to reach new clients?

On top of our lifting solutions used in several industries,

A: We work with marketing intelligence garnered from

we offer dynamic services under the name Unified,

INEGI's databases to contact manufacturing companies.

which are modular aluminum and steel workstations.

This gives us access to more than 140,000 Mexican

These are generally used by automotive companies to

contacts so we can visit these companies' facilities or

position tools managing them at almost zero gravity.

meet them at events. Our marketing strategy is modern

Unified embodies a dynamic stacking model. This allows

and we have benefitted from having a presence both on

automotive companies to assemble and dismantle the

Twitter and Facebook among other mediums, as well as

equipment in different manufacturing areas, creating

our own website. Our website’s chat is open 18 hours a

a solution that can be significantly customized to each

day with an online operator who helps our clients’ with

company’s needs.

any problems or doubts.

Q: How have you developed appropriate safety awareness

Q: How have the materials you manage evolved in terms

in your workforce?

of technology to offer competitive advantages over

A: Our concept of safety by choice begins at our

alternative products?

university for machinery, which opened a Mexican

campus in 2014. This training is supplemented by road

many years in the internal mechanical security of

shows wherein we try and make our employees aware

its equipment. We just joined forces with Magnetek,

of the importance of health and safety from personal

which provides controls and technological intelligence

heavy lifting courses to the safe use of our heavy-duty

to approximately 80 percent of the companies in our

equipment. Columbus McKinnon promotes a Health and

specialty. Our investment in this company should allow

Safety Day through several chambers and associations

us to modernize our technology, updating our products

carried through to our operations. When a client tells

in terms of connectivity and user friendliness. To

us they have a specific problem with safety, we visit

balance mechanical excellence with the integration of

their facilities and train their personnel on topics such

Industry 4.0 in our equipment, Magnetek was the next

as attaching pulleys correctly to their load and properly

step for Columbus McKinnon to take to become more

connecting hoists.

sophisticated in our operations.

Columbus

McKinnon

has

been

investing

for

VIEW FROM THE TOP

TARGETING THE MIDDLE TO DOUBLE SIZE MICHAEL VON KEITZ Managing Director of Industrial Solutions at ThyssenKrupp System Engineering

Q: How can ThyssenKrupp help companies gain a

US and Germany. Hence our focus on OEMs, including

stronger presence in the Mexican automotive market?

heavy equipment manufacturers such as John Deere.

ThyssenKrupp

customized

System

engineering

Engineering

automation

provides

solutions

for

offer

international

experience

project

handling

management

multinational

and

automotive OEMs, Tier 1 and Tier 2 companies. The

broad

ventures.

group decided to establish a service office in the state of

Our comprehensive knowledge of the local market

Queretaro in 1999 to locally manage projects and avoid

can provide companies with strategies to follow. Our

the cost of specialists and goods coming from Germany.

direct working relationship with robotic suppliers such

We provide services to the new Ford plants in the states

as KUKA, ABB and all other major suppliers offers

of Chihuahua and Guanajuato and for FCA’s plants in

additional benefits. For pneumatics, we work with

Toluca in the State of Mexico and Saltillo, Coahuila. We

FESTO and SMC. Since we are a global company, we

also work with GM, Audi and Volkswagen.

have worldwide purchasing agreements with every major equipment company. As few suppliers are based

We have a large number of clients but we hope to double

in Mexico our working relationship is limited. We hope

our size in Mexico. We need to make changes to increase

that more suppliers will manufacture their products

our competitiveness. When a new OEM shows interest

locally in the future, to improve prices and customer

in the country, we provide support and insight on the

service through competition.

local market. However, most of the support comes from Germany and the US. OEMs, such as Audi, Nissan or

How

has

ThyssenKrupp

System

Engineering

BMW tend to make their purchase decisions overseas

overcome challenges in local industry?

so we only provide local support for supply selection.

A: Mexico offers many opportunities but there are several hurdles to overcome. For ThyssenKrupp, one

The extent of our operations in Mexico might seem

of the most complicated hurdles is companies finding

limited

the necessary funds to finance projects. The exchange

assignments with teams from different companies in the

but

position

ourselves

taking

rate will probably create challenges in 2017 and will

US and Germany. We help them acquire local projects

force companies to increase their costs. Our suppliers’

and provide intelligence on possible new business

materials and the components of our equipment are

opportunities.

produced outside Mexico and priced in dollars, directly affecting our costs and prices.

Q: How is ThyssenKrupp System Engineering targeting its potential customers and updating its services to

While automotive is growing promisingly in the Bajio

appeal to all companies in the region?

region, the industry ought to expand to new locations to

A: ThyssenKrupp is targeting medium-sized enterprises,

avoid heavily concentrating in one corridor. OEMs must

which we believe are being neglected by our competitors.

take advantage of business opportunities in different

Bigger companies have no interest in participating

parts of the country. The Mexican market will continue

with smaller businesses, while our smaller competitors

to experience moderate growth and ThyssenKrupp

lack the financial ability to attend to this particular

wants to take advantage of favorable conditions to

market segment. We are approaching manufacturing

double its sales figures in the next three or four years.

businesses, especially in engine assembly, gearboxes

The company’s focus on being more competitive and

and axles, to supply Tier 1 companies with the entire axle

working more with subcontractors is a way of lowering

assembly line. We have contributed to shared assembly

ThyssenKrupp’s costs. We are trying to grow internally

projects with Tier 1 companies between Mexico, the

with the best staff.

205

VIEW FROM THE TOP

PUTTING OUT FIRES, SAVING INDUSTRY LUIS GERARDO GONZÁLEZ Director General of Fire Service Plus Mexico (FSPM)

Q: What unique products can FSPM offer its clients within

206

Social Welfare and the Ministry of Health to collaborate in

the industrial segment?

regulation updates. We are working with Volkswagen and

A: Fire has four main components, oxygen, heat, fuel and free

we will probably be equipping the new Audi plant in San

radicals. Eliminating any of the first three means eradicating

Jose Chiapa, Puebla.

the fire. While most extinguishing agents attack only one or two, our products target all four. FireAde transforms

Q: How does FSPM help its clients to develop their fire

water into foam multiplying its volume 20 times and giving

extinguishing infrastructure?

it an ecological edge over competitors as it helps to reduce

A: We have a design and risk analysis team that collaborates

water consumption and pollution. 3M was the first company

on the development of our clients’ infrastructure, following

to develop aqueous film forming foam (AFFF), more

international regulations. We follow comes the US National

commonly known as light water, which is the basis for our

Fire Protection Association (NFPA) standard and mainly

technology. These early foams contained persistent organic

work according to NFPA 11 regarding low, medium and

pollutants (POPs) that were eradicated from European

high-expansion foam. In Mexico, there are certain reference

industry in 2010. They were finally banned in Mexico in

norms like NRF-116 PEMEX-2007 and PEMEX-2010 and we

2015 but the authorities have not completely enforced their

are the only company that complies with addendum 12.1

substitution. Our products, however, are certified under the

of this particular standard. This requires our products to

NOM 002-STPS-2010, and are nonpolluting agents without

extinguish a fire in a PEMEX tank model within 3 minutes.

perfluorooctanoic acid or perfluorooctane sulfonate.

Ours do it in only 1 minute and 17 seconds.

Our entire Enforcer line works with FireAde including our

Q: How corrosive are FSPM’s chemicals on machinery and

extinguishers of up to 12 liters, our tanks such as the Enforcer

manufacturing equipment?

10 and the Enforcer 200, as well as our automatic spraying

A: FireAde has a neutral pH of 7.2 and its wetting agent

spheres. When tackling fire, response time is crucial and

helps protect the equipment from any potential damage.

we have worked hard to provide effective and user friendly

If someone were to ingest it or if it were to splash in

products. As an example, we are developing small off-road

someone’s eyes, they would not be harmed. We even have a

vehicles, or first response units, that can be operated by

letter from Boeing that recommends AFFF products instead

only one person where a fire truck cannot be deployed.

of chemical powder for any accident involving their aircraft. Chemical powder is an effective extinguishing agent, but its

Q: How has FSPM helped improve Mexican regulations in

corrosiveness could result in the overhaul of the entire plane.

the industry? A: We have lobbied for stricter regulations in the industry

To work with Volkswagen, we underwent several testing

and have even fought for the implementation of an

processes, particularly related to metals that react

official norm in terms of private extinguishing equipment.

aggressively with water. Their supplier Rassini had a

With regard to the automotive industry, we have askedf

metallic paint that reacted with the humidity in the air,

the government to establish clear norms regarding fire

igniting the filters behind the brakes. After applying our

extinguishers in all vehicles, especially in the public

product the company managed to counter that effect.

transportation and the logistics segment.

We have been working with the Volkswagen Group for four years and recently started operations with Irizar in

The current Mexican norms have been in force for a long

Queretaro.

time and are only reviewed every five years without taking technology developments into account. For that reason, we

We are also approaching Mazda and negotiating with

have reached out to SEMARNAT, the Ministry of Labor and

Honda and Nissan. There are some challenges in the

commercialization of our product given its advanced

the situation. These are highly sophisticated add-ons so we

technology and the initial payment but this has to be seen

are working to lower our production costs to offer better

as an investment rather than a cost.

prices to our clients.

Q: How much participation has FSPM had in the

Q: How have you educated operators and private users to

development of new products and solutions?

promote a safety-oriented culture?

A: Since we started innovating approximately five years

A: We teach the basics of fire theory and offer practical

ago, all our new products have had a huge impact on the

courses with digital equipment and laser extinguishers.

industry. Having developed purchase and rental programs,

These courses grade users according to their level of

many companies that rent industrial facilities in Mexico have

expertise and they are designed to train people on fires type

opted for our rental solutions as the best alternative. Our

A, B, C, D and K. We are trying to target different industry

innovations are diverse. Administratively, we have created

segments to involve people of all ages in this process.

software to track the extinguisher stock of our clients

Similarly, we hope to implement a norm stating that all

throughout their production or distribution chain.

handicapped and elderly people should be located as close to the exit as possible in any public setting. This serves as a

Regarding technology, we designed several compressing

precaution in case of an accident. Prevention will always be

systems and are working on a firefighter drone in

cheaper than any corrective action and our gloabl offices

collaboration with IPN. This project is being developed with

have worked hard to promote this mindset. Furthermore,

heat detection features based on artificial vision creating a

alongside the Ronnie Thames Foundation, the company has

constantly prepped security system. In terms of vehicles,

the goal of helping children that have been severely burned.

there are certain off-road models that catch fire easily so

The organization already does an amazing job in the US and

we are working on a portable first response unit to handle

we are now looking to establish it in Mexico in 2017.

207

INNOVATION & TECHNOLOGY

Innovation has been a constant in the industry. OEMs and their suppliers are implementing new technologies throughout the manufacturing process right down to the final product. In some cases, production times are down to half what they were only a few years ago. Designs, car batteries, headlights, measurement devices — everything is subject to innovation. Sustainability is also playing an imortant role as companies look to become greener not just with their products but with their processes from start to finish.

This chapter focuses on the innovative practices companies have incorporated, how sustainable processes have been impacted, what has been the effect on production plans and the products that have resulted.

209

CHAPTER 8: INNOVATION & TECHNOLOGY 212

VIEW FROM THE TOP: Carlos Lozano de la Torre, Governor of Aguascalientes

213

VIEW FROM THE TOP: René Schlegel, Robert Bosch México

214

INSIGHT: Lighting Provider Points Laser at Americas, ZKW

215

VIEW FROM THE TOP: Adriana Macouzet, PPG Mexico and North Latin America

216

TECHNOLOGY SPOTLIGHT: SCHUNK Synergy

217

VIEW FROM THE TOP: Francisco Maciel, Faurecia México

218

VIEW FROM THE TOP: Alejandro García, Harman

220

VIEW FROM THE TOP: Frank Deutsch, BYD México

221

VIEW FROM THE TOP: Bjoern Eller, Covestro

222

VIEW FROM THE TOP: Sergio Bautista, ABB México

223

VIEW FROM THE TOP: Rafael Lelo de Larrea, Carl Zeiss de México

224

VEHICLE SPOTLIGHT: Mercedes-Benz E-Class

226

TECHNOLOGY SPOTLIGHT: Desmex Rooftop System

227

VIEW FROM THE TOP: André von Frantzius, Grupo Desmex

228

VIEW FROM THE TOP: Dr. Jesús González, CIDESI

229

VIEW FROM THE TOP: Luis Trápaga, CIATEQ

230

VIEW FROM THE TOP: Ricardo Guerra, CIATEC

232

VIEW FROM THE TOP: Juan Méndez, CIMAV

233

VIEW FROM THE TOP: Alejandro Preinfalk, Siemens

234

INSIGHT: Building the Foundation for Wider R&D Recognition, CIDETEQ

236

PLANT SPOTLIGHT: KIA Pesqueria, Nuevo Leon

211

VIEW FROM THE TOP

A NATIONAL STANDARD FOR SCIENCE AND TECH CARLOS LOZANO DE LA TORRE Governor of Aguascalientes

212

Q: What is the government doing to promote the local

Calsonic-Kansei Mexicana, Tachi-S Latinoamerica and

supply chain, especially with all the new investments

Donaldson. Aguascalientes has become a national

coming to the country?

standard for science and technology with six research

A: The results of an automotive competitiveness study

centers linked to CONACYT. All operate to international

in Aguascalientes performed by the state’s Ministry

quality

of Economic Development in collaboration with the

development and knowledge transfer in diverse areas

Center for Mathematical Research (CIMAT), helped

ranging from information technology to optics and geo-

us create the SME Automotive Impulse Fund. This

referencing. We are developing a PhD network to link

program is focused on helping local SMEs enter the

these professionals to local companies and OEMs in the

supply

automotive and aerospace industries.

chain

and

increases

their

competitiveness

standards,

fostering

advanced

technology

through an integration program, including machinery and technology acquisition, training and management

Q: How successful has the electric taxi program been

systems development. In its first year we distributed over

and what development plans do you have?

MX$124 million (US$6.7 million) to 55 local automotive

A: This administration has developed each initiative as

SMEs. The Aguascalientes government’s contribution

a green project, be it in infrastructure, education, health

was over MX$48 million (US$2.6 million).

or transport. We are constantly working to decrease energy consumption and implement programs that

Q: Once all the new OEMs begin operations, what will

promote clean energy generation.

be the impact on the state? A: The state will have an important role, having brought

The Zero Emissions Green Transport Program started

in the sector’s largest and most important investment

with 50 units operating in the city of Aguascalientes and

projects in recent years. Nissan and COMPAS plan to

in 2016 another 15 units were added, including battery

produce a joint 1 million units per year in Aguascalientes

charging infrastructure. Besides the 50 level 2 stations,

by 2021, representing 20 percent of the projected total

the level 3 and 4 rapid recharge stations and the public

production in Mexico. OEMs outside Aguascalientes

chargers in strategic points of the city, another 15

will have the benefit of a stronger supply chain as

simple wall chargers were installed. This entire network

local providers get the opportunity to join the supplier

generates 400 MWh per year supplying at least 70

network. It is important to have successful local

percent of the electric energy needed to charge the

companies with attractive costs, efficiency, quality

65 electric taxis. Over 9 million kilometers have been

and productivity that enable them to grow and supply

traveled with these vehicles, avoiding the emission

at a national level. Given that Aguascalientes stands

of over 2,850 tons of CO2 into the atmosphere. This

out internationally for its safety and inviting business

initiative has helped us spread awareness on electric

environment, we are receiving numerous visits from

mobility to over 250,000 people.

suppliers on all five continents that work with more than one OEM.

The greatest challenge for Aguascalientes and Mexico in general is to achieve sustainable mobility. We know

What

the

state’s

strategy

for

industrial

the use of electric automobiles is in our future but it

development, particularly in R&D and hard engineering?

is a process that will take time as renewable energy

A: We are promoting the establishment of engineering,

infrastructure must be developed. We know these

research and development centers among companies

projects though long and costly at first are key to

and have had very good results. Some companies are

facilitating the adoption of electric automobiles for

already successfully operating such centers, including

domestic and daily use.

VIEW FROM THE TOP

DRIVING HIGH-TECH INTO THE FUTURE RENÉ SCHLEGEL President of Robert Bosch México

Q: How has Bosch collaborated with its clients in

Q: How is Bosch supporting the growing Industry 4.0 trend?

technology developments on connectivity and telematics?

A: We are a special case since we work as both automation

A: Connectivity and telematics involve an exciting

suppliers for the industry and heavy users of automation

and important area for the industry, closely related

technology in our own plants. As users of automation

to the evolution of the Internet of Things. There are

solutions, we expect savings of US$1 billion by the end of

many applications for these technologies, focusing on

2020, while as providers we expect to generate revenue

passenger safety, comfort and autonomous driving. The

of approximately US$1 billion in the same time frame. We

vehicle of tomorrow will have many variables to deal

have an advantage because we can test our solutions by

with system-wise. The computer must connect with the

integrating them into our operations before releasing them

environment, the navigation system and other drivers

to the market. Bosch understands how the mechanical part

who may not be connected to the information network

of the business works, along with electronics and sensors

but still are part of road traffic. Cars will receive data

involved in manufacturing processes. The industry’s

from their surroundings and transmit the information

evolution will be a gradual process and companies will

to all other vehicles on the road. They will be able to

introduce improvements focusing on the most critical

use this information to determine actions autonomously,

or complex processes first. Operators will also follow

eventually better and more consistently than humans

a healthy learning curve to understand the enhanced

could. The complexity of autonomous driving will depend

capabilities of the machines they handle.

on the environment and the available infrastructure, especially in urban applications. Highway solutions will

Q: How do you perceive the risks between increased

represent less of a challenge and we foresee huge leaps

automation and human capital development?

in technology involving many participants in and out of

A: We have to be honest to address all possible

the mobility industry.

uncertainties. Many technical improvements over the years have caused uproar but they have been dealt with in

Q: What is the biggest challenge for the company in

less than a generation. This evolution will be much faster,

terms of safety features and technology?

affecting mechanical labor and certain services. Humans

A: Automated driving will be safer once we remove the

were better than machines at many tasks but robots can

human factor. Machines are predictable and they apply

now perform certain activities just as well or even better

everything they have learned at the same time and on a

than people. We already see collaborative robots that can

consistent basis, with higher frequency in terms of reading

work next to a human without a cage. Once we breach the

incoming signals and providing outgoing information.

barrier and machines start delivering better results than

Until technology reaches an optimal point, we can support

people we will have to determine how to refocus human

humans in the same way we will eventually support the

labor on even more value-adding activities. This process

vehicle’s computer. Car accidents are among the leading

is especially interesting in regions where labor is highly

causes of death globally, not to mention the economic

cost competitive, as this benefit could slowly disappear

losses related to these types of incidents. Investment in

when machines can offer better results. The transition is

safety technology is not only sensible but also necessary

forcing countries like Mexico to focus on productivity and

and highly profitable for society. Collision warning

ever increasing added value. These two factors will be the

systems are a clear example, along with automatic braking

only way for these regions to retain or even expand their

mechanisms and sensors that detect the amount of time

competitive edge, assuming the government is strongly

the driver closes their eyes. All these features help the

committed to these goals. Rather than fearing this

driver stay in control of the vehicle and will eventually help

inevitable change, we should all try to be a part of it and at

machines do the same.

Bosch we want to help people do just that.

213

INSIGHT

LIGHTING PROVIDER POINTS LASER AT AMERICAS “Laser allows infrared cameras to focus and illuminate

and Queretaro, so Puerto Interior in Silao was a natural location for the company’s plant to be close to the supply

specific objects, enabling the

chain. Guanajuato’s industrial zone offers perfect access

driver to see pedestrians and

pool of experienced automotive technicians who can slot

other cars more easily”

is an additional selling point as nearby airports and

Alfred Macher, General Plant Manager of ZKW 214

ZKW’s suppliers are located in Guanajuato, Guadalajara

to the automotive industry in North America. It offers a straight into any company’s roles. Transport infrastructure highways make Silao a highly connected area. Despite ZKW’s laser innovations, the majority of new

ZKW is a privately owned Austrian company with

developments are in LED lighting as they weigh less than

headquarters and an R&D center in the town of Wieselburg.

standard illumination systems and can be integrated

The provider of lighting and electronic modules has plants

into

around the world, including Slovakia, China and India,

constantly introduced into lighting systems such as light

all following the same strict quality standards. Its latest

beam adjustments. ZKW’s headlights alter their angle

target is the Americas and the soon-to-open plant in Silao,

automatically, moving separate groups of LEDs to dip

Guanajuato will play a leading role in the company’s plan

the beam and avoid dazzling oncoming drivers, while

to penetrate the continent. Mexico is crucial for ZKW’s

simultaneously compensating with brightness from the

business strategy as the newest member of the exclusive

other side of the car. This function is only possible with LED

group of countries paving the way for laser technology in

or laser, as xenon bulbs cannot be adapted in this way. The

lighting systems.

systems that control headlight adjustments are managed

mass

production

vehicles.

New

functions

are

at an in-house unit in Austria solely focused on electronics. ZKW’s focus on new products and technology has helped it to stand out among premium brands. The company’s

Specializing in smaller volumes has permitted ZKW to

global customers include BMW, Mercedes-Benz, Audi,

incorporate advanced technology into its products and has

the Volkswagen Group and Volvo, as well as large truck

placed it among the top three companies worldwide in the

companies such as Scania, MAN Truck & Bus and Volvo

lighting systems field. While it innovates alone, the company

Trucks. Once the Silao plant is up and running by the

has to work hand in hand with OEMs for their car designs.

end of 2016, its manufacturing lines will cater to Volvo,

Limitations can arise because of a car’s motor or exterior

Freightliner, Ford, General Motors and Infiniti. ZKW has

shape, hence the importance of close collaboration. It also

already reached out to Mercedes-Benz and Audi’s local

must comply with each brand’s specifications, such as Audi’

facilities as it supplies headlights for both brands in

distinctive headlight shape that can be recognized at a

Europe and hopes the partnership will continue in Mexico.

distance. ZKW innovation is reflected in design, technology and in the vehicle’s performance. Its lights can significantly

ZKW specializes in the production of lighting systems,

reduce a vehicle’s weight for potential clients. Such is the

primarily headlights, indicators and fog lights for the

case of the Audi Q7, a prime example of a lighter car partly

premium segment. ZKW was the first company to

thanks to different headlights.

incorporate laser light technology in a vehicle, namely for the BMW i8. The difference between LED and laser

Over the next three years ZKW plans to hire between 300

is the headlights’ reach. LEDs allow 200-300m visibility,

and 350 people to run the Silao plant. The company is

while the i8’s laser headlights help the driver see 700m

prepared to employ up to 2,000 workers once operations

ahead and can even illuminate up to 900m in some cases.

are consolidated. The company believes there is plenty

This innovative addition to the product line employs

of potential to supply both Mexican-based OEMs and

the laser’s whiteness to make it feel almost like you are

those in the US. The Austrian company has great plans

driving in broad daylight when it is pitch black. Laser

for Mexico. Introducing product adaptations and new

allows infrared cameras to focus and illuminate specific

technology will be a priority once it is operating fully

objects, enabling the driver to see pedestrians and other

while R&D operations in Mexico City also are being

cars more easily.

considered.

VIEW FROM THE TOP

TECHNOLOGY ATTRACTS BUT COLOR ENCHANTS ADRIANA MACOUZET President and Director General of PPG Mexico and North Latin America

Q: How has PPG prepared for new companies entering

How

can

PPG’s

technology

contribute

the

the market?

environmental strategies of its clients?

A: We have grown in all the segments we are involved in to

A: We develop solutions that help optimize our clients’

become the leader in paint and coatings for the automotive

paint usage, reduce volatile emissions and lower energy

industry. Our products are present in every OEM in Mexico

consumption. When a new assembly plant is built the area

and eight out of 10 cars are manufactured with at least one

that requires the largest investment is the paint shop. This

PPG product. Between 2012 and 2013, we foresaw the boom

section uses more water and energy than the rest of the

of new automotive OEMs so we decided to proactively

assembly plant so any contribution we can offer makes a

expand our operations, anticipating growth in demand for our

huge difference. Normally, cars need at least four coats:

solutions. We called our expansion plan the Monarca project

electrophoretic protection, a surface primer, color and

because the Monarch butterfly passes through Queretaro

finally the clear coat. Between these layers there needs to

on its journey to Michoacan. But it was also an allegory for

be a baking process, resulting in at least three bakes for

the company’s endurance and the transcendence we want

each car. Our goal is to reduce the baking processes to

to accomplish. We increased our production capacity by

lower gas and energy consumption, as well as paint and

approximately 30 percent, built four new buildings to ensure

water usage. We developed our B1:B2 compact process,

better working conditions for our employees and invested in

where we eliminate the surface primer and one of the

laboratories dedicated to product design. We also added a

bakes. The savings for our customers are considerable and

Robotics Automotive Center where we have similar robotics

the paint shop area can be reduced to approximately half

equipment to that used in OEM facilities.

the original size.

Q: What makes PPG the industry leader and what is your

Q: Apart from these innovations, what other state-of-the-

advantage over your competitors?

art products does PPG offer OEMs?

A: Our biggest difference is the service we offer and the

A: Our electrophoretic coating Enviro-Prime EPIC is the

quality of our aftersales operations. Paint transforms when

eighth generation of our cathodic deposition solution. In

applied in the client’s plant and if the conditions are not

this process, the car is submerged in a container where the

appropriate the final result will not be optimum so we

coating is applied by electric potential difference, allowing

must work closely with our clients, making us consultants

it to reach all cavities and making the car completely

rather than just suppliers. Paint is the first or second thing

corrosion-resistant. In terms of color, the ANDARO

you notice about a car so the added value we bring to our

line is one of our main products. These are special-

customers is immeasurable.

effect pigments that offer more depth and better color saturation with excellent resistance to UV radiation. We

Our leading technologies and diverse product portfolio also

are also introducing new pretreatment products as part of

make us a forerunner in the industry. PPG offers adhesives

our ZIRCOBOND line based on zirconium instead of zinc

and sealants, noise isolation products, pretreatment

or manganese, resulting in better deposition efficiency

solutions and several other products used in the paint shop.

with the same corrosion-avoidant results.

We even provide detackifying solutions that minimize paint waste, resulting in less water consumption. This allows

PPG acquired Grupo Comex in November 2014 so we can

water to be recycled easily and more effectively. Our local

also offer solutions for the entire infrastructure, either for

production offers a final advantage to our clients as we can

maintenance of current facilities or for greenfield plants.

respond faster to any request. The automotive industry is

This helps us build a stronger relationship with our clients

one of the most demanding sectors regarding Just-in-Time

from the beginning of their operations, providing an

operations so we must stay close to our customers.

integral paint and coatings solution.

215

TECHNOLOGY SPOTLIGHT

SCHUNK SYNERGY

216

Proper automation requires powerful and effective tools.

to undertake any task. Meanwhile, SCHUNK’s gripping-

SCHUNK

superior

systems division develops grippers, rotary and linear

components thanks to the company’s innovative portfolio,

modules, robot accessories, modular assembly automation

which results in a harmonized interplay of clamping

and stationary and mobile gripping solutions. These

technology and gripping systems for turning, gripping and

tackle all challenges companies may have with material

handling. SCHUNK’s product integration allows them to

handling. SCHUNK’s solutions ensure faster loading

access their equipment’s true potential. For lathes, we provide

and tool changing operations that maximize a systems’

solutions from powerful chucks, precision toolholders and

productivity by creating more efficient and process-stable

the largest standard chuck jaw range, up to special chuck

machine tools.

Synergy’s

customers

benefit

from

jaws and hydraulic expansion toolholder solutions. SCHUNK Synergy allows for complete integration by SCHUNK can provide full coverage for a unique spectrum

unlocking a company’s true manufacturing potential in

of machining requirements by using innovative and highly

all machining and production processes. This leads to

precise toolholder systems alongside the largest modular

strong cost reductions that combine accurate and flexible

system of stationary clamping technology. This allows it

workstations with dynamic production automation.

VIEW FROM THE TOP

ANTICIPATING THE NEEDS OF FUTURE MOBILITY FRANCISCO MACIEL CFO of Faurecia México

Q: What designs do you have in the pipeline and how

it. To improve vehicle efficiency, this energy can heat the

are you collaborating with other parties on technology

vehicle’s cabin or recharge the engine’s battery.

development? A: Stanford University has collaborated with Faurecia,

Q: What role do you expect Mexico to play in Faurecia’s

investigating

global operations?

the

interior

changes

required

for

autonomous car. This design process will be gradual

A: Mexico is a strategic location for the automotive

because at first passengers will not trust a machine

industry and Faurecia is preparing three new plants.

enough to truly relax. Cars will only be autonomous for

Two in San Luis Potosi will manufacture seating frames

certain roads so the driver will need adaptable seating to

and interiors while Puebla will be home to another plant

take control when necessary. With time we can develop a

targeting Audi’s operations. We are also expanding our

style that allows for a greater variety of uses.

plant in Queretaro to cater to our upcoming projects.

On the manufacturing side, we are already producing

Many of Faurecia’s inventions have come to Mexico. Some

parts made of natural fibers in our Puebla facilities. This

of its developments include technology for seats and an

technology was developed following the acquisition of a

award-winning adaptive valve for exhausts, which plays a

company that specializes in cultivating industrial hemp

critical role in weight reduction as it halves total muffler

to reduce the weight of plastic parts by 30 percent. Our

weight. This active contribution to vehicle weight savings

Active Wellness solution has seat sensors designed by

helps make each vehicle more fuel efficient. While this

NASA that measure the driver’s heart rate and breathing.

was created in North America, all technological advances

If the seat detects the driver is falling asleep, it sends

permeate other markets and increase our worldwide

countermeasures to wake them up. Similarly, the seat can

competitiveness. In Mexico, our projects vary depending on

adjust ventilation or ambient factors to alert the driver.

what local clients want us to create for them. For example,

The technology could even allow a doctor to observe the

Volkswagen has offered us an opportunity to develop a

driver’s long-term heart-rate patterns and for emergency

platform using natural fibers. To create innovative and

services to know how many passengers were in a crash.

ergonomic products we have a team of more than 5,000

While not yet integrated in vehicles, Faurecia is developing

R&D engineers worldwide, although some R&D operations,

it to anticipate the market’s need.

such as our composites manufacturing or electronics research, are managed via alliances with companies and

Q: How do you contribute to protecting the environment

universities.

through your operations? A: The growing need for sustainable mobility in the

Q: Which areas do you hope Mexico will improve to

automotive industry encourages us to be wary of weight

preserve its growth rate?

and this applies across all operations. The goal of the

A: The difficulties Mexico faces begin with an excessive

majority of our innovations is to make lighter pieces

demand for engineers. Those that are qualified for highly

and reduce fuel consumption. Faurecia technologies are

specialized manufacturing are already employed and

designed to cut up to 100kg per unit, which means a 10g

those that are available tend to have little experience

reduction in CO2 pollution per kilometer driven.

in product development. We expect this challenge will intensify in the Bajio region, especially with BMW’s arrival,

We are also working on technologies that increase

Ford expansions, and Tier 1 and 2 companies arriving with

efficiency. About 30 percent of the energy in fuel is lost

them. To face this issue, Faurecia contracts engineers with

as heat in the exhaust system. We have technology that

potential to grow and offers them training here in Mexico

recovers heat from exhausts in hybrid cars and recycles

and abroad when possible.

217

VIEW FROM THE TOP

MEXICO SOUNDS JUST RIGHT FOR AUDIO GIANT ALEJANDRO GARCÍA Vice President North America Operations of Harman

218

Q: How is Harman positioned in the global audio market,

change we make to our processes without wasting time

especially in the automotive segment?

or material by trial and testing. Once we understand an

A: Harman has surpassed US$6.5 billion in sales globally

issue we can redesign and improve our processes. Harman

with more than US$23 billion in projects and orders ahead

is the market leader in connected car solutions to the

of us in the automotive industry. We are leaders in several

world’s automakers. Our innovative and highly integrated

divisions, thanks to our 16 brands in 25 countries. With our

infotainment technologies offer automakers the most

global team of 28,000 people we have obtained 5,900

complete solutions for advanced navigation, intuitive user

patents and in 2014 we earned 51 design awards, not to

interfaces, integrated audio, device connectivity, cyber

mention three Grammy Awards and two Academy Awards

security and connected safety.

as a result of continuous innovation from our 12,600 Q: What are your proudest achievements in terms of

engineers, designers, and process technicians.

innovation and technology in recent years? Q: How are Harman’s many specialties divided to offer

A: We developed systems such as Clarifi, which takes a

the ideal service to each client?

low-quality compressed audio file and converts it so

A: Harman splits its activities into Connected Car, Lifestyle

the user can enjoy it in higher quality. Clarifi works by

Audio, Professional Solutions and Connected Services. In

modifying a limited frequency, allowing the sound to be

the year to Q1 2016, sales in the Connected Car division

understood more clearly by the brain. Also, the number

reached approximately US$3 billion, Lifestyle Audio made

of Harman speakers in a car can vary from six to 20,

US$2 billion, Professional Solutions totaled US$1 billion

achieving the best sound experience possible. Harman

and Connected Services closed at US$500,000.

has also managed several alliances and joint ventures with Microsoft and Google among others to achieve the

The

Connected

Car

division

develops

navigation,

desired connectivity in cars.

multimedia, connectivity, safety and telemetrics services for the automotive sector. Lifestyle Audio creates premium

As car manufacturers target lighter vehicles, noise-

consumer branded products for general use including home

isolation material in the cabin is reduced to lower fuel

theatres and infotainment centers for cars. The Professional

consumption. Under the HALOsonic name, Harman’s

Solutions division caters to large events in terms of audio,

technologies can produce sounds that counter the noise

lighting and video for entertainment companies, concert

of the engine thereby increasing audio comfort inside a

halls and airports, to name a few. Connected Services

car. Similarly, since pedestrians do not usually hear an

develops the software needed to link the other three

electric car as it approaches, HALOsonic technologies can

divisions. Harman is known worldwide as Harman Kardon,

electronically simulate the sound of an engine to remove

Bang & Olufsen, Infinity, JBL, Bowers & Wilkins, among other

the danger inherent in vehicles that make almost no sound.

brands in the Lifestyle Audio section. Within Professional Solutions, AKG, AMX, BSS, Lexicon and Crown are some

Harman has R&D operations in Queretaro, where 50

of the brands we manage. Within Connected Car and

engineers are creating software and designing products

Connected Services, we operate under the Harman name.

for the company. We develop full systems from scratch and we collaborate with OEMs to consider the number

Q: What are the technological and production processes

of speakers, as well as the engine’s noise and resonance

that ensure the quality of your products?

within the unit while engineering our product.

A: Any time we find a problem, we analyze the system and processes to avoid mistakes in the future. By following

Q: How does your plant in Queretaro contribute to your

a scientific method, we can project the result of any

position in the automotive industry?

219

A: Harman International’s goal is to capitalize on our

Q: To what do you attribute Harman’s impressive growth

brands, diversify and grow in emerging markets while

in Mexico?

optimizing costs and capital structures. The plant in

A: Our human capital is the key to our success as

Queretaro specifically contributes to these three main

a company. Our recruitment process is based on

pillars by expanding our technological leadership.

identifying talent rather than just focusing on studies and experience. Depending on whether candidates

Our company is number one in infotainment for Audi,

display interpersonal traits, are fast learners or work with

though our clients include BMW, Chrysler, Ferrari, General

structure, we can place them in the level of responsibility

Motors and Hyundai. We are already creating head units

and area most suited to their particular talent. New hires

for Audi’s new production operations in San Jose Chiapa,

must be as enamored with the company as we are to

Puebla and are preparing our local team and installations

maintain Harman’s high quality. We provide the best

for the entrance of BMW to San Luis Potosi. A product

training possible to certify new staff in their area and to

specifically for Mercedes-Benz’s plant in Aguascalientes is

ensure they begin with excellent skills. We even sponsor

planned for the second half of 2018.

certain employees who want to continue their studies and those already working can accelerate their career

Our plant in Ciudad Juarez, Chihuahua focuses purely on

development according to the experience they acquire

speakers but the two Queretaro facilities produce head

while working for Harman.

units. The larger of our two plants in Queretaro employs almost 1,800 people and we expect that to grow by 200

Q: What recommendations would you offer Queretaro

people over the next fiscal year. While it is a fledgling

universities to generate better prepared graduates?

plant, it has developed exponentially and our success in

A: There is a lot of room for improvement, especially

Queretaro has been palpable.

in electronics R&D, design, software and hardware. Regarding the manufacturing divisions, there are gaps

The last four years of hard work have positioned us as the

in knowledge particularly in electronics. To combat this,

top Harman plant worldwide. The first sale from our Mexican

we have a handful of methods to provide universities with

production in 2011 paved the way for the US$1 billion in sales

feedback. Harman Experience invites university students

we have reached with a single plant. Our second facility in

to meet our human resources team, to visit our plant and

Queretaro will support similar brands, expanding Harman’s

inspect vehicles that have Harman equipment installed.

existing operations to meet growing demand from OEMs

We offer direct internships to universities across all areas

including FCA, BMW, Volkswagen, Daimler, Subaru, KIA,

of production. Many of these interns remain with Harman

Hyundai, Ford, Audi, General Motors and Maserati.

and continue growing after they graduate.

VIEW FROM THE TOP

ELECTRIFYING THE HEAVY VEHICLE MARKET FRANK DEUTSCH General Manager of BYD México

220

Q: How did BYD shift its business line from making

Q: How is BYD pushing for better conditions, such as

batteries to manufacturing cars?

governmental incentives for hybrid and electric vehicle

A: BYD is still the leading rechargeable battery maker in the

usage and infrastructure?

world but we have become an electric company with an

A: Some minor incentives have been created for electric

automotive business area. BYD is working on energy storage

light vehicles — no emissions verifications are needed,

projects and we plan to increase the capacity of our battery

for example — but this is not enough. Germany just

production over the next two to three years, transitioning

passed a new regulation wherein users receive a €5,000

from 10GW to 15GW production capacity. We see the

(US$5,500) discount when purchasing an electric vehicle

automotive industry as the perfect vehicle for our battery

(EV). The Federal Electricity Commission (CFE) is

and electric motor technology. We are the only heavy vehicle

evaluating the implementation of charging facilities in the

OEM in the global market that can manufacture its own

country, which may slowly add pressure to increase the

batteries, electric motors and the controls that run them.

market. Public transportation is a dramatically different

After we decided to use our iron-phosphate batteries in

scenario because charger networks are not essential. Our

transportation, we immediately acquired a company within

batteries have a 250km autonomy range, which will be

the automotive segment. Batteries that can withstand up

expanded to 300km by 2017. That will be plenty for the

to 4,000-5,000 charging cycles and have average lifespans

standard application of our vehicles. Even though there

of 13.5 years have been inserted into our vehicle lines. Once

are clients who will exceed this, we can design a solution

they become obsolete for vehicle usage, they can be reused

to fit them. Our vehicles are slightly more expensive than

for wind and solar energy storage.

comparable products but the benefits are much greater, reducing costs over a product’s lifetime.

Q: What is BYD’s global strategy for its automotive segment?

Q: How is BYD reaching out to these companies and what

A: Demand for our gasoline passenger vehicle comes mostly

support has BYD received from the government?

from China. Even though BYD sells these vehicles in the

A: The problem we have faced in public transportation

Latin American and South Asian markets, major consumers

is that few companies are government-owned. Having

like Brazil, the US, Mexico and Europe are protected

a concessionary system leads to excess bus supply as

markets, making it extremely difficult for external players

union fees are awarded on a monthly basis. This creates a

to gain recognition. Our hybrid and electric vehicles have

private interest to expand the number of owner-operators

proven to be very attractive, pushing us to promote them

in the city. BYD needs to engage directly with a financially

in different markets. Nonetheless, the peso fluctuations’

stable operating company to reverse the owner-operator

impact on import volumes has significantly restricted us as

plan. The Metrobús project is the clearest example of how

prices have risen beyond the consumer’s purchasing power.

government input can quickly change the city’s culture and improve traffic flow.

What

does

BYD

identify

Mexico’s

biggest

opportunities?

We are in the process of picking three strategic customers

A: Regardless of the specific energy strategy in a given

that will help us expand here by showcasing our product

country, demand for electric vehicles is rising globally. A

lines. But, transport companies are still lacking the right

perfect example is Saudi Arabia. Producing and exporting

incentives in Mexico. Washington’s policymakers had a

petrochemical products does not change the fact that the

clear strategy to reduce polluting emissions and they

country is a primary pollutant. If we also take Mexico’s fuel

implemented electric transport using resources channeled

prices into consideration, we can present a solid argument

from both federal and state governments, as well as from

for hybrid and electric vehicles.

private organizations.

VIEW FROM THE TOP

MATERIALS GIANT FLIES SOLO BJOERN ELLER CFO of Covestro

Q: What led Bayer to carve the MaterialScience business

sunroofs and windows. With sustainability in mind, our

out into a separate entity creating Covestro?

coating business has developed a new self-repairing coating

A: Bayer wanted to focus purely on the LifeScience

that eliminates the need for new paint to repair scratches

business. The separation was beneficial for both Bayer and

on the car. Together with a major German energy company

MaterialScience since we had been competing for resources

and RWTH Aachen University, we also developed innovative

internally for years with the LifeScience part of the company.

technology to use CO2 from the air and transform it into a

Healthcare and CropScience are still part of Bayer’s portfolio,

raw material for our production process. Even though this

while the MaterialScience business was carved-out and

technology is still not available in the market, it is a major

converted into Covestro. We now enjoy strategic freedom

breakthrough as it does not only reduce the use of certain

to execute our own asset optimization. Bayer owns over 60

oil derivatives in our production process but contributes

percent of our shares but its clear long-term strategy is to

actively to the elimination of CO2 pollution.

reduce its Covestro shares down to zero. Q: How do you incorporate the automotive industry’s Q: Which megatrends are shaping your innovation strategy?

projected growth into your strategy in Mexico?

A: Our global strategies focus on megatrends such as

A: Our three divisions cover Polyurethanes (PUR),

scarcity of fossil resources, urbanization and the onset of

Polycarbonates (PCS), as well as Coatings, Adhesives and

climate change. We help our customers design and develop

Specialties (CAS). Six out of the seven announcements of

innovative products that reflect these issues and promote

foreign direct investment by major OEMs worldwide have

sustainable applications. We believe sustainability should

been dedicated to Mexico between 2014 and 2016. This

be considered at the early stages of every production

shows the market here will continue to grow. Our goal is

process. We are working to make cars lighter, helping

to work hand in hand with our customers and OEMs to

to reduce fuel consumption significantly. For example,

support them with our technical knowledge and services,

substituting glass for polycarbonate reduces the weight of

guaranteeing an efficient distribution network. Our clients

components by almost half. About 15 percent of a car was

are mainly Tier 1 and sometimes Tier 2 suppliers. These

made with plastics in 2015. Studies show that by 2020 this

companies represent the most important segment for

percentage will grow to 25.

Covestro.

Our intention is to produce more environmentally friendly

Q: What strategies are you implementing to keep growing

plastics by reducing waste during our manufacturing

your stock price?

processes. We are using more efficient technologies

A: The key strategies in capital markets are communication,

that consume significantly less energy than traditional

transparency and reliability. Being a newly listed company

processes. Practically all of our products are produced in

we are focusing on building our credibility in the market. Our

the NAFTA region, giving us a competitive advantage on

investor relation department is in constant dialogue with

delivery times and costs, and helping to reduce pollution

our equity and debt investors. Although our share price has

from transporting goods.

grown to more than €40 (US$44.7) since our initial public offering in October 2015, we still depend on the overall

Q: How is Covestro participating in sustainability trends?

stock market’s development. We also have a chance to

A: We are working closely together with electric car OEMs

communicate what Covestro stands for. Our objective is to

and scientific research centers that use our materials for

increase awareness of our products’ applications. We expect

designing parts for these vehicles. Our Bioplastic mixture

to end the year with mid to high single-digit growth of our

of biological and inorganic plastic parts was designed for

core volume, freeing up operating cash flow and earning a

electric car batteries. Other applications include glazing,

higher premium over our cost of capital than in 2015.

221

VIEW FROM THE TOP

COLLABORATE, SIMPLIFY, DIGITALIZE SERGIO BAUTISTA Local Division Manager of Discrete Automation & Motion and Local Business Unit Manager of Robotics at ABB México

222

Q: What is ABB’s take on the growing Industry 4.0 trend

controllers. As a result, we could “call” them whenever we

and its impact?

needed data. Unfortunately, this solution presented several

A: Collaboration, simplification and digitalization are the

challenges in signal reception, Internet connectivity and

bases of Industry 4.0 and the idea of the “factory of the

manufacturing. It was a good idea but the technology

future.” Collaboration is the new buzzword in robotics,

had not advanced enough to deliver an efficient solution.

indicating people safely working side by side with robots.

Today, our Connected Services platform is interconnected

It also means robot integration with production and

via 4G and the communication device is embedded in the

business planning systems, rather than individual cells or

controller. Internet security has also become much more

islands of automation. This is already part of ABB’s DNA.

advanced for better integration.

The company works with its customers to develop tailored and application-specific solutions. Improving the end-user

As automation needs and systems become increasingly

experience has been the primary mission guiding ABB’s

complex, simplicity becomes a key driver. This urges

product development, resulting in a new era of industrial

system

robotics. The end game for the company is to create

maintenance crews to have intuitive and easy to use

new robot models that consume less energy, require

human-machine interfaces (HMI). Previous analog HMIs

less maintenance and have a significantly lower carbon

were overly technical and could only show raw data such

footprint. Digitalization is also a growing facet of Industry

as motor currents, voltage failures or mechanical stress.

4.0. Many manufacturers recognize the importance of

This has evolved into complete dashboards that show

evolving to more efficient and reliable digital technologies

every aspect of the robot and are accessible on smart

but the path is not always clear.

phones or tablets at any time and place. Data also can

designers,

programmers,

operators

and

show the equipment’s efficiency and its participation in

In the factory of the future, an order placed from an end customer will trigger an entry into a supplier’s ERP system, scheduling production and necessary activities all the way to delivery confirmation

overall production. The robot acquires almost the same characteristics as any mobile device, which is the basis of the Internet of Things. Eventually, the programmer will cease programming the robot, focusing on teaching, monitoring and connecting the equipment as intuitively as any cellphone on the market. Q: How can this data be integrated into a resourceplanning solution? A: In the factory of the future, an order placed from an end customer will trigger an entry into a supplier’s Enterprise

Q: How has ABB innovated to integrate these ideas into

Resource Plan system, thus scheduling production and

its products?

necessary activities all the way to delivery confirmation.

A: ABB developed a platform named RobotStudio over

This is already standard in retail operations and will

12 years ago, which focused on digitalizing our own

become increasingly common in the automotive industry

equipment and offered remote services for our robots.

as well. A robot’s ability to contribute as part of the

This breakthrough took place many years before the

Internet of Things becomes critical in this interconnected

term “Internet of Things” was even coined. The company

ecosystem. Rather than individual products, optimal

also developed a remote service solution for monitoring

solutions are often pre-engineered as modular systems

equipment. The platform was previously based on GPRS

that are easy to install, integrate and program, delivering

technology so we added a SIM card and an antenna to our

superior productivity with reduced set-up times and costs.

VIEW FROM THE TOP

SOLUTIONS FOR INTELLIGENT MANUFACTURING PROCESSES RAFAEL LELO DE LARREA Director of Industrial Metrology at Carl Zeiss de México

Q: What impact is the 4.0 Industry having on Zeiss IMT?

A: Metrologists are in high demand because they can perform

A: Despite the digitalization and automation processes the

quality inspection services. Mexico is in need of well-prepared

4.0 Industry demands, this new technological wave does

engineers, capable of managing cutting edge technology.

not replace jobs. It helps people focus on making better

We offer the Aukom certification (Coordinate Metrology

decisions, improving processes and helping companies

Training), which reinforces and certifies our workers’

become better at what they do. Zeiss Industrial Metrology

knowledge of tolerance, statistic magnitudes, legality,

wants to eliminate the routine of operating a machine

measurement techniques and quality control of measurement

and enable operators to use their time for the creation of

equipment and production lines. The certification, granted

more efficient and better-quality products. An example

by the industrial metrology department of Zeiss de México,

of the benefits digitalization and automation bring to the

and training enables workers to meet their quality, efficiency

industry is the PiWeb software designed and patented

and safety goals on the manufacturing of the final product.

by Zeiss. It specializes in the analysis of process quality

Accrediting more engineers and companies would contribute

in real time and the interpretation of data obtained from

to the growth of the local manufacturing industry, increasing

measurements. It allows companies to detect any kind of

our competitiveness.

anomaly and provides a fast solution. For Zeiss’ clients, PiWeb is the key to practices in the 4.0 Industry.

Q: How does Zeiss raise awareness of the advantages of its products among its clients?

Q: What innovations in alternative metrology techniques

A: We promote our products through constant participation

is Zeiss IMT working on?

in forums and expos that focus on innovation in the metal-

A: Innovation is fundamental to Zeiss IMT. Every year we

mechanic, automotive and medical devices industries. It is

invest 10 percent of our profits in innovative techniques.

important to stay close to our clients so we can ease their

The Carl Zeiss Foundation also funds our R&D department

doubts and to see their needs first-hand. We also forge

to help us create solutions that will allow businesses and

strategic alliances with research institutions. We teamed

companies to reach their objectives in a competitive

up with the Center for Advanced Technology (CIATEQ) to

industry. Our O-Select vision equipment is the result of our

develop the first Laboratory of Industrial Tomography and

constant innovation. It enables companies to find micron

Correlated Microscopy in Mexico. We expect the laboratory

errors through automated complex measurements. The

to provide almost 5,000 companies with access to its

technology makes the product among the most advanced in

technology and consultancy services.

the automotive industry, providing precision, simplicity and better-quality control on production processes.

The success of our clients is paramount for us. That is why we offer consultancy throughout the entire

In addition to the O-Select equipment, in 2016 Zeiss

purchase process. We assess the needs of our clients,

IMT introduced the Metrotom. Through contactless

provide recommendations and perform trial tests on the

technology, it guarantees the highest precision and quality

recommended equipment and software. Our relationship

on final results, reducing margins of error. The growing

with customers does not end after a sale, it is only the

importance of SMEs as Tier 2 and Tier 3 companies

beginning of a long relationship. Our equipment has a

inspired us to develop Duramax LTE, which enables SMEs

trackable serial number that allows us to perform follow-

to use the same technology as OEMs and Tier 1 companies

ups. We also have a highly specialized technical service

but at lower prices.

team that periodically performs maintenance services on our equipment, complemented with measurement,

Q: How does the company ensure its employees are

inspection of parts through computerized tomography and

specialized in metrology?

online services to guarantee appropriate response times.

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VEHICLE SPOTLIGHT

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MERCEDES-BENZ E-CLASS The 10th generation of the Mercedes-Benz E-Class made its debut in Mexico City in 2016 with the brand’s evolution in technology and design on full display. The iconic model now has a completely renovated driving experience that combines elegant design with innovative technology. Only two versions are available in Mexico, the E 200 Avantgarde and the E 200 Exclusive. Two more models, the 250 Avantgarde and 400 Avantgarde, are expected later in the year. In terms of features, the Exclusive and Avantgarde are practically the same. The real difference is on the outside. While the Exclusive has a more commanding and elegant look, the Avantgarde has a sporty edge. Both versions include a 4-cylinder inline turbo engine and a nine-speed 9G-TRONIC PLUS automatic transmission, capable of 184hp and 300Nm of torque. Inside, the E-Class has two high-definition, 12.3-inch displays, joined beneath a glass surface. One is directly in front of the driver and the other sits atop the central console. Mercedes-Benz introduced touch controls to the E-Class’ steering wheel, and the infotainment system also includes a touchpad in the centeral console, capable of recognizing handwriting. An active emergency servo brake system alerts the driver in case of an imminent collision, supports all emergency braking situations and autonomously brakes if necessary. The model comes with energy-saving LED lighting technology, plus ambient lighting with 64 color options. The new E-Class takes safety features to the next level, with the PRE-SAFE Impulse Side and PRE-SAFE Sound protection mechanisms. The PRE-SAFE Sound system emits a short signal when an imminent collision is detected, preparing the car’s occupants for the sound of the crash. When the collision takes place the PRE-SAFE Impulse Side inflates an air chamber on the driver's side and on the side of the front passenger closest to the impacted area, increasing the distance between the occupant and the actual shock. The system is part of the Driving Assistance package PLUS. The E-Class features active assistance for lane changing and Remote Parking Pilot. This system controls the vehicle via a smartphone app so the driver can move it in and out of tight parking spaces remotely. Drive Pilot and Distronic maintain speed and distance behind other vehicles at up to 210km/h. These features prompted the US state of Nevada to award the E-Class the first license plate given to any car in production for autonomous driving.

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TECHNOLOGY SPOTLIGHT

ELECTRIC POWER FROM A ROOFTOP Desmex’s Rooftop solutions take advantage of Mexico’s prime geographical position for solar energy. They represent a profitable investment with at least 25 useful years and a warranty lasting 10 years. Following a regular high-consumption domestic rate established by Federal Electricity Commission (CFE), the Basic Rooftop system breaks even in the sixth year and generates increasing savings from the seventh year. If the tariff is revised, these intervals could be reduced to three years of expenses with only savings after that. Overall, the Rooftop system represents more than 2,500km/W and more than 20,000km of driving

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per year, eliminating approximately 48.6 tons of CO2 Electric vehicles are new to the Mexican market and their

emissions. The energy produced by the solar panels

charging infrastructure is still under development. This has

and the inverter can be used for the vehicle, for general

forced OEMs to develop their own technology and offer

consumption or it can be transmitted to CFE’s network

it directly to the consumer. BMW went one step further,

and lead to further savings.

implementing solar charging stations in line with its vision of sustainability, savings and energy independence.

The systems can be installed with translucid modules or

The company found a partner in solar compay Desmex,

architectonic integrated solutions. The client can also

which creates solutions that include the evaluation of the

choose between basic and advanced solutions. The first

required equipment, complete installation of high-quality

solution features six Solarnova SOL 260GT solar panels

solar panels and an efficient photovoltaic design for

and 1,560Wp of installed power, while the latter includes

significant energy savings.

eight solar panels and 2,080Wp.

VIEW FROM THE TOP

HARNESSING THE POWER OF THE SUN ANDRÉ VON FRANTZIUS Commercial Director of Grupo Desmex

Q: How have you translated your experience in the solar

consumption. We try to establish long-term contracts,

industry to the automotive sector?

to become a socially responsible corporation. We offer

A: The world is moving toward electric mobility. BMW is

to cover parking spaces for the disabled and for electric

one of the sector’s pioneers, offering an electric vehicle

vehicles with our panels but the final goal is to cover the

with three different speeds of charging stations. Each

entire lot. Industrial and commercial tariffs are low, so the

charger has different power requirements to rein in costs.

return on investment for a solar project of this magnitude

BMW located a strategic partner in the solar industry for

could take 11-12 years to materialize.

each of these stations. This was innovative because the paradigm was energy centralization. In the future, energy

Q: How are tariffs expected to work for the final customer

will be generated locally for individual consumption and

in public electric vehicle charging points?

stored for transport applications.

A: Even though the market has opened up, energy consumption and commercialization are still under CFE’s

Desmex is collaborating with BMW as a solar panel

control. But clients are now able to generate their own

manufacturer. In 2013 we acquired the German company

energy or look for cheaper options from competitors in

Solarnova, which has 35 years of experience in the solar

the market. The public infrastructure offers energy free

market. Solarnova is capable of producing different

of charge to electric vehicle owners to incentivize the

solar panel technologies, namely a regular mono or

market. Once there is more penetration, the government

polycrystalline solar panel and a translucent panel for

might introduce a subsidized tariff, eventually moving

architectonic integration. We added a third technology

toward real energy costs.

based on glass film. The advantage Mexico holds over the US is that there are no snowstorms so we are not required to use actual glass in construction. These glass film panels can also be used for architectonic integration and are much lighter than regular glass. Q: How is Desmex participating with other companies to develop BMW’s charging stations? A: We have an indirect relationship with players on different

Mexico is committed to 35 percent of clean energy sourcing by 2024

parts of the process. BMW organized tenders for each step leading to our closing the contract, as did Schneider, GE

Q: What is the status of Desmex’s solar project for

and every other company involved. Schneider focuses on

Guanajuato Puerto Interior?

the charging infrastructure and the connection between

A: The project will be unveiled in October 2016. We are

the car and the station. As vehicle plugs are universal, most

already working on the second stage and have landed a

companies can use BMW charging stations' technology.

five-year contract with one of the park’s tenants. These

Clients need only decide between a supercharger, a fast

are difficult negotiations that depend on energy prices

charger or a regular charger.

and the duration of the contract.

Q: How is Desmex evolving to adapt to the increasing

Although we have submitted a higher price, we offer the

demand for charging infrastructure?

advantage that a project of this type takes only five years

A: Desmex has a specific solution for parking lots and

to see a return on investment. This initial stage has an

malls based on solar roofs. Building owners are our direct

energy capacity of 3MW, while the second will add 10MW.

clients, while they charge the user for the vehicle’s energy

We are planning a third phase for an additional 10MW.

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VIEW FROM THE TOP

INTENSIVE RESEARCH UNLOCKS MANUFACTURING POTENTIAL DR. JESÚS GONZÁLEZ Director General of CIDESI

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Q: How has CIDESI established its position as partner for

In the US, manufacturing data is ranked even higher in

the automotive industry in the Bajio region?

complexity than government data, so we have to resort

A: We actively promote the expertise of the Research Center

to Big Data analyses to truly understand our machines

of Industrial Developments (CIDESI) through company visits

and give them the necessary information to autonomously

so clients can explore our facilities and see first-hand how

make decisions. This part of our research has attracted the

successful we have been in the auto sector. Having created

most important specialist in Mexico, Dr. Adolfo Guzmán

integral production lines for the most important automotive

Arenas. Working with the leader in this sector is crucial to

companies in the region, we have attracted new clients

the development of this department. CIDESI also has an

and incorporated new technology to our manufacturing

association with Tecnalia. Over the last 20 years, several

operations. Approximately 30 percent of the projects we

entities have merged to work on strategies oriented to the

manage target the automotive or auto parts industry. We

“Industry of the Future” through Tecnalia.

have 12 directors and each is responsible for promoting one of CIDESI’s areas. We must continue to work on projects

Q: What are CIDESI's technology development priorities?

that offer global competitiveness to companies in Mexico,

A: We are focusing on adhesives that can be used on

ultimately convincing these same corporations to relocate

materials that have previously gone through a surface

their R&D operations. Unfortunately, CONACYT enforced

treatment process like carburizing or nitriding. Preparation

budget cuts at the beginning of 2016 of more than MX$500

for these components is essential to avoid any deformation

million (US$27.3 million). That affects CIDESI’s budget

after the coating application. On the other hand, additive

so we need to see how we can reshape our plan to keep

technologies have become a strong trend in the industry

supporting domestic industries.

as well. Combining these solutions leads to a hybrid manufacturing process capable of producing highly

Q: What projects is CIDESI developing specifically to

complex parts that would be impossible or extremely

cater to the shift to Industry 4.0?

costly to fabricate otherwise. We just integrated our first

A: To successfully lead digital change in manufacturing

hybrid equipment with the hope of offering more efficient

we must process an unbelievable amount of information.

solutions to our clients.

VIEW FROM THE TOP

TECH LAB DESIGNS PROGRESS FOR SUPPLY CHAINS LUIS TRÁPAGA CEO of CIATEQ

Q: What is the scope of CIATEQ’s contribution to the

A: The design and engineering of special devices and

automotive industry?

machines is among CIATEQ’s main strengths. For a long

A: The Center for Advanced Technology (CIATEQ) is an

time, collaboration with clients was achieved through

advanced technology center that possesses significant

traditional face-to-face meetings during the conceptual,

human and infrastructure capacities for the design,

basic and detailed engineering stages. Our engineering

modeling and manufacturing of machinery used in

rooms now enable us to work in different cities and

many industries, including the automotive sector. The

review jointly, in real time, the advances made on projects,

facilities in Aguascalientes, San Luis Potosi and Hidalgo

especially regarding design and the inclusion of new

have developed the greatest number of projects for the

concepts. This way, our clients can contribute with fresh

sector. Between 2007 and 2015, CIATEQ conducted 83

ideas during the project’s execution stage.

technological development projects and 133 services for the industry. Projects conducted for VW, GM, Nissan

CIATEQ also has the necessary infrastructure to perform

and Honda stand out among our most successful

virtual manufacturing projects or simulation of production

collaborations, as does our support for the improvement

processes for unitary or global operations. It is a very useful

of production processes at Tier 1 companies, namely

tool, especially when there are equipment or systems that

Valeo, Mahle, Sealed Power, Delphi, Hutchinson and

need to be integrated or removed from the production

Moresa.

line, or when production lines need modifications. The use of this simulation tool saves important economic resources

CIATEQ is collaborating with CIDESI and COMIMSA in the

and time when companies need to make modifications to

creation of the Center for Engineering in Dies and Tools

their processes.

in San Luis Potosi. The center will focus on the design, manufacturing and testing of molds, dies and tools with

Q: What expertise can CIATEQ offer as a metrology and

applications in diverse industries, especially automotive.

testing partner, especially for SMEs that plan to enter the

The center will be the first of its class in Mexico and will

market and establish their supply chain?

give a strong boost to companies in the value chain

A: CIATEQ has the infrastructure to offer calibration,

dedicated to input manufacturing using different tools.

measurement and testing services. It complies with

The center is expected to gradually end imports of molds

the characteristics required for a type II laboratory in

and dies by domestic companies.

accordance with the ISA-RP52.1 regulation, which is used to regulate environments for standard laboratories. This

Q: What strategies has CIATEQ employed to promote its

laboratory employs highly qualified personnel and has a

engineering services to newcomers?

Quality Assurance System accreditation from the Mexican

A: We have ties with industrial chambers that have helped

Accreditation Entity as a calibration and testing laboratory.

us establish relationships. CIATEQ constantly takes part

It also has ISO 9001:2008 certification, which guarantees

in meetings of associations such as AMIA, CANACINTRA,

it complies with the requirements to be a supplier for

COPARMEX and ANIPAC, where we can offer our

companies that have ISO 9000 systems. We offer services

technological capacities to industry representatives. We

to calibrate according to mass, temperature, length,

also help organize events that benefit the sector such as

pressure, flow volume, force and electricity. We also offer

the Forum for the Development of Mexico’s Auto Parts

certified calibration masses manufacturing, consulting

and Vehicle Industry, held annually in Aguascalientes.

for the accreditation of laboratories, metrology courses and collaborations with laboratories in the MESURA

Q: What is the extent of CIATEQ clients’ involvement in the

Interinstitutional Network to calibrate by other dimensions,

design and engineering processes of new components?

such as time and frequency.

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VIEW FROM THE TOP

PUSHING INNOVATION WITH A LEAP OF FAITH RICARDO GUERRA Director General of the Center for Applied Innovation in Competitive Technologies (CIATEC)

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Q: What technologies are CIATEC developing that have

of the tests we perform, it is common to have personnel

application in the automotive industry?

from both OEMs and suppliers present when we run our

A: We provide our services to over 1,600 companies every

evaluations. CIATEC is more than capable of tracking

year. Since its establishment, CIATEC has added distinct

quality and performance. Moreover, we have the tools to

layers to its R&D operations. Automotive OEMs have well-

develop new technology and correct a flawed component

defined processes that include the creation of designs

when needed.

and engineering, as well as the development of their Tier 1 suppliers. We identified an opportunity for CIATEC to

This industry is dynamic and we are evolving every day.

further develop the local automotive supply chain at Tiers

Safety is one of our biggest concerns and new technologies

2, 3 and 4.

can always improve this. Embedded systems, measuring mechanisms and detection methods such as autonomous

To understand the types of materials required in the

driving are examples of continuous advances that would

automotive industry, CIATEC had to develop in-depth

liven up the automotive industry.

knowledge of every component involved in vehicle production. Evaluation can give us an understanding of

Q: To what extent does the government and CONACYT

what is needed for companies to enhance the quality

support CIATEC?

of their components. CIATEC has been testing plastics,

A: The federal government is the majority stakeholder

rubbers and gaskets for over six years to ensure the

in CIATEC. We receive between 60-65 percent of the

safety of volatile organic compounds used in vehicles. Our

center’s annual budget through the Ministry of Finance

metrology team evaluates all car components right down

and CONACYT. The remaining 35-40 percent is acquired

to minor aspects such as smell.

through projects we develop ourselves. Having a certain degree of self-sufficiency will allow us to grow out of

We became one of Mexico’s top research centers with the

government reliance in the long term.

help of our airbag laboratory. Even though OEMs have internal testing labs to evaluate these types of products,

Mexican business must invest in science and technology

CIATEC includes design testing. There is no other laboratory

innovation. We are sure that once the stigma surrounding

that comes close to this. We examine the airbag’s behavior

Mexican research is broken and investors see how

and the way it deploys according to two critical attributes,

capable the industry is, opportunities for Mexican design,

pressure and timeliness. A successful deployment takes no

development and new product testing could reduce costs

more than 60 milliseconds but temperature can directly

and increase efficiency through innovation.

impact this. We are responsible for any variable that might affect a component’s functionality. To detect malfunctions,

Q: How does the center help Tier 2 and Tier 3 suppliers

we perform our studies with high-speed cameras that

develop and obtain certifications?

record up to 6,000fps.

A: CIATEC aims to help companies understand their products as profoundly as possible. We work with the

We need advanced technology as well as efficient

ISO 9001:2015 certification since it offers the necessary

mechanisms that enable us to obtain and archive data.

traceability for our processes. This standard has helped us

Our supercomputing facility has a storage capacity of five

understand the way businesspeople think and what they

teraflops, so information can be stored for at least 15 years.

expect from us. We have been tuning into their mindset

Problems may appear at any given point but with this

for 40 years, which has allowed us to understand their

level of information availability, OEMs can detect the exact

train of thought more effectively and offer them more

piece that may have been affected. Given the importance

accurate results.

CIATEC is the only CONACYT center with a certification

solicitations in the pipeline and six more that have

program for products, processes and systems. Our center

already been awarded. In addition, CIATEC has granted

was originally created to oversee the leather and footwear

30 industrial models and designs since its establishment.

industry. We had to adapt to new production needs,

As well as patent validations, we award development

improving advanced manufacturing and lean processes

recognition to companies with innovative technologies.

to cater to the more intricate processes involved in the automotive and industry.

CIATEC likes to take leaps of faith on disruptive projects that we consider groundbreaking.

Q: What strategies does CIATEC employ to tackle human capital issues in the automotive industry? A: Mexico has been effective in creating large volumes of engineers, including industrial, chemical and mechanical engineers but we have fallen short in channeling their expertise into the automotive industry. CIATEC was established alongside the Mexican Corporation of Material Research (COMIMSA), in Coahuila, with the help of the

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University of Coahuila, the University of Guanajuato, the Potosino Institute of Scientific and Technological Research (IPICYT), as well as the University of San Luis Potosi. Through these alliances we created a pathway that facilitates development processes of specialized human capital. Mexico is one of the main generators of human talent

The federal government invests close to MX$4 billion (US$266 million) every year in its industries

globally, accounting for close to 100,000 engineering graduates every year. Unfortunately, many of them find

We help up-and-coming companies to structure their ideas

themselves unemployed as the mechanisms that would

and develop them through our technology transfer office

support their entry into the automotive industry are

(OTT), which operates under CONACYT’s endorsement.

lacking. Red tape involved in starting a company makes

The OTT performs a market study coupled with a business

new project development difficult and innovation even

plan and presents it to companies, helping entrepreneurs

less probable. Mexico has the human capital needed

access

to become an R&D hub and the government is inclined

capital ventures. Our interest in technology adds another

to help its industries. The government invests close to

spectrum to the value chain, rather than a carbon copy of

MX$4 billion (US$266 million) every year in its industries,

previous methodologies and technology.

negotiations,

investment

opportunities

and

regardless of the size of a company. Not every government provides this kind of support.

Q: To what extent has CIATEC been involved in expanding Mexico’s R&D capabilities?

Each state sets different industries as the foundation for

A: We seek to position our center as a technological

their economic stability, so we must build on the skillset

service provider with high international standards. The

of Mexican professionals to match the industries with the

automotive industry is at its peak and we need to keep up.

greatest human capital requirements. Guanajuato is mostly

The industry as a whole must create a national strategy

focused on robotics and electronics and in response we

that will allow everyone involved in the automotive sector

are working toward meeting the state’s demands. We have

to respond to this rapid growth.

been training our personnel abroad to be specialists in top level industrial specialization processes. These practices

CIATEC is involved in CONACYT’s initiative, the National

enhance the skills of our professionals and their knowledge

Attention Strategy for Industrial Sectors, promoting

of international norms and practices.

several Mexican industries. These include the automotive, hydrocarbon,

aerospace,

distribution

and

logistics,

Q: How does CIATEC’s collaboration with the Mexican

manufacturing and IT sectors. The consortium is invested

Institute of Industrial Property (IMPI) help entrepreneurs

in minimizing the waste of resources by using every

looking to patent their technologies?

piece of equipment and infrastructure available. This

A: As an R&D center, CIATEC is extremely focused

improves efficiency and the integration of specialists,

on patenting. The center is the Bajio region’s number

which in return improves the response time within the

one patenting instrument provider. We have 29 patent

production sector.

VIEW FROM THE TOP

R&D FUNDING MUST COME FROM WITHIN JUAN MÉNDEZ Director General of CIMAV

232

Q: How has a lack of private sector investment hampered

We are confident the human capital supply will support our

research and what needs to be done to bring about change?

center’s expected growth. In fact, qualified professionals

A: In developed countries, the public-private composition

outnumber spaces in the center.

of investment in science and research is approximately 30:70. In Mexico, up to 75 percent of total investment in

Q: How will CIMAV expand to meet growing demand?

science and technology is offered by the state. This shows

A: Our facilities will expand by 50 percent in the medium

the private sector relies too heavily on the government to

term thanks to a 12,000m2 development. We have reached

fund research initiatives. If the local industry hopes to grow,

20 percent of the complex’s potential but more laboratories

companies must provide more funding toward establishing

will be created and staff will be hired over the next five years

patents instead of acquiring them or paying royalties to

to reach our full potential.

innovators. The local culture does not encourage Mexican companies to create their own research centers so we must

CONACYT offers CIMAV a fixed budget of MX$200

transform this mindset. Foreign direct investment will not

million (US$12 million), which we administer alongside an

fill this gap. Change must be internal and state-motivated.

additional MX$100 million (US$6 million) generated by our internal activities. Our goal is to increase our own resource

Q: To what extent is CIMAV focused on either applied or

generation by 10-15 percent each year until we match

fundamental research?

CONACYT’s grant. Analytical indicators show we have the

A: We carry out both fundamental and applied research

greatest quality, productivity and best fiscal resources as

commissioned by CONACYT or other important bodies.

a ratio of generated revenue. The center has also moved

Similarly, the center has been directly assigned projects by

toward creating more satellite branches, such as a recently

private companies to solve specific problems. The Program

opened location in Monterrey, which will work to the same

to Stimulate Innovation (PEI) manages MX$4 billion (US$235

standards as our Chihuahua center. We have our eyes set on

million) so companies can subcontract our research services.

Durango and have sent representatives to investigate the

The Research Center of Advanced Materials (CIMAV) is

potential for a new center.

proud to have the second-most projects contracted thanks to this program. PEI projects awarded to our center totaled

Through a consortium with the Research Center of Industrial

177 over the last six years, catering to various industries.

Developments (CIDESI), three sister centers are allying to create a new branch specifically focused on advanced

Q: How does CIMAV ensure its study plans prepare students

manufacturing. Although Tijuana and Guadalajara are

to cater to industry needs?

potential locations, any expansion depends on funding.

A: CIMAV has 205 staff members, two-thirds of which work in

Abundant opportunities exist in Mexico but we are reliant

Chihuahua and the other third in Monterrey. We have 65 PhD

on a stable economy and a steady increase in investment.

graduates and offer five postgraduate programs in materials, nanomaterials, energy and environment. Two of these

Depending

programs have demonstrated such quality that CONACYT

legislative environment, we will either strengthen existing

governmental

circumstances

and

the

awarded them the highest international ranking achievable.

research centers or open more locations. We must adhere

Our study plans are created according to international

to our original mission and follow international standards

tendencies. The country must begin moving toward these

of quality to be perceived as research leaders. We are one

trends to keep up with international competition, taking

of the top three institutions of CONACYT’s 27 centers.

universities such as Stanford, Yale and MIT as inspiration for

Though CIMAV is only a medium-sized research center, we

developing leadership. An encouraging number of trained

have aspired to and have achieved excellence in advanced

professionals in Mexico hold Master’s Degrees and PhDs.

material innovation.

VIEW FROM THE TOP

DIGITALIZATION FOR SMART LIFECYCLE MANAGEMENT ALEJANDRO PREINFALK Executive Vice President of Digital Factory & Process Industries and Drives at Siemens

Q: What makes Siemens different from other network

Q: How do you participate in technology integration

systems providers?

processes?

A: Our main differentiator is the digitalization concept we

A: It is much easier for new companies or major

apply. Ours begins at the first stage of CAD (computer-

expansions in existing companies to try new technologies

aided design) simulators, ensuring the development of a

or concepts. In established systems, it can take longer

concept’s strengths and characteristics right from the start.

to measure risks and select the right solutions. One of

Beginning the process earlier than any other product vendor

the best examples of how our technology can help is

while being present in the design process has allowed us to

Maserati. We reduced its time-to-market by 50 percent

analyze how the product could be manufactured efficiently.

by building a digital twin of the production line before it

The evidence of how much we believe in our product is that

was physically implemented using the complete product

we use it in our main automation factory in Germany. The

lifecycle management (PLM) portfolio. Our advanced

system allows us to produce 1 million Programmable Logic

automation simulators can show even the system’s PLCs

Controllers (PLC) a month and more than 1,000 different

down to the welding cells, as well as the movements

versions of each system. Each product we manufacture

of robots and the conveyor. This allows us to show an

is autonomous enough to tell the machine what needs

extremely realistic representation of how a line could

to be done, allowing us to reach a quality standard of

be improved. Ergonomics play an important role in the

99.99 percent perfection while offering great flexibility to

automotive industry as assembly areas require many

companies that run on tight deadlines.

more operators than in other industries. Thus, a worker’s movements can be digitally analyzed in detail.

Every producer has its own style when manufacturing cars but our goal is to create customized mass production.

Q: What would you highlight as the company’s primary

This means that standard components are the base of the

success in its involvement in Industry 4.0?

product but there can be many variations according to

A: We serve all the major players in the industry, not only

the demand of customers. Siemens’ offering keeps costs

OEMs. Tier 1 and Tier 2 companies offer the greatest

down while allowing customers to tailor their products

opportunity for us to add value because integrating these

and solutions, reducing a manufacturer’s need to hold

players’ concepts into the same database makes the whole

large inventories.

chain more reliable. This is the main concept of Industry 4.0, upgrading from the automated islands of Industry 3.0

Q: What innovative solutions does Siemens provide to the

that lacked network interconnection.

automotive industry? A: Automotive is one of the key verticals we serve and

Q: What innovations are you currently developing?

our portfolio matches the industry directly. From power

A: Siemens speculates that software and digitalization

generation and distribution solutions to automation,

will become prominent in manufacturing, including

we can design future-proof manufacturing suited to the

smart data and lifecycle management. In the mobility

automotive sector. Siemens helps industrial customers

segment, sensors in vehicles can analyze data within

measure gas and steam consumption in their plants to

the unit to schedule the most efficient and appropriate

ensure energy is used as intelligently as possible during

maintenance for the vehicle. Siemens’ key driver is using

manufacturing processes. All industries are looking to

digitalization to optimize technological advances to be

save resources and cover demand. Technology and data

more competitive and to improve the overall industry’s

can make huge changes when put together. We classify

structure. We consider Mexico an exciting market in which

automotive as a discrete manufacturing industry and in

to participate following the Energy Reform and as the

that segment automotive is a trendsetter.

main manufacturing hub for the Americas.

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INSIGHT

BUILDING THE FOUNDATION FOR WIDER R&D RECOGNITION

234

The automotive sector is booming but Mexico already is

their equipment to India, China and the US, they are

adjusting its sites to focus on the next target: R&D. The

finding CIDETEQ’s services competitive in quality, logistics

country is not yet known for its research and engineering

and delivery times. “Sending a component all the way to

prowess but groups like the Electrochemistry Research

India or China usually means delaying production for close

and Technology Development Center (CIDETEQ) are

to three weeks. We can provide results in about 24 hours,”

working to change that.

Siade says.

Building a reputation as a testing and engineering provider

CIDETEQ’s facilities are equipped to carry out accelerated

is essential for continued development, says Gabriel

corrosion and weathering tests. “One of our most recent

Siade, Director General of CIDETEQ. The organization is

projects was the phosphating of components for a

implementing a global strategy in line with that goal. For

Swedish company, which had to comply with stringent

the last two years, it has organized a forum to highlight

specifications,”

its technological services. The first focused on materials

Technology Services at the National

for the automotive industry and the second on water

supported the company for a year and a half, developing

treatment solutions. “We are consolidating the knowledge

the necessary tests to prove the material’s efficiency.”

explains

Arturo

Corona,

Director

CIDETEQ. “We

and expertise we have accumulated over our 25 years to figure out the best way to offer our services to more clients,

CIDETEQ has 97 certified processes covering water,

especially in our water treatment division,” Siade says.

food, residue, metallurgy and chemical applications. The center is also certified by the National Water Commission

A key is convincing companies to look locally for research

(CONAGUA)

and testing. In the automotive segment many foreign

Protection Against Sanitary Risk (COFEPRIS) for water

and

the

Federal

Commission

for

the

companies will send their equipment abroad to complete

treatment processes, and by Bombardier for its aerospace

quality and safety-testing processes, a resource and time-

activities. It also has AS 9100 and ISO 9001 certification.

consuming undertaking.

The organization’s operations mainly target the Bajio region, comprising Guanajuato, Queretaro and Jalisco, as

CIDETEQ offers these services. The organization’s R&D

well as the north in Chihuahua, Nuevo Leon, Coahuila and

center in Queretaro has worked with 260 companies since

Sonora. The center also has a strong presence in Mexico

its inception in 1991. Of those, 100 are in the automotive

City, the State of Mexico, Puebla and Hidalgo.

sector, for which it mainly focuses on corrosion testing. Siade says that even though most companies in the

“We work closely with companies like Henkel and PPG,

industry, and also in aerospace, have preferred to send

mostly focusing on coating solutions development,” says

Luis Godínez, Science Director of CIDETEQ. “Our coating

competitive environment of innovation through healthy

testing involves everything from the solution formulation

collaboration with other institutions.” Putting words to

to the engineering of deposition systems for industrial

action, CIDETEQ is forming a group of six R&D centers

applications, as well as their resistance to corrosive

that will focus on technology transfer.

environments.” One aspect that needs addressing is human capital. Although most of its services are directed at Tier 1, Tier 2

Certified by CONACYT, CIDETEQ offers two graduate

and SMEs, providing routine testing and failure analyses,

programs. The first follows the traditional Masters and

the organization also works directly with GM, Ford and

PhD model in electrochemistry or environmental studies.

Volkswagen and is targeting the Japanese. “We have

“Both of these programs are unique in the country,” says

recently acquired specific equipment to test components

Godínez. “We have graduated 150 students from these

for Japanese corporations and we have started negotiations

programs since we started offering them in 1998 and 92

to collaborate with one of them,” Corona says. “Our goal

percent work in the corporate sector.” The center is starting

is to strengthen our participation in this market segment,

to implement its second graduate program, a Masters in

especially considering the development of the Japanese

innovation with a specialization in electrochemistry or

cluster in Guanajuato and the Bajio region.”

environmental studies for working students. “We enroll people that want to solve specific problems in their own

One of CIDETEQ’s advantages is its diverse research and

industry,” Godínez says. “That way, students do not have

technology applications. The center is working on coating

to leave their jobs and most of the work happens in the

developments based on nanostructured materials. “One

company itself. We already have five people in this first

of our latest patents was a coating with a base of silver

class, and we think there is excellent potential in the

nanoparticles that help with the decontamination of

market for these programs.”

components, specifically for handrails,” Godínez says. “But these nanostructured projects are still being researched.” While this project might be in its early stages, CIDETEQ is already applying its findings to the fuel sector with biodiesel and bio jet fuel solutions. “Our research into residue exploitation and the improvement of catalytic processes is beyond the research phase and we already have clear application goals for the medium to long term,” says Francisco Rodríguez, Head Researcher at CIDETEQ. “We are participating in the biodiesel and bio jet fuel cluster thanks to an initiative from CONACYT, alongside other companies and R&D centers, including the Applied Innovation Center in Competitive Technologies (CIATEC).” Collaboration is essential within the CONACYT network and even though CIDETEQ does not focus on machining applications, the center collaborates with the Center for Advanced Technology (CIATEQ) in more complex projects. According to Siade, CONACYT normally forms partnerships between research centers and universities, like the Autonomous University of Queretaro, to address nationwide projects. Initially, the center’s priority was the automotive industry but it is also participating in projects for biofuels, fuel cells and 12 more research areas. “CONACYT has seven research centers and 40 smaller units throughout the country,” Siade says. “Even though these centers are divided into science, technological and social areas, this does not prevent us from working with them on different projects. Our objective is not only to strengthen our individual position but also foster a

235

PLANT SPOTLIGHT

236

KIA PESQUERIA, NUEVO LEON For its first plant in Mexico and Latin America, KIA Motors Mexico chose the state of Nuevo Leon as its host. Three factors played a key role in the selection. First, there is no other OEM operating in the state. Secondly, Nuevo Leon has a solid auto parts supply base. Finally, the state offers a skilled workforce that can meet the challenges of the automotive industry. The plant’s four production buildings for stamping, welding, painting and assembly were built on 499 hectares. Construction started in August 2014 and the site began operations on May 2016. Located in the municipality of Pesqueria, the plant is expected to manufacture 100,000 units in 2016. Once fully operational it will produce between 300,000 and 400,000 units annually. The model now being assembled is KIA’s Forte with four and five doors. An estimated investment of US$3 billion was needed to begin operations that will generate economic benefits of around MX$27 billion (US$1.5 billion) for the state of Nuevo Leon. In addition to the direct revenues that will be generated for KIA, the number of jobs created in the state by 2017 will more than double, totaling 14,000 people, including suppliers. Eighty percent of the vehicles that will be manufactured will be exported to 80 different countries, including the US, Canada and Latin America. The quantity of exports translates to an estimated annual value of US$4 billion for Nuevo Leon. Though the plant is already operational, it still lacks infrastructure to be fully functional. It is missing a fourlane highway to connect the northern and southern parts of the plant. The OEM, with the state government’s support, needs to finish the construction of the warehouse and loading patio, pluvial and sanitizing drainage, railroad sidings, a training center, a water-processing plant and ensure the functioning of the electric installation. The plant is one of the most modern facilities KIA has. The walls and windows are covered with thermal material to avoid excessive consumption of electric energy. Its cutting-edge Regenerative Thermal Oxidizer (RTO) technology will eliminate air pollution from the manufacturing process by purifying emissions. This will make the plant one of the most eco-friendly facilities in the country.

237

DOMESTIC SALES & SERVICES

For several years, Mexico was regarded solely as an automotive manufacturing country. Unlike 30 years ago when it first broke into international commerce, Mexico now enjoys macroeconomic stability, commercial relationships with international markets and an established middle class that is pulling the country’s economy forward. The availability of car loans is also helping fuel the domestic market’s gains. Almost half a million units in the first half of 2016 were sold on the back of financing. Should the trend continue, domestic sales will boost the performance of the automotive industry to another record.

The growth of the domestic market and the opportunities for improvement grab the spotlight in this chapter, featuring views from leaders at the largest financing companies on the challenges the sector faces and how they are being addressed.

239

CHAPTER 9: DOMESTIC SALES & SERVICES 242

VIEW FROM THE TOP: Guillermo Rosales, AMDA

243

VIEW FROM THE TOP: Mayra González, Nissan Mexicana

244

VIEW FROM THE TOP: Andrés de la Parra, NR Finance

246

VIEW FROM THE TOP: Carlos Alberto López de Nava, Grupo Alden

247

INSIGHT:

Carmen Dávila Mondragón , Ariza de México

Víctor Campuzano Pieras, Ariza de México 248

VIEW FROM THE TOP: Jörg Pape, Volkswagen Financial Services

249

VIEW FROM THE TOP: Miguel Plazas, GM Financial Mexico

250

VEHICLE SPOTLIGHT: Chevrolet Cruze

252

VIEW FROM THE TOP: Miguel Luz, Hyundai Motor de México

253

VIEW FROM THE TOP: Jesús Vera Rodríguez, Subaru de México

254

VIEW FROM THE TOP: Gerardo San Román, JATO Dynamics

256

VIEW FROM THE TOP: Pedro Albarrán, Hyundai Motor de México

257

VIEW FROM THE TOP: Gerardo Gomez, J.D. Power

258

MAP: Light Vehicle Sales by Region

260

VIEW FROM THE TOP: Ariel Cilento, LatAm Autos

261

VIEW FROM THE TOP:

Fernando Gómez Arriola , Nexu Abdon Nacif, Nexu

262

INSIGHT: In an Accident? There’s an App for That, Axa Seguros

263

VIEW FROM THE TOP: Alfonso Monreal, OnStar

264

VIEW FROM THE TOP: Jesús Smith, Banorte

265

VIEW FROM THE TOP: Ricardo Hoyo, Arrendadora Actinver

266

VIEW FROM THE TOP: Aureliano García Valenzuela, Scotiabank

267

VIEW FROM THE TOP:

Tjahny Bercx, LeasePlan Marcio Hociko, LeasePlan

268

INSIGHT: David Díaz-Flores, ABA Seguros

269

VIEW FROM THE TOP: Luis Aguilar, ABC Leasing de México

270

INSIGHT: Antonio Borrajo, Zurich Mexico

271

VIEW FROM THE TOP: Esteban Hernández López, Auto Safe International

241

VIEW FROM THE TOP

YOUNG BUYERS TRANSFORMING TRADITIONAL TRENDS GUILLERMO ROSALES Director General of AMDA

242

Q: Which factors have led to the impressive growth in

SUV models can compete directly with the compact

Mexico's domestic market?

segment, including the Renault Duster, the Honda HR-V

A: Not only is the population growing but our vehicle park

and the Ford Ecosport. This allows SUV manufacturers

offers the perfect opportunity for renovation, following

to target a younger and more diverse audience. Four

the stagnation resulting from 2008’s economic crisis.

or five years ago, the SUV segment represented 14-

Contrary to popular belief, employment conditions also are

15 percent of the market,but it is now reaching a 20

improving. This is leading to a substantial growth of the

percent share. Mexico’s increasing preference for SUV

middle and upper-middle class segments. Demographic

models contrasts with a greater number of people with

shifts combined with the market’s current low inflation are

the means to acquire more luxurious vehicles from

the reasons behind the recovery of the population’s general

brands like Audi, BMW, Infiniti, Acura and Mercedes-

income. In terms of supply, all brands are now working on

Benz. These companies also had to adapt their portfolio

improving their sales and aftersales services, focusing on

to the Mexican market offering smaller vehicles with the

the quality of their products and remaining client-oriented.

features that distinguish their brand.

Financing has also played a crucial role in developing the

Q: What impact will new players have in an already

domestic market, having grown 22.8 percent at the end of

competitive market?

2015. Credit is becoming available at historically favorable

A: According to our latest estimations, individual sales

rates, with increasingly attractive terms. Furthermore,

per dealership are just above 600 annual units, which are

financing opens up the market to potential clients that

practically the same figures as 10 years ago. As more brands

want to participate in more expensive segments with better

enter the country, more dealerships appear while OEMs that

conditions. The entry restriction for imported vehicles has

are already here begin to expand their operations. For the

been equally effective at incentivizing the domestic market,

first time in our history we are seeing favorable conditions

particularly in the northern-border regions. Overall, the

on both the supply and demand sides of the market.

market for imported used vehicles saw a decrease of more than 60 percent in 2015, and for the first time in a decade

Q: How do you expect the hybrid and electric markets

we closed the year with less than 200,000 imported units.

to grow? A: Environmentally friendly vehicles are still a long-term

Q: How is the younger demographic influencing trends in

vision for the Mexican market. The average retail price for

the Mexican automotive market?

vehicles bought in Mexico is MX$250,000 (US$12,820),

A: This population segment adds an aspirational factor to

which is far below the cost of most hybrid and electric

the automotive market. Young buyers are transforming

models in the market. The available technology still

the trends upon which sales were traditionally based,

poses a price difference of almost 25 percent for hybrid

focusing on healthier lifestyles and more diversified

versions while electric models can escalate to more

activities, leading to an upsurge in the SUV segment.

than MX$600,000 (US$30,770), making them niche

What has truly promoted sales of these vehicles is their

vehicles that are not yet suitable for a mass consumption

availability in the market at much more affordable prices.

market. Even with higher purchasing power and different

The cheapest cars within the subcompact segment cost

incentives for green technologies, these vehicles represent

between

MX$145,000

only 3 percent of total sales in the US market. In Mexico it is

(US$7,430). Prices in the compact car segment range from

MX$100,000

(US$5,130)

and

below 0.5 percent and there are no applicable incentives.

MX$150,000 (US$7,690) to MX$270,000 (US$13,840).

Therefore, these cars will continue to be aspirational

Most SUVs, however, compete with higher-end vehicles like

products while the emerging market sectors will be

the Honda Accord or the Toyota Camry, although several

dominated by more efficient gasoline engines.

VIEW FROM THE TOP

GIANT FOCUSES ON BRAND, INNOVATION MAYRA GONZÁLEZ President and Director General of Nissan Mexicana

Q: What goal has Nissan established for the Mexican market

Q: How do you merge more than 50 years of experience in

as competition continues to grow?

the market with a renewed vision for sales and service?

A: Competition is inevitable and ultimately necessary. We

A: Nissan has established a solid image in the country

plan to consolidate brand recognition in Mexico. Being

that allows us to compete with new brands, which are

the number one brand in the country is not the same as

implementing innovative marketing strategies, while

being identified as such by consumers. We are already the

maintaining Nissan’s tradition. Even with almost 55

market leader but we must communicate this achievement

years of experience under our belt, the evolution of

to customers so they see Nissan in the same light. We will

our distribution network has renovated our image.

continue offering innovative products, a healthy distribution

Our development strategy was created to adapt to

network, a strong financing branch and effective marketing

the country as it gradually changed and it has been a

platforms focused on customer experience. All these factors

continuous process that will have to be revised again

have been our pillars of growth but now they will allow us to

after 10 or 15 years. New brands have the advantage of

branch into new markets and create new ideas. Having been

entering the market with the appropriate it strategy but

the number one company in Mexico for over seven years, my

marketing is cyclical and they too will have to rejuvenate

personal goal is to reach the 100-month mark.

those strategies.

Q: How will Nissan target younger customers who have

Q: What strategy are you using to boost Nissan’s presence

different purchasing habits and requirements?

in Mexico, given recent environmental conditions that have

A: Younger demographics define all the new trends in terms

affected the domestic market?

of technology and sales experience and they have become

A: There is no problem that a good product cannot solve,

more relevant for every brand to target. We focused a huge

be it a government policy or any other hurdle. Our vehicles

part of our resources on our digital presence. These platforms

are the best recommendation letter we can offer and they

allow us to connect with our clients on a more personal level,

speak volumes about the quality of Mexican production.

sharing the emotional response we want them to feel with

If we continue to invest in human capital development

our vehicles. We also created the GT Academy Program

for manufacturing operations, we will continue offering

where gamers can become professional drivers and we

highly competitive costs and excellent quality. This will

became official sponsors of the UEFA Champions League.

eventually lead to innovation, which is the ultimate goal in

All those strategies have raised brand awareness for Nissan.

the Mexican industry.

243

VIEW FROM THE TOP

NISSAN FINANCING ARM READY FOR GREATER GROWTH ANDRÉS DE LA PARRA Vice President of Corporate Planning and Financing Products of NR Finance

244

Q: What strategies has NR Finance established to

portfolio. We are convinced there are no bad customers

become the country’s strongest captive company?

and that we need to be understanding of our clients’

A: NR Finance is dynamic and craves innovation. The

situation. To this end, we are pioneers in improving the

new regulations regarding the No Drive Day program

versatility of financing products. NR Finance was the

in the first half of 2016, for example, led us to launch

first company to offer 72-month plans, though it was

specific programs to boost hybrid and electric models

not a popular option at the time. We realized this type

from the Renault-Nissan Alliance. Mexico still needs to

of contract could provide certainty to the client when

consolidate its electric vehicle market and financing will

acquiring a new vehicle, although loans are often paid

play a pivotal role in the process.

off before the contract expires.

NR Finance has always supported the SME market since

The market presence of our brands also led us to

financing options for these enterprises are limited. We

strengthen our relationship with the parent companies

have dedicated solutions for smaller companies and

and

even for start-ups. The company also has developed its

distributors to approve credit within minutes, which

fleet applications to offer proper invoicing platforms

means a customer can leave with a vehicle the same day.

and stronger management solutions.

At a Renault event, customers could apply for financing

different

insurers.

Our

infrastructure

allows

and take the car immediately, which resulted in eight Being Nissan, Infiniti and Renault’s financing arm involves

transactions. Six used vehicles and two new cars were

an important commitment and responsibility to help all

purchased.

three companies grow in the market. The offering these encompass is so complete we participate across all

Q: To what extent has the acceptance of leasing grown

premium and volume market segments. Nissan, Infiniti

among NR Finance’s customers?

and Renault are equally important for our strategy and

A: Leasing is now a popular option for Infiniti clients.

we employ the same approach with clients of all three

Over 69 percent of our contracts involve these types

brands.

of solutions. We believe in our products and we do not shy away from contracts that could potentially lead to

Over 69 percent of NR Finance's contracts involve leasing solutions

the return of a vehicle after the contract’s completion. In those cases, we gladly take back the car and commercialize it once again. Most of our Nissan leasing contracts are held by corporate clients. It is uncommon for the customer to return the vehicle in those cases, since the driver usually pays the residual value and keeps it. Our participation is limited to date but we are keen on increasing our presence in this market.

Q: What options do you have to support Nissan, while

Q: What are the company’s goals as more Mexicans turn

boosting the presence of Renault and Infiniti?

to financing?

A: We must maintain healthy liquidity rates to sustain

A: We have enjoyed steady growth over the past few

our operations. Our client base has grown immensely

years but we have had to adapt our strategy to market

but we must ensure its stability with a low overdue

changes. Previously we could predict our end-of-year

MAINMAIN AUTOMOTIVE FINANCING PLAYERS ININ MEXICO 2016 in thousand of vehicles) AUTOMOTIVE FINANCING PLAYERS MEXICO(jan-jun (JAN-JUN 2016) (THOUSANDS) 120

2016

2015

100 80 60 40

others

Banregio

Ford Credit

Scotiabank Inverlat

Banorte

Toyota Financial Services

FC Financial

BBVA Bancomer

GM Financial

NR Finance

Volkswagen Financial Services

Sources: AMDA

figures but the Mexican equivalent of Black Friday, the

solutions have also grown leading us to create specific

day after US Thanksgiving and the traditional start of

programs for Uber, Cabify and CityDrive cars. We have

the Christmas holiday shopping season, has altered our

a program solely for students and another for female

perception as sales on that weekend in November are

drivers in August.

less predictable. We must be on top of market trends to adapt accordingly We

are

convinced

the

market

will

continue

its

and stay abreast of our clients’ evolving requirements.

tremendous growth with rates of 10-12 percent and

Last year we launched the Súbete program specifically

we are preparing for that with suitable programs for

directed to people who do not have a steady income

both the new and used vehicle segment. Our used car

registry. This program was developed to support

strategy has been redefined and Nissan has been well

entrepreneurial customers and it has now become a

accepted by the market. We offer the same warranties

brand standard with more than 1,000 transactions every

clients would find in the new vehicle market, giving the

month.

customer quality assurance. We are now developing a similar plan for Renault named We have a strong team in place such that even

Llévatelo and it has shown similar success. Sin Fronteras

with only 13 years’ experience here, NR Finance has

is another initiative that offers financing alternatives

sufficient infrastructure to address the needs of the

to people in the US, so their families can have a car

Mexican market. We have more than 500,000 active

in Mexico. This generates wealth in the country and

clients, which is the largest portfolio focused purely on

boosts the domestic automotive business. We also

automotive financing. Additionally, we have a contact

have a collaboration with a large insurance broker that

center dedicated to improving the level of service within

will allow us to offer more transparency, efficiency and

NR Finance.

ultimately a better service to our clients.

Q: What is NR Finance’s biggest challenge given all the

Q: How successful is your strategy for electric vehicles

new entrants to the market?

such as the Renault Twizy?

A: There will always be new companies and competitors

A: The Twizy is a unique product that has found its niche

so we must consistently strengthen our foundations with

among consumers but we still need to be patient while

innovation. We can no longer categorize our clients by

the market for electric vehicle technology consolidates.

demographics, since we need to take age and domestic

Building a strategy for a megalopolis with short driving

market trends into consideration. Digitalization has

distances differs greatly from that for openly distributed

become widespread in our target market, signaling

urban areas wherein commutes might be longer. Our

the need to switch our strategies so we can appeal to

strategy is equally strong for this vehicle in financing

younger generations. Car sharing and private driver

and leasing.

245

VIEW FROM THE TOP

PRICES TO RISE BUT SPIKES UNLIKELY CARLOS ALBERTO LÓPEZ DE NAVA Director General of Grupo Alden

246

Q: What are Grupo Alden’s growth expectations and what

Q: What is your forecast for prices?

are the impacting factors?

A: Prices will continue to rise although some brands might

A: By May 2016, Mexico City, where most of our business

decide to delay increases. Fortunately, price spikes are

is based, was down 5 percent in new car sales due to

minimal and few brands have experienced a drastic jump.

government measures limiting private car use, while

General increases of 2 percent may occur throughout

Chihuahua grew 29 percent. The second half might show only

the year. Interest rates could also present a challenging

small growth in Mexico City as taxes and rising ownership

situation as credit becomes more expensive. On the bright

costs limit buying. The dollar-peso rate is making importing

side, exports are enjoying positive growth and boosting

more expensive for those brands that do not manufacture

the economy.

locally and some are lowering production for Mexico as a result. For these reasons, experts speculate the market will

Q: How do growth rates of new and used cars differ

slow but Grupo Alden believes growth rates will stay the

across the industry?

same. The industry grew almost 20 percent in 2015, closing

A: Used car sales have grown in Grupo Alden, which keeps

the year at approximately 1.4 million sold units. In the same

our inventory low. Having too many used cars can be a

period, we sold 30,000 vehicles compared with 25,000 in

problem, although most dealerships do not consider used

2014 to keep pace. We strive to be on top of the industry

car sales important. In the US, the average is 10 new cars

but this level of growth was completely unexpected. That

sold per five used vehicles so it does not rely on new car

the majority of our business is based around Mexico City

sales. Our northern neighbor profits highly from repairing

and the metropolitan area helps us.

used cars but Mexico does not. Our best distributor in the group has a 10:4 ratio and the rest have 10:2.5, which

Q: What strategies does Grupo Alden use to attack both

has proven successful. Used car sales in Mexico usually

the new and used car segments?

generate a 10 percent profit. If a company makes a real

A: Statistics show a reduction in used car imports of 80

effort, it could make 15 percent at the most.

percent. This explains the recent growth spurt in the north as used cars are no longer invading the market. New car

The used market in Mexico is unlikely to become as

sales may be improving but a car costing MX$50,000

attractive as in the US. Our company invests in improving

(US$ 2,750) can be attractive for many people with lower

the used car image by offering credit, insurance, auditing

purchasing power. States like Michoacan and Chihuahua

and the use of mystery shoppers to evaluate agencies.

have an abundance of used cars and an 80 percent reduction opens up potential in the local market.

Q: How aligned is Grupo Alden to the industry’s sales and service transformation?

Q: How important are Hyundai and KIA, the latest entrants

A: The industry is slowly unifying. Certain brands are

to the market, in Alden’s portfolio?

uniform in their approach such as Toyota, Hyundai and

A: KIA has enjoyed the most successful launch in Mexican

KIA. Meanwhile, there are challenges for traditional

history with 5,000 vehicles sold in just one month. This

brands as new companies try to please customers.

company’s advantage is its plant, since manufacturing

Paradigms need to be broken and customers need to

can quickly recover any capital lost to volatile exchange

be treated perfectly. Service appointments are being

rates. Hyundai does not have local production yet so it

incorporated in every dealership, leaving behind the

relies solely on imports. We are satisfied with Korean car

long queues of the past. Some dealerships will even offer

quality but we are hoping for a bigger supply to reach full

breakfast to make the visit more pleasant. Traditional

potential. Nissan will continue to top the market along

automotive repair shops may be full of people, while new

with GM and Volkswagen.

service shops are empty.

INSIGHT

FLEET MANAGEMENT EMBRACES HIGHTECH, BIG DATA Carmen Dávila Mondragón Managing Director of Ariza de México

Víctor Campuzano Pieras Director of Sales and Marketing of Ariza de México

The Mexican vehicle park has almost 35 million vehicles,

A fleet is more than just a collection of vehicles. It is

of which commercial units represent nearly 35 percent.

the company’s brand and the work environment of its

Steady growth in the segment pushed fleet units to 20

employees. Beyond that, it is a critical contributor to the

percent of all domestic auto sales in 2015. Historically,

overall success of a business. A partner that understands

fleet sales have been closer to 17 percent of the vehicle

specific needs, embraces goals and strategies and

market but robust economic conditions have supported

works to ensure the fleet is meeting the organization’s

the

requirements is essential to long-term success. One-

sector,

allowing

fleet

companies

consider

expansion.

size-fits-all solutions can miss critical elements that can help a fleet drive efficiency up and costs down.

Many organizations buy their vehicles outright but leasing solutions have become increasingly popular in recent

With more than 20 years in the Mexican market, ARIZA

years. When making this decision, taxes, regulatory

delivers simple and flexible solutions that meet all these

challenges and questions of risk come into play.

needs. ARIZA de México is unique in here as it has an established history while offering innovative, cutting-

In the modern global environment, operating efficiency

edge products and solutions backed by a committed

is not just an advantage but a necessity. No business has

investment in technology and data management. We

the luxury of assuming the way things have always been

are able to offer a wide variety of services and solutions

done is good enough or that processes should never be

integral to fleet management, optimizing operations

examined to find more efficient solutions. These same

while lowering costs for our customers.

principles are true in fleet management.

Fleet units represent 20 percent of all domestic sales

Technology and Big Data have fueled tremendous advances in the fleet industry and this has allowed innovative, forward-thinking management companies to embrace an almost entrepreneurial mindset when it comes to best practices and finding new ways to approach challenges. A reliable fleet manager can develop these solutions, tailored to the client and its strategy for savings and a lower total cost of ownership. It is no different in the Mexican market. Having the ability

Having a trusted partner that has been in the market for

to access data quickly and in real-time is necessary

many years and has invested the necessary time, money

for running an efficient fleet. But it takes powerful

and knowledge into developing solutions specifically

technology and software to handle the volumes of data

tailored for the Mexican market is absolutely critical to

a fleet produces.

ensure getting the most out of any fleet at the lowest possible cost.

New processes and systems supported by advanced technology solutions help companies dive into every

We are experts in vehicle management, seeking to solve

part of their operation, ranging from acquisition and

complex problems through analysis and management

maintenance, regulations and insurance, fuel and other

tools that promote fleet efficiency, monitoring and

expenditures, as well as driver behaviors and skills.

analyzing data to take the best course of action. Our

Clients can then understand where they can cut corners

strength is the experience and talent of our people who

or even predict problems before they happen.

are devoted to delivering value to our customers.

247

VIEW FROM THE TOP

A STRONG FUTURE FOR LEASING NEW CARS JÖRG PAPE CEO of Volkswagen Financial Services

248

Q: What are the highlights of the development of

of 2017. Through it, we will not only offer pure financing for

Volkswagen Financial Services in Mexico?

our leasing products but a complete solution with additional

A: First and foremost our mission is to support the sales of

services adapted to client requirements. Our first focus is

Volkswagen Group brands and we have already become

to include maintenance and repair operations in our leasing

market leaders. We have seen steady growth in our

product since it is the service with the highest demand.

penetration rate, moving from less than 30 percent in 2011 to more than 48 percent in 2015. As a result, almost one in

Q: How are leasing products growing compared to regular

every two cars of the Group coming out of the dealerships

credit solutions?

has a sticker from Volkswagen Financial Services Mexico

A: Both solutions presented similar developments in

and around 90 percent also include one of our insurance

2015 when taking the total growth of the market and the

options. With Volkswagen and SEAT we have reached a

industry into account. On average our rate of financing

higher penetration rate than with our premium brands.

is approximately 70-75 percent compared to leasing solutions across all our brands. In Mexico, car ownership

Q: Having hit its goal to have 100,000 financing contracts

is still valued highly. That mindset is an obstacle to private

by the end of 2015, how will the company build on that?

customers accepting that leasing can be an excellent

A: We closed the year with 115,000 contracts so our

solution for their needs. This is a cultural issue and we

penetration rate grew well above our expectations of 44

expect it to change in the coming years.

percent. Of our contracts, 107,000 were for new vehicles. The rest were from the used car segment, a division that has

Q: What are Volkswagen’s expectations for the financing

proven to be a crucial player in our development strategy.

market in Mexico in 2016?

Mexico’s market is heavily focused on new car sales but

A: This year will be an interesting one for the company.

several dealers are now recognizing that an important

Volkswagen Financial Services accompanies the sales of

part of their income is from used cars. We want to support

Volkswagen Group brands and we are expecting them to

that vision and have created attractive packages for this

have an excellent year. We may reach 1.5 million car sales

segment. We introduced certain solutions at the end of

in the country. Also, we see untapped potential with the

2015 and now we want to consolidate those opportunities,

professionals and businesses working in the informal

offering the same conditions we offer to our new car

economy. We are studying the ideal product in the fleet

clients.

business for customers that would not normally have access to a financing solution. A product like this would bring

According to our data, we are already covering 85 percent

financial inclusion for Mexico and promote opportunities of

of the market available for financing. Volkswagen Financial

economic growth for more people. For us, it would entail

Services has joint publicity with all the brands of the

a completely different commercial approach and we are

Volkswagen Group in Mexico, targeting certain products

already working on specific training for our personnel.

for specific models and it is continuously promoting its services through the dealer’s network. There are minor

Our insurance broker will be launched in 2016 under the

opportunities we are not tackling due to their high risk.

Volkswagen Financial Services entity. Through this new entity we will be offering full insurance solutions with an

The segment that shows the strongest potential of growth

improved service for customers and dealers. The initiative

for us is the fleet business. As our clients’ fleets grow, our

is aligned with an international strategy of self-developed

services need to adapt. A good example of our flexibility and

brokers. This model will allow us to measure the risk of

eagerness to offer the Mexican market what it needs is our

every insurance product and to better adapt them to

full-service leasing solution to be launched before the end

client needs.

VIEW FROM THE TOP

VEHICLES WITHIN EVERYONE’S REACH MIGUEL PLAZAS Sales and Marketing Director of GM Financial Mexico

Q: What is Mexico’s contribution to GM Financial’s global

our reach and new technology has enabled GM Financial

operations?

to enhance its level of customer service. A growing

A: As a global financing company, our overall objective is to

number of clients use our digital portal to get a quote

support sales of GM vehicles while achieving appropriate

for our vehicles or to access their account statement. We

risk-adjusted returns. We provide a full spectrum of

also have a specialized team permanently monitoring our

financing solutions for GM dealers and end users. Our

response time to any customer requirement. Anticipating

goal is to provide solutions tailored to the needs and

client needs is part of our continuous improvement

preferences of our clients and become their preferred

strategy.

brand financial institution. Our portfolio includes vehicle financing, insurance solutions and extended warranties.

Q: How is the company adapting its long-term strategy

We have seen the effectiveness of our initiatives through

to this market?

increased financed sales. Mexico is a key market in size

A: We are aware of the value Mexican customers place

and contribution among the 18 countries where GM

on long-term products so we launched a 72-month

Financial International Operations has a strong presence.

financial plan. This particular product is designed to allow

The Mexican automotive market grew robustly at a year on

customers to pay lower installments and increase their

year rate in 2015, contributing to the company’s profitable

payment capacity. We also have created Plan Accesible,

growth. We have gained a strong and competitive position

a solution specifically for clients without proof of income.

over the last two years. Seventy-three percent of GM’s

Plan Accesible’s success in 2015 led to product continuity

sales are financed through GM Financial.

throughout 2016. We also offer insurance solutions through qualified companies that guarantee good service

Q: How has your leasing service been received in the

to our customers. We have included two new insurance

Mexican market?

options in our program, providing our customers with a

A: Mexican consumers need to become aware of the

wider choice of products to best fit their requirements.

benefits leasing provides for both private and commercial customers. It is part of our job to actively promote these advantages. Even though in Mexico vehicles are still considered a status symbol, we hope to contribute to reversing this belief. We launched a new leasing product for the Cadillac-GMC-Buick channel in Mexico that we

Chevrolet represents the largest share of GM Financial’s portfolio

expect will grow annually. Q: What are GM Financial’s plans to expand its presence? Q: What strategies are you implementing to meet the

A: We have confidence in the Mexican industry. With our

needs of Mexican customers?

strong portfolio, we are well positioned in an increasingly

A: GM Financial has a strong service platform and is

competitive market. Chevrolet represents the largest

committed to providing best-in-class customer service.

share in our portfolio and even though the number of

Our experienced team is the foundation of the company.

financed GMC, Cadillac and Buick vehicles has increased

GM Financial College provides training to improve skills,

in the last two years, we want to further improve in these

which is important because employee engagement and

segments. We also expect the leasing business to grow

development have a positive impact on customer relations

faster once Mexican customers become more familiar with

and contribute to the success of the company. The latest

the way the product works. We have seen this behavior in

technological and mobile platforms also have helped us

other markets and are willing to support the development

appeal to a larger number of customers. We have increased

of this solution.

249

VEHICLE SPOTLIGHT

250

CHEVROLET CRUZE Chevrolet’s Cruze has always been characterized by its stark elegant style. The next generation adds some hightech muscle. The Cruze’s front view offers double-grid sight with chromed details while the exterior lines attract attention to features that are usually overlooked, such as the fog lights. The 18-inch rims on the Premier version give the sedan a sporty touch. Spacious describes the interior. The Cruze offers more room and comfort for every passenger as well as topquality sound — the Premium version comes with a 9-speaker Bose audio system. Besides the extra space, the back seats have a 60/40 folding system. An eight-inch touchscreen shows objects behind the vehicle with the help of the rear camera. The Chevrolet MyLink Smartphone Integration system also allows the driver to display phone contacts, messages, apps and music on the screen. Equipped with an Ecotec 1.4L turbo engine, with 153hp and both automatic and manual transmissions. The PEPS systems allows drivers to open the car without having to take the key out of their pocket and to start the engine with just one button push. The Stop/Start system also automatically turns off the engine when the car comes to a complete stop and restarts it when the footbrake is released, providing greater fuel efficiency. For some buyers, it is the gadgets that often make a difference and the Cruze gives tech lovers much to admire. Among the appealing technological features are a wireless charger system that allows users to charge their smartphones quickly and easily while driving. it also comes equipped with built-in 4G LTE Wi-Fi for connectivity. The OnStar application puts safety at your fingertips. At the press of a button, the app will send medical help in the event of an accident via its Automatic Crash Response function, or you can talk to a live operator. With the RemoteLink app, users can start the engine and access data such as gas and oil levels in real time. The Cruze continues its focus on passenger safety with a display of information on performance, such as tire pressure. The LS and LT versions are equipped with 4 airbags, but the Premier version is equipped with 6 airbags that also provide coverage to the passengers sitting in the car’s second row. The elegance remains, it is just a bit more muscular.

251

VIEW FROM THE TOP

WORLD CUP, DIGITAL FOCUS AMONG TACTICS FOR GROWTH MIGUEL LUZ Marketing and PR Director of Hyundai Motor de México

252

Q: Which strategies are responsible for Hyundai’s success?

of car ownership. Average length of ownership has greatly

A: For every brand enters a consolidated market such as

reduced, from five to three years. For that reason, it is

Mexico, the main strategies are differentiation and the

important to ensure our vehicles have a significant residual

use of the brand’s added value. Our products are built

value and the most competitive ownership cost.

following a comprehensive analysis of our competition, which allows us to identify areas in which to innovate

Q: How important are car loans for Hyundai?

and improve. All our vehicles are iconic, demonstrating

A: More than 50 percent of our sales are completed under a

consistency and congruency in our product portfolio.

financing plan. Credit has successfully penetrated the Mexican

While we do not intend to be a luxury brand, our cars

market and acquiring a loan is much easier. New buyers are

implement the “modern premium” concept, with the goal

much more informed about prices, competition and their

of surpassing existing expectations for the mass market.

own budget. As a result, sales no longer follow traditional

Hyundai’s motto is “New Thinking, New Possibilities,”

methods. It has become necessary to fully understand the

which is the basis of all communication strategies from

actual needs of a client to identify what they find most

media planning to relations with our commercial partners.

relevant in terms of sustainability, autonomy, safety and

The brand is employing specific strategies to boost brand

efficiency. We have turned our marketing strategy around

recognition, such as our collaboration with FIFA for the

so that 70 percent of our investment is in digital platforms.

Qatar World Cup. We are also taking advantage of the

Social networks have become one of our main tools but we

World Rally Championship to showcase our cars under

are also experimenting with other solutions such as Spotify.

extreme conditions. We have won two competitions with normal production cars that have not been modified in

Q: What is Hyundai’s strategy to balance performance

weight, transmission or engine.

with energy efficiency? A: Hyundai has developed Ionic as a superior alternative

We also are breaking service paradigms by eliminating

to the competition in motorization, energy consumption

minor guarantee clauses in specific areas and providing

and range. We easily surpass the industry’s 160km average

bumper-to-bumper warranties for five years. We have

with Ionic’s 250km range. The company is optimistic about

even implemented unique tire insurance for the Mexican

this vehicle for the middle-term but our plan will depend

market due to the country’s road infrastructure and the

on the evolution of market demand and the country’s

solution has generated a higher level of trust in our brand,

infrastructure. Our experience with hybrid technologies is leading us toward electric developments and Ionic has a

Q: How is Hyundai targeting the millennial market

hybrid, plug-in and full electric version.

considering the challenges created by new technologies and the rise of alternative transport solutions?

Q: What new Hyundai products will be introduced to the

A: While this generation may not possess as strong a sense

Mexican market?

of ownership as their parents, a car is still the second most

A: We introduced the new generation of the Elantra early in

emotional purchase for any generation after a house.

2016, which has been a great success as the entire line has

Millennials are also tech-savvy, they make informed

the singular “problem” of demand surpassing our existing

decisions based on in-depth research. Informed customers

offer. By mid-2016, we launched the Santa Fe, our top of

can be a bonus for car manufacturers. We are identifying

the line SUV, and in the third week of July we unveiled

the specific necessities for every stage in a person’s life.

the Creta, our smallest SUV. We are also evaluating the

Younger buyers are looking for more independence thus

possibility of introducing a new sedan model for next year

they prefer smaller, more efficient cars. We also generate

and we are planning subtle facelifts for several products,

specific financing plans for them, promoting the benefits

including the Sonata and the Tucson.

VIEW FROM THE TOP

DESIGN ADVANCES PUT SUBARU IN STRONG POSITION JESÚS VERA RODRÍGUEZ Director General of Subaru de México

Q: What is Subaru’s sales goal for the year and what is

should readjust the numbers. Although stability is unlikely

your longer term outlook in Mexico?

in the next six months, I predict the dollar-yen exchange

A: We have set a goal of selling 2,450 units in Mexico in

rate will not drop drastically. Assuming the dollar stays at

2016 and as of January 2016 we are already on track, having

MX$19 and the yen at MX$0.18 in 2016, we will not need to

sold 172 units, 27 percent more than the same month a

raise prices more than 2-3 percent.

year before. In 2015 we sold 1,618 units, a significant improvement on the 1,430 sold the previous year and

Q: What are the main equipment and technology

even more so compared to the 570 units sold in 2013.

demands of Mexican public?

New vehicle releases played an important role, especially

A: The Mexican public tends to focus on safety and the

the sport coupe BRZ, which debuted at the end of 2015

price-to-design ratio, although the vehicle’s image is still

and grabbed attention. As a high-tech manufacturer

very important. The driving force for many clients is still

we are in the top 10 brands, with an important focus on

the vehicle’s exterior appearance. We have made advances

safety controls and technology. Expanding our network of

in design, changing the team in Japan for a fresher input,

concessionaries and accurate price targeting has helped

with the WRX and BRZ as clear examples of its success.

us reach growth of approximately 250 percent since 2012.

The Legacy has changed considerably as well, along with the appearance of the Outback, thanks to new designs.

Our primary goal is to reach 1 percent of the market by

The latter’s sales have increased by more than 200 percent

2020, or 10,000 units according to the current size of the

in Mexico and have been affected 20-25 percent by the

market. We project, however, that by 2020 the market will

exchange rate changes, as it is completely US-sourced.

have grown and we will have to sell 13,000 vehicles to reach 1 percent of the market. But we are committed to reaching

The Forester and the Subaru XV, which are the models with

at least 10,000. Subaru is walking a fine line on product

the highest sales volumes, are always in demand. The XV

availability, as all countries have greater sales needs than

has attracted plenty of attention, accounting for 21 percent

what the company can manufacture. Therefore, plants in

of our sales and has become one of our most important

the US and Japan have been instructed to diversify and

products. The XV is on the verge of overtaking the Forester

divide production more efficiently to increase capacity.

in sales volumes, which currently represents 38 percent

Right now we need to prioritize extending production

of our sales. The competition has been fierce, all OEMs in

in our existing plants, but in the future we may consider

Mexico have registered 10-23 percent growth and more

Mexico for another plant location. We will need to evaluate

competitors continue to enter the fray. We want to diversify

the market and reach our 1 percent market share target to

sales of different models and the Outback, XV and the

justify building a plant in the country.

Impreza are key to balancing demand. The Impreza is the only sedan in the segment with four-wheel drive and will be

Q: How competitive is Subaru compared to similar

relaunched at the end of 2016.

German and Japanese premium brands? A: We are positioned in a niche between these two divisions.

Q: What does Subaro have planned for the coming year?

Our goal is not to compete with European brands as they

A: This year will be Subaru’s 10th anniversary in Mexico

tend to be more expensive than Subaru but our vehicles

and we will celebrate by announcing the release of the

are much better equipped than other Japanese brands.

new Tribeca prototype, the largest SUV we offer, for five or

The dollar’s volatility has not yet impacted Subaru’s sales

seven passengers. This type of vehicle is usually the most

because customers accepted a price increase we finally

requested in the US market but it will permeate Mexico as

implemented in December. We will wait to see if this first

well. BRX and Impreza will see full model changes in the

price increase affects sales before deciding whether we

near future and almost all lines will be updated.

253

VIEW FROM THE TOP

INFORMED WEB SURFERS, INFORMED BUYERS GERARDO SAN ROMÁN Head of Latin America at JATO Dynamics

254

Q: What trends has JATO detected in the market’s sales

limited to 48-month contracts, there are now loans for

and aftersales operations?

over 72 months. This could mean customers are running

A: The main driver in Mexico is financing. When we started

out of money and could create a problem for OEMs in their

tracking financing in 1995, Mexico was a closed market and

product planning process.

reeling from the 1994 economic crisis, which prevented this type of funding from becoming a real alternative for the

Q: How has Mexico become more competitive in the face

market. In 1997, however, General Motors implemented an

of new emerging markets?

aggressive promotion plan for the Chevy with a 12-month

A: Crucially, labor laws are attractive to foreign investors.

interest-free scheme, prompting other brands to reformulate

They are less stringent than regulations in comparable

their financing alternatives. Since then Mexico has grown

countries such as Brazil. The peso’s position against other

organically, even enduring the latest crisis in 2008.

currencies also keeps operating costs far lower than most other manufacturing hubs. Mexico enjoys the advantage

In contrast to the uncontrolled development seen in other

of proximity to the US and has developed strong logistics

countries, which led to deceleration, Mexico’s unwavering

infrastructure facilitating exports across the Atlantic

growth has generated a more stable market. A market’s

and the Pacific, and strong free trade relationships with

saturation point and elasticity define the purchasing power

more than 45 countries. Specifically for the automotive

of its clients but Mexico’s growth projections are positive.

sector, Mexico has developed formidable expertise in

While forecasts are not as optimistic as in 2015, we expect

manufacturing and assembly operations, which has proven

growth rates of 4.5-4.7 percent. Vehicle sales are expected

an advantage for companies targeting the NAFTA region.

to reach approximately 1.45 million by the end of 2016, based on the excellent results seen during the first quarter of 2016.

Production focus is on exports, which differentiates the country from other regions whose domestic market is

Financing rates are now competitive across the market

prioritized. The Brazilian government relied on the growth

and time frames for loans are more attractive than 20

of domestic sales, neglecting other opportunities while

years ago. Nevertheless, we should be cautious about the

most investors tried to get a bigger share of the market.

duration of financing contracts. Having previously been

They failed to recognize the country’s development

POPULARITY OF OF FINANCING PLANS (jan-jun thousands ofGRÁFICA units) DE BARRAS (THOUSANDS) POPULARITY FINANCING PLANS (JANUARY-JUNE) 150 120 90 60 30 0

6 2016

12 2015

Sources: AMDA Source: AMDA

Other

Selffinancing

could falter and Brazil’s weakened market now lacks

A change in mindset is essential from a technological

strong commercial relationships with other countries

standpoint and for financing alternatives such as leasing.

to recover. Therefore, despite the country’s production

The Mexican culture is ownership-oriented and car owners

capacity of over 4 million cars, potential sales only reach

do not know about vehicle depreciation. Leasing offers an

approximately 2 million. Although growth in the domestic

excellent alternative in operating costs and fiscal benefits.

market would be even more attractive to investors, we

If we were to combine all those advantages with the

believe Mexico bet wisely on its development strategy.

characteristics of an electric vehicle, companies would save on energy taxes and on maintenance costs.

Q: How could changes to the “No Drive Day” program affect the new and used vehicle markets?

Q: How do you project digital sales will grow Mexico’s

A: While only temporary measures, they have undeniably

market, which relies heavily on personal interaction?

affected used vehicle sales. Credit applications for used

A: The purchasing decision process has turned full circle.

cars grew 15 percent in only 15 days, according to NR

Sales used to be emotionally and financially motivated

Finance’s Vice President Andrés de la Parra. The electric

but today when customers enter a dealership, many

vehicle market also felt the impact. While Toyota sold 96

have already made up their mind. Of new car buyers, 75

and 58 Priuses in January and February of 2016, in March

percent start their search on the Internet. They may know

the brand sold 422 of the same model. I would be cautious

a lot more about the product than sales people. Certain

to mark these numbers as a defined market trend for the

opportunities still need to be addressed to offer the client

whole year. The restrictions were lifted after June 30. From

the best information, but generally they search for what

July 1, emissions regulations became stricter. It is unclear

they want, what they can afford, the financing alternatives

how effective these latest changes to the “No Drive Day”

they can choose from and even the total cost of ownership

program have been on the city’s poor air quality. What

of any model before approaching a dealership. Positive

has become evident is that public transportation is part of

or negative opinions available on the Internet influence

the problem and that these vehicles should be regulated

buyers. Social media plays a fundamental role in the

under the same plan as any car on the road.

decision-making process of many customers, transforming user experience described on the websites of automotive

But the measure has been beneficial as it has pushed

manufacturers and media outlets into crucial marketing

some drivers to adopt hybrid and electric technologies.

opportunities for every brand in the market.

255

VIEW FROM THE TOP

WARRANTY, CURIOUSITY SPARK SALES PEDRO ALBARRÁN Managing Director of Hyundai Motor de México

Q: How has Hyundai adapted its services and product

to our customers. Although we only have five products

portfolio to achieve 60 percent growth over 2015?

here, our plan is to double that number by 2018, ensuring

A: Our products have a very attractive design and are

that our customers can have the vehicles they want.

well balanced in terms of safety features and a bumper256

to-bumper warranty for five years. Our warranty implies

Q: What role has your distribution network played in the

an ongoing commitment from Hyundai and is a perfect

development of the Hyundai brand?

opportunity to maintain a close relationship with clients

A: Our dealerships receive about 1,000 visits per month,

after they leave the dealership. We just launched a two-

resulting in an average 30-50 visits daily. This shows the

year tire insurance program that has been effective in

market is active but also exemplifies the attractiveness of

Mexico. If a client needs to change two damaged tires

our brand. From the moment we set foot in Mexico in 2015,

per year within the first two years, we will replace them

our dealerships have been extremely busy even though we

completely free of charge. There have been some minor

did not launch a new product until May 2016. Nonetheless,

obstacles to overcome but our warranties and aftersales

new models for the Tucson and Elantra were a substantial

service have ensured 90 percent of our customers return

contribution to our business.

to Hyundai installations for maintenance and repairs. Many of the customers visiting our dealerships are new to We want to offer a truly balanced portfolio for both

the brand, attracted mostly by curiosity. We have trained

cars and SUVs, and we are analyzing the possibility of

our sales force to understand our vehicles intricately to

introducing eco-friendly vehicles to the Mexican market.

identify the needs of our customers and offer them the

The Hyundai Ioniq has just been released globally but we

most suitable option for their lifestyle. Our clients also are

also have a hybrid version of the Sonata, among several

beginning to demand products that have not yet been

other models that will be vital to our future strategy.

launched in Mexico. While the inclusion of more models is in our plans, it will take about two years to expand

Q: How did Hyundai adjust its image to target specific

our portfolio completely. Out of 30-50 daily visits to our

customers?

dealerships, almost 50 percent end in a purchase. This is

A: We researched the needs and priorities of Mexican

possible thanks to our teams as well as a strong financing

customers extensively and adapted our portfolio. We

branch powered by Bancomer. We can resolve 65 percent

identified which safety features were most sought after,

of our loan requests within one hour.

the colors they preferred, interiors for many different tastes and the infotainment systems that are most in

Q: How is Hyundai managing competition with KIA as

demand. We began with a lineup of four vehicles focusing

both brands are part of the Hyundai Motor Group?

on the most popular segments in the Mexican market and

A: Although both brands are part of the Hyundai Group, we

just launched the new Hyundai Santa Fe, our fifth model

have wholly different strategies. The Hyundai Motor Group

here. We have already sold 50,000 units and all our models

first invested in Mexico in 1989, establishing a plant in Tijuana.

have waiting lists of interested buyers, demonstrating the

Today, the group is introducing a second investment with

growth opportunities that still exist in the country.

KIA’s new plant in Pesqueria, Nuevo Leon. This project may be entirely focused on KIA but depending on its success,

Our Mexican dealerships now portray Hyundai’s global

Hyundai will evaluate the possibility of introducing vehicle

public image. We communicate the brand’s current

assembly to Mexico. Overall, the Hyundai Motor Group

aspirations, now that Hyundai is no longer a low-entry

wants to reach 10 percent market share in Mexico, which is

brand. We have vehicles in all major segments in the

a realistic goal considering the growth that both Hyundai

country and we needed to convey this more appropriately

and KIA have seen in the last year.

VIEW FROM THE TOP

TECHNOLOGY NOT ONLY DRIVES THE CAR, IT SELLS IT GERARDO GOMEZ Director General México of J.D. Power

Q: How have studies by J.D. Power impacted the sales and

Q: How can OEMs best incorporate new technology

service segment of the auto industry?

systems?

A: Because OEMs are focusing heavily on the requirements

A: All new vehicles are being updated with novel technology

of Mexican customers, we syndicated and published three

but in all fairness it is a challenge just to keep up, let alone

studies that measure satisfaction. The first study evaluates

innovate. We believe that OEMs should prioritize making

sales satisfaction, while the others consider dealerships’

technology affordable and easy to use but frequent updates

aftersales service and product quality. These provide key

in technology make this extremely difficult. J.D. Power

information for OEMs to improve their dealership network.

offers information regarding these issues to OEMs, advising

It is gratifying to see companies leveraging this information

them on how a new customer with no special knowledge

and coming to us for more. Customers are interested in

might perceive their vehicle’s technology so that engineers

having clear information throughout the sales and service

can appreciate difficulties from a different perspective.

process, which includes promises on delivery times being kept and the customer being informed when deadlines

Telecommunications

cannot be met. Mexican carmakers must prioritize this kind

information that is available elsewhere is desirable. The

of transparency to build trust in their brand. Regaining the

real barriers are the infrastructure in Mexico, which may

trust lost over decades among Mexican customers is a long

not be ready for new technology, or simply the price.

process. Many younger customers are more influenced by

Prices must be decided by the market’s purchasing power,

their elders’ opinions on brands than by advertising or

not the other way around as most brands seem to believe.

marketing, meaning we have to contest backdated ideas

This is creating an obstacle to more Mexicans adopting

across generations. Transparency is vital to generate trust

electric cars. Nonetheless, although some technology

and customers particularly value a clear explanation of

may be difficult to implement in Mexico, others flourish.

what they are paying for and why.

For instance, traffic applications work perfectly and experience

high

are

demand.

universal

One

and

the

access

overlooked

Q: How do you encourage manufacturers to become

advantages of the introduction of specialized technology

more service-oriented?

in the Mexican market, such as traffic apps that would not

A: The brands that produce the greatest product volumes,

be as successful elsewhere, is that they provide companies

especially those that have been around for 50-70 years,

with extremely valuable feedback on the market.

struggle to update such a deeply engrained mindset. Realistically, new brands entering Mexico, such as KIA, are

Q: How is demand spurring the evolution of safety

at an advantage because they can build this employee

systems?

awareness from scratch, a much faster task than retraining

A: Consumers are becoming more sensitive to safety

the entire staff. Nonetheless, J.D. Power has witnessed

mechanisms. Any addition to a vehicle is well-received

new market entrants contracting employees from existing

and OEMs are incorporating items such as airbags in all

brands and retaining them efficiently, proving it is possible

vehicles, not just high-end vehicles. As consumers, we now

to change this mindset. The most important advice we can

assume basic safety features will be included in all cars and

give to clients is to identify the final impact on end-users

although OEMs are sometimes limited by costs as to how

and to adjust processes to improve customer satisfaction.

much safety technology they can include, they endeavor

Technology offers great advantages to car dealerships,

to provide as much as possible as standard. Collision

enhancing options for clients and providing assistance to

avoidance systems are just starting to reach all vehicle

sales advisors. The dealership owners are responsible for

segments, and as customers begin to fully understand this

showing their teams how to get the most out of technology

technology it will be taken as a given, in the same way that

but until now few have directed investment to that area.

electric windows have become the norm.

257

I LIGHT VEHICLE SALES BY REGION IN MEXICO

69.7%

41.4%

44.2%

258

28.2%

25.6%

38%

27.6%

37.2%

Center

11.7%

Gulf-Peninsular

30.6%

Metropolitan Northwest North

35.4%

West South

31.8% 35%

Region

Jan-Jun 2015 (units)

Jan-Jun 2016 (units)

Center

144,668

168,417

Gulf-Peninsular

65,998

75,056

Metropolitan

131,762

130,070

Northwest

39,495

57,584

North

94,864

123,406

West

63,173

85,245

South

69,865

82,078

Total

609,825

721,856

Source: AMDA

State

Variation % 1

State

Aguascalientes

11.7

Morelos

21.3

Baja California

69.7

Nayarit

30.6

Baja California Sur

25.6

Nuevo Leon

30.9

Campeche

-3.1

Oaxaca

17.8

Chiapas

7.1

Puebla

20.9

Chihuahua

44.2

Queretaro

24.2

Mexico City

-1.3

Quintana Roo

26.7

Coahuila

28.2

San Luis Potosi

27.1

Colima

31.8

Sinaloa

Durango

27.6

Sonora

41.4

Guanajuato

29.1

Tabasco

-4.8

Guerrero

6.7

Tamaulipas

17.1

Hidalgo

21.3

Tlaxcala

33.9

Jalisco

35.4

Veracruz

15.8

State of Mexico

8.6

Yucatan

21.4

Michoacan

Zacatecas

37.2

Variation % 1

Between Jan-Jun 2016 and Jan-Jun 2015

Source: AMDA

30.9%

17.1%

27.1%

29.1%

24.2%

8.6%

21.4% 21.3%

-1.3% 21.3%

33.9%

26.7% 15.8%

-3.1%

20.9% -4.8%

6.7% 17.8% 7.1%

259

VIEW FROM THE TOP

NEW TECHNOLOGY TO SELL PRE-OWNED CARS ARIEL CILENTO COO of LatAm Autos and Speaker for SEMINuevos.com

Q: How was LatamAutos created and what expectations

need a trustworthy partner to help them form an opinion

does it have for the Mexican market?

about the product. We aim to become the best partner for

A: LatAm Autos is present in six Latin American countries,

these customers who want to buy or sell their vehicle.

namely 260

Mexico,

Argentina,

Ecuador,

Peru,

Panama

and Bolivia. Mexico and Argentina represent our main

Q: How has SEMINuevos.com built trust between both

opportunities for growth. The company was formed

parties in a car purchasing operation?

through the acquisition of five car-listing companies

A: We still have many miles to cover in this area but we

in six different countries. Mexico was the only country

are creating a unique solution. Having developed a tool

where LatamAutos bought two different companies, one

that helps the client determine if a vehicle is within an

in Guadalajara named SEMINuevos.com and the other

acceptable price range we added an option to list a car

in Mexico City called Demotores.com. We unified both

with no cost. We are not directly involved in the payment

platforms under the first name and even though we do

process but we are working on a solution to integrate this

not only focus on second-hand cars, SEMINuevos.com had

into our operations. Even if a customer does not pay for

enough presence to secure a solid position in the country,

their ad, we still validate certain information about the

with the largest specialized vehicle audience.

person and the vehicle. Purchasing a new car is relatively easy but used cars can imply complications for both

We launched our IPO in December 2014 and focused on

parties. We work to create a stress-free environment.

unifying all platforms in the first months of 2015. In the

We support OEMs by helping with their new releases

second half of 2015, our target was to restructure the

and brand development strategies. SEMINuevos.com is

company, to implement new operations and work on a

an excellent partner in the customer-attraction process.

positioning strategy. By the end of that year, we had a

With large distributors our role is to appeal to customers

follow-up offering of US$20 million. Our goal for 2016

using the group’s portfolio. Even though both OEMs and

is to consolidate the business so we are dedicating a

distributors have their own digital platforms we do not

considerable part of our monetary and human resources

consider them competitors as we do not sell the cars.

to Mexico. Our Mexican webpage attracts over 2.5 million visits per month and at least 60,000 new listings.

Q: How has LatAm Autos innovated to offer a better

Comparing inventories on car-listing websites in Mexico

solution to clients?

and Argentina with the penetration rate of these platforms

A: Listings have not evolved much from their original

and the population in both countries indicates that the

concept but the Internet has made it much easier to extend

market still has plenty of growing room.

inventories to the public and connect people beyond their phones. From June 2016 onward, we implemented

Q: What participation has SEMINuevos.com garnered in

real-time communication between buyers and sellers on

the new and used vehicle segments?

our platform. Instant messaging is now commonplace,

A: Our challenge is to offer added value to the customer.

so it is a natural next step for these types of operations.

Nine out of 10 people with access to the Internet use it to

Our

find information when they are car shopping, so our goal is

15 percent, showing visitors spend more time on the

to attract 100 percent of those people to our website instead

website. Furthermore, this system allows us to track all

of the OEMs’ platform. On SEMINuevos.com the customer

the interactions between buyers and sellers, providing

can compare all brands in the market and the advantages

insight into the needs of both parties. In response to what

of a particular model against other vehicles. Buying a car

our corporate customers were saying, we just released

is an emotional process. Used vehicles can present certain

MOTORChat and MOTORDealer for dealers to manage

complications regarding the state of the car so customers

their online presence and their online sales.

engagement

rates

have

grown

approximately

VIEW FROM THE TOP

THE NEXT STEP IN FINANCING SERVICES

Fernando Gómez Arriola Co-Director General of Nexu

Abdon Nacif Co-Director General of Nexu

Q: What inspired Nexu’s innovative business model and

Q: How did the company convince potential partners and

what is the basis for Nexu’s platform?

customers about the benefits of the platform?

AN: The defining factors that paved the way for Nexu were the

FG: Mexican companies were not familiar with the

growth of digital marketing, the increased trust that clients

business model so we had to convince each partner that

have in Internet-based transactions and the vast number of

Nexu could be another distribution channel for their

financing options on the market. We realized the process for

services. For many companies, building new branches in

obtaining automotive credit was tiring, time-consuming and

new regions to connect with more customers is not cost-

complicated for consumers, as they normally have to visit

effective but the fact that the digital market is growing

several financial institutions before finding the best option,

immeasurably is well-known. Approximately 68 percent

while also keeping track of each submitted application. Also,

of the estimated 70 million cellular phones in Mexico are

once a financial institution accepts an application, most

smart phones, meaning that even those without access

clients stop searching, unaware that another institution

to a computer can use online services. Also, 67 percent

could have offered them better terms.

of our customers contact us through a mobile device. Most financing companies see this as an opportunity

FG: While these were the main inspirations behind our

to attract potential customers who could not contact

project, we also detected an opportunity with clients

them otherwise, although they may still need to develop

that might not fulfill the traditional conditions required

programs to address this niche.

by financing companies. Furthermore, financial services have developed considerably in Mexico, particularly in

AN: Buyers are becoming less impulsive and are more

the automotive segment. According to a whitepaper we

inclined to compare different options, making our service

published in collaboration with Carmudi, the financing

more valuable. We have been really fortunate because news

process has been improving for users over the last 15

about our operations has traveled along the grapevine and

years. In 2000, the lowest interest rate you could get for

led to significant organic growth. When we started, all

an automotive loan was around 25 percent. Now, you can

our clients arrived through paid advertising. By the end

contract a loan at half that rate, increasing the popularity

of 2014, 7 percent had heard about our service through

of these services as well as the financial inclusion in the

other channels. By April 2015, this number had grown to 15

country, which gives Nexu the perfect springboard for

percent and in September we reached 25 percent.

growth. The first thing that Nexu analyzes is the user’s profile, including their sources of income and credit

Q: What obstacles has Nexu faced, particularly when

history, how they want to manage their credit and how

attracting new clients?

much money they want to spend. Nexu then finds the

FG: Attracting clients to the platform was the difficult part

companies that meet those needs while considering all

since it challenged the traditional methods of buying a car.

the available special offers on the market, creating a truly

We knew that we had to target a young demographic, and

informed report for the user.

currently 76 percent of our customers are under 39 years of age. Today, the usual paradigms have shifted and, little

AN: All clients start their process on our webpage. Once

by little, customers are learning to trust digital services.

a customer shows interest in a certain vehicle, they are

Google has reported that more than 90 percent of people

contacted by a Nexu Ambassador who accompanies

who want to buy a car use the Internet at some point in

them through the entire operation. Our Ambassadors

the process, illustrating an excellent opportunity to reach

offer objective consulting services to determine the best

the market digitally. Our early adopters have also helped to

financing plan for each client according to their specific

build Nexu’s reputation through recommendations. At least

preferences and desired vehicle.

half of our users have recommended us to new clients.

261

INSIGHT

IN AN ACCIDENT? THERE’S AN APP FOR THAT Besides the police, the first person you call in an accident

relations. “We have adapted the platform according

will likely be your insurance representative. Now, there’s

to customer comments and we always validate any

an app for that. Axa Seguros launched the My AXA

updates with our customers,” says Ruiz. “The ratio of

mobile platform in January 2016 to boost its connection

digital to telephone reporting is still low but customers

to customers. “The idea behind My AXA is to have a

are gradually getting used to this new idea.” The digital

customer’s information in one place, so they can contact

tool is not intended to eliminate the human factor from

us easily in the event of an incident,” says Óscar Ruiz,

AXA’s services. Customers can contact a company

Director of Digital Transformation at AXA Seguros.

representative directly from the app, without unlocking the phone. “Our goal is to open an additional channel of

262

My AXA has been downloaded 40,000 times as of

communication so users can choose the one they prefer,”

August 2016, a result so encouraging, the company set a

Ruiz adds.

goal of 100,000 downloads by the end of the year. The platform features more than 50 services, integrating

According to INEGI, there were 14,319 road accidents

vehicle insurance with all the products a customer

in Mexico City alone in 2014, which is why the capital

might manage through AXA. In the event of an incident,

is AXA’s main market for the new app. The platform

customers simply report it through the app and their

also is available throughout the country and Ruiz says

vehicle, medical, life or any other insurance policies are

the reception in other major metropolitan areas like

automatically coordinated. According to Ruiz, the app

Monterrey, Puebla and Guadalajara has been great. He

is updated every month to integrate new services and

adds that the platform has doubled its market penetration

to offer a better service to all users. “Among its main

each month since release and has been an excellent tool

features, customers can track the claims adjuster on

for supporting AXA’s sales force.

the way to their incident and evaluate their service accordingly.”

The company’s final goal for My AXA is to develop a platform that can attract more users, while diversifying

There were 14,319 road accidents in Mexico City alone in 2014

its solutions for its existing customer base. “Since the app is not only for vehicle insurance, our clients in other segments can learn about and hopefully contract more of AXA’s solutions,” says Ruiz. “Furthermore, we want My

AXA Seguros developed this solution in-house and it has

AXA to become a go-to platform for all maintenance and

been an excellent tool for attracting a younger clientele,

repair services, even when they are not related to a road

Ruiz says. As sales and service paradigms change, a

accident.” As the market evolves, My AXA will allow the

digital approach is key to maintaining good customer

company to stay on top of digital consumer trends.

VIEW FROM THE TOP

COMPLEMENTARY SERVICES GROW IN POPULARITY ALFONSO MONREAL Government and Public Relations of OnStar

Q: How successful has OnStar been in Mexico and what

on the rear-view mirror to receive a personalized safety,

challenges has GM faced in bringing the solution here?

security, navigation and connectivity service. OnStar is an

A: Mexico was the first country in Latin America to receive

exclusive service and only GM offers it in Mexico. We have

the service, beginning in June 2013. We started with only

had over 720,000 interactions with our customers since

two pickup truck models, the Chevrolet Cheyenne and the

we started operations.

GMC Sierra. By the end of that year we had about 2,000 customers. Three years later we have over 55,000 with 30

Q: How is OnStar evolving to target the needs of the

models across the four GM brands: Chevrolet, Buick, GMC

Mexican market?

and Cadillac.

A: Connectivity is one of the most important aspects of new technology. We are working to improve our services

The challenges OnStar has faced involve people still

and adapt them to Mexican customers. Our goal is to offer

discovering us, so we are working to create more

OnStar across all GM brands. OnStar is already available in

awareness. One of our most important services can help

many segments, from the subcompact like the Chevrolet

save lives. In the event of a crash, the vehicle immediately

Spark to premium large like the SUV Cadillac Escalade.

sends critical information to the OnStar call center, such as the location of the crash, if air bags have been deployed

Q: What is GM’s relationship with insurance companies to

and the speed of the crash, to help the customer as fast as

ensure quick responses?

possible, in coordination with emergency services. In case

A: OnStar registers the driver’s insurance information so

of theft, the technology allows us to locate the vehicle

in the event of an accident, customers do not have to

and help authorities recover it. Another service assists

worry about calling their insurance company. The service

drivers with navigation. Our diagnostics service can help

puts them in contact to provide the necessary assistance.

us understand the mechanical status of the vehicle and

OnStar has created excellent relationships with safety and

anticipate any problem.

security institutions across the country and collaborates with them, sharing important information about a crash or

Q: What are your marketing strategies to boost awareness with new and existing customers? A: We have an advertising campaign in various segments through different channels such as radio, movie theaters and magazines. When a customer buys a new GM car at an agency, a sales advisor helps to enroll the vehicle in OnStar and explains the services that can be used free of charge for one year. Every month our customers receive an email about the diagnostics of the vehicle, including technical information, to keep the car in good health. They also receive a newsletter detailing our services and inviting them to discover the benefits of OnStar. Q: How has the technology helped GM attract customers and what feedback have you received from the Mexican public? A: OnStar is an example of innovation from GM. Our technology means a driver only has to push a button

assisting in the recovery of stolen vehicles.

263

VIEW FROM THE TOP

ALLIANCES TO BOOST AUTO LOANS JESÚS SMITH Director of Automotive Financing at Banorte

Q: How has Banorte’s participation in the auto loans

264

car dealership and the OEM. Banorte needs to adjust

sector changed in line with increased vehicle demand?

its processes and requirements for Grupo Picacho. Our

A: Although the number of brand financing companies

financing plan will also need to be specialized to include

has grown in recent years, commercial banking is as

different priorities. We expect a homogenous process

relevant as ever. Mexico’s growing market has allowed

between our traditional operations and our alliance

us to maintain growth rates and in 2015 Banorte had

operations, with clearly differentiated teams for each.

the second biggest market share among commercial banks. We reached 20 percent year on year growth in

Q: What must Banorte do to widen its presence in auto

the first quarter of 2016 and we are working to keep

financing?

the spotlight on our products in all car dealerships and

A: Banorte is paying close attention to every client

Banorte branches. Our strategy includes establishing

and car dealership. Part of our strategy is to offer our

alliances such as that launched with Beijing Automotive

financial plans and insurance policies, workstations and

Industry (BAIC). This follows a tie-up with Isuzu. They

sales points to distributors. Both dealerships and private

target different market segments and their processes

individuals want integral and added value products.

and market approach are different. We also participated

Providing pre-approved loans to our existing client base

in the taxi-substitution strategy in Mexico City and we

helps both the individual and the dealership in the car-

expect to keep generating more business on this front.

purchasing process.

Competitive

down

To boost our national market presence, Mexico needs to

payments, as well as promptness in loan resolutions

reach financing levels similar to those seen abroad. The

have positioned our products in the market. Banorte

automotive financing market has not grown as expected

has developed a specialized tool that allows us to

because of banking usage levels. The banking sector

immediately approve or respond to a client’s request

faces the challenge of widening its appeal. If we do this,

for loans. We are making it available to all our

we will see car loans increase.

payment

schedules,

rates

and

representatives but it has already helped consolidate our services among individuals and car dealerships.

Q: What are Banorte’s projections for this segment? A: Our expectation is to maintain the growth we

Q: How is the BAIC alliance expected to work with the

witnessed in the first five months of 2016. Automotive

financial solutions Banorte provides?

financing is among our most important offerings and it is

A: Our agreement with BAIC makes Banorte its primary

designed to help families and companies own a car. The

financial entity, although other entities might enter the

promotions we offer our alliances and the availability of

equation in the long term. We still have challenges,

people-centric products will boost demand. We have

such as BAIC being a little-known brand in Mexico. But

positive expectations for the car industry in Mexico.

the company is not new to the automotive industry. It manufactures and sells more than 2.5 million cars

The peso to dollar exchange rate has not had a dramatic

per year globally. The brand will use Grupo Picacho

impact on car prices. The industry is still growing and we

dealerships.

are facing historically low interest rates, meaning there is no better time to buy a car. There are several growth

Although this strategy allows us to participate directly

possibilities we need to analyze, including leasing

with the OEM rather than managing mini-alliances

to private individuals. Future services are still being

with the car dealerships, it also poses a new challenge

defined but we believe that if the auto industry grows

since we have three different clients: the final user, the

then Mexico will grow.

VIEW FROM THE TOP

PROVIDING THE RESOURCES FOR TRIUMPHS IN TRANSPORTATION RICARDO HOYO Head of Sales at Arrendadora Actinver

Q: What steps will Actinver take to reach the double-digit

financial solution is not secured, compromising the clients’

growth it targets?

cash flow and future loans. The sooner companies increase

A: Sales force specialization has made a huge difference,

their financial savviness, the faster their operations will grow.

so continuing to work on that endeavor is essential. Our

The owner-operator plan in Mexico further dents our work

clients’ experience is also crucial. We are keeping a close

as financial providers. Financial products are not uniformly

eye on potential opportunities to improve customer service.

understood, which prevents Actinver from targeting certain

Actinver’s presence, strength and market share continues

segments.

to grow in the Mexican market, which gives consumers extensive financial service availability and increases our

Q: To what extent has Mexico advanced in terms of

commitment to the local market.

incentives? A: Incentives are the same, such that leasing still offers

Last year, Actinver grew by 38 percent, doubling its leasing

the best alternative to asset renewal. The exchange rate

portfolio compared to 2014, which we are striving to

is the most influential factor in the industry because

repeat for 2016. Given the importance of the transportation

most assets are valued in dollars and Actinver’s financial

segment, we are working to increase our participation

products respond similarly, leading to many projects

in these activities. This segment represents MX$1.6

being put on hold.

billion (US$95 million) of Actinver’s overall MX$4 billion (US$235 million) portfolio, including sea, land and aerial

Areas of opportunity in light vehicle leasing are numerous but

transportation. Most of our growth resulted from our sales

individuals are not yet entitled to fiscal incentives, hindering

force specializing in different sectors, namely the transport,

the transition to a US consumption plan. Nonetheless, by

health, technology, energy and machining fields. Our

creating a sufficiently attractive model we can collectively

flexibility differentiates us and having improved our internal

build a financial culture that will promote leasing, benefiting

procedures, we can quickly allocate financial resources

both financial entities and individual vehicle users.

as part of integral solutions to our clients. On top of our competitive interest rates, our rapid responses serve as

Q: How does Actinver cultivate rewarding interactions with

another driver for our success.

fleet management companies? A: Actinver is certified by the Ministry of Communication

Q: Which aspect of the automotive industry has the

and Transportation (SCT) to file heavy vehicle license

greatest potential for improvement?

plates. In addition, we are creating insurance packages with

A: Freight was the sector with the most significant growth for

premiums of 0 percent and GPS services, to be released

our company in 2015, with machining close behind. Actinver

during 2016. The company is channeling its energy toward

services 50 percent of Mexico’s top 100 transportation

expanding its portfolio, positioning Actinver as the third-

companies and we expect to cover the full range of

largest leasing company in Mexico.

transportation segments by the end of 2016. Although our participation in the passenger transport segment is limited,

Leaseback is also a popular service among fleet management

we have some contracts in the pipeline for Mexico’s northern

companies, as it helps these entities recover most of their

region. But poor financial professionalization presents

initial investment while allowing them to continue leasing

a significant obstacle in Mexico’s automotive industry.

the asset long term. If the vehicle has a maximum six-month

With proper financial management, more capital could be

lifespan, Actinver can reimburse 100 percent of the initial

channeled to these players’ operations at a reasonable rate.

investment. We can only engage in this practice if the unit

When companies fail to comply, risk increases, negatively

does not exceed that lifetime, in light of the asset’s projected

affecting loan procurement. As a result, the best viable

depreciation.

265

VIEW FROM THE TOP

GREEN CAR FINANCING A GROWING MARKET AURELIANO GARCÍA VALENZUELA Automotive Financing Director and CFA of Scotiabank

266

Q: How does Scotiabank participate in the auto financing

have grown 6 percent within brand penetration, which is

sector and what are your growth expectations?

now close to 40 percent of Mazda´s total sales. We have

A: We have been working with the automotive industry for

solid experience as a brand financer and are prepared to

17 years and car loans are one of the bank’s strongholds. We

work with other brands at any given moment.

are passionate about cars and we know and understand the industry. There has been exceptional growth in the sector

Q: What new business opportunities do you expect to

and its financing services, especially in the past three or four

come to fruition in the car loans industry?

years and we have yet to hit a ceiling. From January to June

A: After the pollution problems Mexico City experienced

2016 the auto finance industry generated 474,792 contracts

in the first half of 2016, we created a product designed

and we anticipate sales of around 1.5 million units by the

for hybrid and electric vehicles. We provide our lowest

end of the year. Thanks to new financing opportunities,

interest rate, an environmental bonus deducted from our

many people are now able to buy new cars and we expect

customer’s credit and unemployment insurance at no

the segment to grow, financing almost 65 percent of cars

extra cost. Customers that choose to finance their hybrid

sold in the country. To distinguish ourselves from our many

or electric car with Scotiabank can also make advance

competitors we have to put in the extra work. Scotiabank

payments free of charge and there is no down payment

offers financial and other services, such as counseling to

needed. Even though sales of electric or hybrid vehicles

choose the best option, and designs personal plans based

are not extensive here, they have been growing by 60

on a customer’s purchasing power. Our objective is to inspire

percent year on year for the past three years. For the

confidence and above all develop an outstanding customer

second half of 2016, we expect to allocate 200 loans of

experience. We try to make the process of obtaining credit

this type and we hope this product will experience growth

as smooth as possible, offering our customers every tool

rates of 30-35 percent per year.

they might need to communicate with us through our callcenter, our website or our branches. Scotiabank believes

Q: How has Scotiabank’s FIU offering affected purchases

the growth we are experiencing is the result of the trust in

of car insurance?

financial institutions and the Mexican economy.

A: FIU is our online insurance store and it has been tremendously

successful,

exceeding

our

initial

Q: What role does brand financing play in Scotiabank’s

expectations. Five insurance companies are working with

auto loans strategy?

FIU and in the future we will be offering more options.

A: We do brand finance for Mazda but our CrediAuto

Insurance companies have been keen to participate and

program is open to any car brand. The growth of brand

have made competitive and interesting offers. FIU is user-

financing in general has been boosted by the subsidies

friendly and we accompany clients through every step

given by car brands and distribution networks. At

of the process. Our ScotiaSeguros department is also

Scotiabank, we do not offer subsidies but focus instead on

focused on helping customers with claims, functioning

high-quality service. Our customers have many financial

as a link between them and insurance companies. The

options, including access to different types of credit, to

most difficult hurdle is convincing people to purchase

design a complete financial package. We also maintain

car

competitive interest rates, enabling people who have

include insurance are starting to resonate with Mexican

never had any banking service to acquire a new car.

consumers. Even though Mexico has a very low index of

insurance.

Fortunately,

car-financing

plans

that

insured cars, we have been seeing an important increase Scotiabank has worked and grown with Mazda for over

in those numbers. We still have a long way to go, but our

seven years. In the first half of 2016, we allocated 10,243

efforts to create accessible platforms such as FIU will help

car loans, compared with a total 8,900 signed in 2015. We

the industry tackle the country’s backlog.

VIEW FROM THE TOP

CAPITAL INJECTION SETS UP AMBITIOUS TARGETS Q: How do you expect LP Group’s recent acquisition of LeasePlan to impact your local and international operations? TB: LP Group stated from the beginning of the process that they support our growth expectations and our overall

Tjahny Bercx CEO of LeasePlan

Marcio Hociko Director of Operations at LeasePlan

strategy. Thanks to the capital the company will inject into LeasePlan, we will be able to aim for more ambitious targets

Q: What strategies are you implementing to grow

in the near future and we will be able to enter new markets.

organically under aggressive development conditions?

Asia is the perfect example as we are opening new operations

TB: We want to become the first choice for the Mexican

in China and Malaysia. This region has become one of our

customer not only thanks to the number of cars, but also

main priorities, added to the Latin American market.

due to service. We will shortly introduce a new system to speed up maintenance approvals and manage all

LeasePlan is already the number one company for leasing

invoicing automatically. This system is in its testing phase

operations and this new investment will give us the

but is expected to be operational in late 2016. We will

opportunity to delve into new technology developments

start testing it with three of our major customers before

to serve our drivers and our clients in the best possible

eventually including it in all our fleets. Our administrative

way. Mexico represents an excellent opportunity for

services also offer added value for our clients. We manage

LeasePlan, especially in the fleet segment. In the last two

all the paperwork for their fleet, so they do not have to

and a half years, we have grown 190 percent and in 2016

worry about anything besides their business. LeasePlan

alone we expect to see 30-40 percent growth.

has clients that do not lease our cars but do use our administrative services.

Q: How has LeasePlan taken advantage of its position in the international market to boost its presence in Mexico?

Q: Where are the cost reductions LeasePlan identifies for

MH: We have expanded our operations and one of our

its clients?

most recent developments was in telematics. Our strategy

MH: Apart from these administrative activities, we make

is to become a one-stop shop for mobile solutions, paying

maintenance operations more efficient for the driver. Our

special attention to the drivers and their needs.

newest platform will also include a workflow-tracking system so drivers can periodically check the time frame

TB: We want to determine what we can do best for our

and progress of each maintenance service. The platform

customers. Over the past two years, we have invested

will help them find the closest service station to their

millions in system improvements and training for our staff.

location, generating a more productive agenda for the

Our employees are a crucial part of our operations and are

driver. Regarding telematics, our new portal will allow

the basis for our growth in the country. Alongside their

fleet managers to track all their vehicles and check which

professional development we always strive to support

are undergoing maintenance. The system will create an

their personal and professional growth. LeasePlan has

analysis of the users’ driving patterns to help companies

worked hard to achieve salary equality between men and

find important cost-reduction opportunities. Rather than

women and we have always made sure every person feels

just handing information to the client, LeasePlan analyzes

like they are part of the company and its evolution. We

it and offers potential solutions that could boost clients’

train our staff to drive more efficiently and on what to do in

efficiency and reduce costs.

the case of a robbery. We also share these courses with our clients, helping them improve the Total Cost of Ownership

TB: After salaries, company car use is by far one of the

(TCO) of their fleet. Certainly growing 190 percent has been

highest costs in any organization. Therefore, we work

astounding for LeasePlan but it also represents a challenge

directly with our dealers and suppliers to offer the lowest

for our relationship with the client and the service we can

possible prices. LeasePlan is the only company that offers

offer. While it may seem simple at first glance, leasing is a

an open calculation scheme. This dictates that 50 percent

complicated product to manage. LeasePlan, being a financial

of any profit made with our cost-reduction strategies is

entity, has specialists that manage products and services in

shared with our customer and we take responsibility for

addition to administrative personnel.

any potential losses.

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INSIGHT

INTEGRATION WITH GIANT BROADENS REACH Overall, the relationship with CHUBB has had a tremendous impact on ABA Seguros’ offerings. It now manages

DAVID DÍAZ-FLORES

over 200 products, compared with about 30 products

Automotive Director of ABA

originally. The result is a more integrated solution for

Seguros

clients, complementing its mainstay automotive policies with life insurance and many other alternatives.

268

The automotive insurance market in Mexico was worth

The company also maintains a broad presence across the

MX$75.7 billion (US$4.2 billion) in 2015 and has an annual

country with offices in 27 of the 32 states. The strongest

real growth of 8 percent, according to the National

markets are Mexico City, Jalisco and Nuevo Leon. It offers

Bonding and Insurance Commission (CNSF). That means

standard solutions and insurance policies with added

there is scope for insurer ABA Seguros to grow in the

value coverage, which includes a larger return value, zero-

segment by offering added value to clients, a proposition

deductible options and alternative mobility solutions. The

made easier now that it has the added weight of global

insurer also sells special products that counteract vehicle

insurance giant CHUBB behind it.

depreciation for a certain period. Luckily for clients, this means they receive larger payouts in case of an accident.

Founded in 1958, ABA Seguros was already an established player in the Mexican market when global insurer ACE

ABA Seguros’ top challenge is to remain competitive while

Group swooped in and bought it in 2013. ABA then found

offering excellent quality coverage to customers.

itself part of an insurance behemoth when ACE finalized the acquisition of its peer CHUBB in January 2016 for

“The Mexican market is price-oriented, but we have always

about US$29.5 billion, creating the world’s biggest

tried to distinguish ourselves by providing the best service

publicly traded property and casualty insurer under the

and the most efficient operations,” says Díaz-Flores. The

CHUBB name. “Our relationship with CHUBB increased

company has invested considerably in technology, processes

our level of service and profitability, resulting in an

and training its workforce. Although this is reflected as an

improved connection with our clients,” says David Díaz-

added cost in policies, Díaz-Flores believes it ultimately

Flores, Automotive Director of ABA Seguros.

helps the company offer a more complete service. “Our objective is not to be seen as the least expensive company

ABA Seguros was previously the insurance branch of an

in the market, we want to stand out as the player with

OEM, an experience it has translated to its relationship

the best products, creating trust among clients that will

with CHUBB to build stronger products and services

reinforce long-term policies with ABA Seguros.”

for customers. Our Mexican branch has ties to over 80 percent of the brands in the automotive market

To boost customer access to products and information,

but is not exclusive to any of them. It also works with

the company has invested in e-commerce, allowing clients

banks and other financing firms, which has helped the

to contract individual policies and corporate products

company gain a better understanding of the market and

directly on its webpage. The platform features contract

its clients’ needs.

data and the progress of any repair in process. After an incident, for example, clients receive a login and a password

The National Commission for the Protection and Defense

so they can stay informed about the status of their vehicle.

of Financial Service Users (CONDUSEF) is the government

The call center maintains close communication with the

organization in charge of measuring indexes of quality

customer to notify them of any development. Similarly, the

standards, terms and conditions, transparency and how

ABA Clientes app is an easy way for clients to keep track

companies relate to customers. Díaz-Flores says ABA

of their policies. “We always consider the final client as the

Seguros is consistently at the top of CONDUSEF’s rankings

most important beneficiary in any technology integration

due to the insurer’s sales process and response time in

process,” says Díaz-Flores. Its tech innovations have also

the case of an incident, as well as its efficient handling of

helped with the company’s workforce. “Our technology

post-accident paperwork. “Communication with clients is

developments have also allowed us to maintain close

paramount for ABA Seguros to ensure they receive the

contact with the development of our people in terms of

service we promise,” explains Díaz-Flores.

training, sales and distribution processes.”

VIEW FROM THE TOP

PRIVATE SECTOR LEASING AN OPPORTUNITY LUIS AGUILAR Commercial Director of ABC Leasing de México

Q: How has ABC Leasing penetrated the Mexican market?

companies in the market but few participate at a national

A: ABC Leasing is solely dedicated to corporate and

level. Information detailing these operations is limited, but

automotive leasing. The corporate division targets the

JATO figures showed a promising future for these services.

equipment and transportation needs of medium-sized

We have seven regional offices and 20 branches throughout

enterprises. Our Car Loan and Leasing Program (PROCAAR)

the country plus our central office in Guadalajara. Our

focuses on SMEs and on individuals who engage in

strategy is to work hand-in-hand with OEM dealerships. We

economic activities. By the end of 2015, ABC was managing

have strategic alliances with Isuzu, Honda and GM. Even

a portfolio worth more than MX$5.7 billion (US$305 million).

though it has its own leasing program, Nissan is one of the

Of this amount, 62 percent was corporations, which make

main brands we work with, alongside Honda, Mazda and GM.

up 46.2 percent of our clients. Conversely, 38 percent of our

We also participate in the premium segment with Mercedes-

business is PROCAAR, which represents 53.8 percent of our

Benz, BMW and Audi representing close to 33 percent of

customers.

our portfolio.

We issued our sixth bond in July 2016 for MX$1 billion

Q: How does the PROCAAR program support ABC’s

(US$55.3 million), supported by Banamex, and we expect to

corporate segment?

launch our IPO within five years. Since our first bond issue

A: Both segments are important for the company such

in 2011, ABC Leasing has tapped the market five times. The

that we are starting a program in partnership with NAFIN

company started in 2004 and in June 2005, ABC acquired

to support the SME market. Instead of solely focusing on

Boston Leasing Mexico. This allowed us to incorporate a

vehicles we also try to offer a complete service encroaching

sophisticated information system, a high-profile portfolio and

on secondary equipment leasing. Private clients are still

specialized staff. In 2009, the company formed a strategic

ownership-oriented but this is radically different when

alliance with Santander and ABC obtained a certification as

we present leasing to companies. Once customers realize

Manager of Credit Financed Assets in 2011. The company

the benefits it provides such as attractive prices and the

agreed a capital investment of MX$300 million (US$16.1

possibility of eventual ownership, they are easily swayed.

million) from the Northgate Capital fund in 2015, when we started our commercial alliance with Scotiabank and began

Q: How has ABC Leasing innovated in its technology and

operations with INTL FCStone. We expect this will lead us to

services?

participate in bond issues in the US.

A: All our vehicles include a GPS system and we are developing a concierge app for our clients. This platform will show all

Q: How does the company maintain a healthy client portfolio

the necessary vehicle data, including the vehicle contract,

in both its segments?

its location, insurance and measures to take in the case of

A: Our corporate strategy employs direct marketing to

an accident. It will also include a quotation system, which

medium-sized companies, focused on cost-effective, high-

will be of great use to our sales force and all salespeople in

volume operations and primarily based on bank funding. The

the dealerships. The app will allow the client to have a much

strategy also relies on direct relationships with equipment

clearer idea of our products, as it will show down payments,

manufacturers and distributors. Our Vendor Lease Program

rent and residual vehicle value. Companies look for a small

has been a successful attraction strategy as it focuses on

down payment, low and tax-deductible rent payments and

leasing and added services such as maintenance, operation,

a high residual value, while private clients want a large down

spare part sourcing and training.

payment, low rent and a very low residual to keep the car at the end of the contract. Leasing benefits are not limited to

We launched PROCAAR in 2006 after detecting a significant

the vehicle’s value, so we must consider all possible options

need for this type of service. There are many leasing

so the client can reclaim as much tax as possible.

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INSIGHT

AS MORE CARS ARE FINANCED, INSURERS SEE AN OPPORTUNITY The company’s global footprint has been essential to winning new business and automotive companies are

ANTONIO BORRAJO

an important part of that, including in Mexico. “Our

Head of Automotive

expertise and our distribution network play a key role in

Partnerships of Zurich Mexico

attracting new businesses as well as in retaining current clients,” says Borrajo. “On some occasions, we have won new automotive customers because the OEM had an

270

There are about 35 million vehicles in Mexico’s vehicle park

existing relationship with the Zurich group in other parts

but only 28 percent of drivers are insured, according to

of the world.” Ford Mexico is Zurich’s oldest partner

Zurich Mexico. While the number is rising, it is still low and

here, but it operates with 17 different brands, attracting

insurers like Zurich see an opportunity. “Europe and the

them with products designed for their specific needs.

US have more developed markets and there is not much room to grow,” says Antonio Borrajo, Head of Automotive

The challenge for Zurich, Borrajo says, is to create a

Partnerships at Zurich Mexico. “But there is great potential

competitive product that addresses the requirements

in Mexico due to the low rate of insured drivers.”

of its customers but also provides enough benefits for OEMs and financial enterprises. “Offering top quality

Borrajo points out the country has a stable and

services is our distinguishing characteristic,” he says.

expanding automotive industry and a growing car-

“We have to make sure all our collaborators understand

financing segment. During the first four months of

our different products and the particularities each client

2016, 66 percent of cars sold were purchased through

might have through a shared information system.”

financing. “Seventy percent of the time the sale is through a brand lender, an increase on last year’s 65

Borrajo says the best way to measure customer

percent. This is important for insurance firms as every

satisfaction is to look at an insurer’s retention rates.

car purchased though financing must be purchased with

“Retention rates are improving due to the longer

insurance,” he says.

payment schedules of car loans than in the past. Renovations generate 65-70 percent client retention

Better payment schedules also have made it easier for

once people finish paying their credits.”

Mexicans to buy a car. “Car loans are longer than they used to be. In the past most payment plans were 24 or

The principle of customer centricity is part of the Zurich

36 months,” Borrajo says. “Nowadays, payment plans

Group’s core values. Client retention due to insurance

can extend schedules to 48 and 60 months. This ensures

renovation is the result of Zurich’s homogenous product

drivers are covered for longer due to the insurance

portfolio combined with a quick response in case of

clause in their car loan.”

accidents.

During the first four months of 2016, 66 percent of cars sold were purchased through financing

Zurich is also adapting new technologies. It provides car distributors with digital tools to facilitate insurance comparisons. Borrajo believes telematics are the most exciting opportunity ahead. The technology would enable Zurich to offer insurance policies that partly reflect the owner’s driving habits. “We want to move in this direction,” he says. “We predict that a time will come when the car is less important than the driver.” The insurer is also reconsidering its role with self-

With 140 years of global experience and over 30 years

driving cars. “The principle behind self-driving cars is

in Mexico, Zurich is ranked among the top five insurance

that technology will avoid cars having crashes but risks

companies in the world. Its first Mexican office was

from flawed technology will always exist,” Borrajo says.

opened in 1984 and it expanded and consolidated after

“Insurers need to evolve to focus on technology rather

the NAFTA Agreement came into force a decade later.

than the car itself and Zurich will be prepared for that.”

VIEW FROM THE TOP

SECURING VEHICLES AMID GLOBAL THREATS ESTEBAN HERNÁNDEZ LÓPEZ Director General of Auto Safe International

Q: What are the major challenges for the armoring sector

We must also consider the load and towing capacity of

regarding car manufacturers?

the vehicles as two fundamental variables in our design

A: Armoring companies have to accommodate new

process. Load capacity is controlled by the suspension

electronic and intelligent components such as suspensions.

and it relates to how much additional weight a unit can

Manufacturing plants also are becoming increasingly

hold. This is not a problem with mechanical components

specialized, which limits the armoring processes that can

but we cannot carry the same process across to adaptive

be performed on the same production line. For example,

air suspensions, airbags and compressors. Therefore,

while Volkswagen has a production rate of one car per

we must equip the vehicle with a lower level of armor

minute, an armored car takes up to three days to complete,

or trick the computer into thinking it still has its original

making it impossible to integrate both processes. A quality

components.

armoring process requires an investment of millions of dollars in a limited number of vehicles, which means the

Q: How do you manage maintenance and repair operations?

company cannot compete on price with cheaper, lower-

A: We are aware of which components are most likely to

quality solutions. Moreover, the electronics in a vehicle are

need replacing and conduct roadworthiness checkups

designed to control a lighter unit, so adding an extra 500kg

every 5,000km instead of the standard 10,000km. After

or more confuses the computer’s control systems. Security

any incident, perpetrated or accidental, every affected

is a concern internationally, so a solution must be found,

ballistic and nonballistic component must be replaced.

as demand for armored cars will continue. General Motors

Additionally, it is crucial that all active and passive safety

is innovating in response. It recently launched a truck

components remain fully functional, including airbags,

designed for armoring and for the needs of the Mexican

ABS and sensors that tend to the passenger. These repairs

market. Built to resist the extra weight of heavy armor, this

are complicated and certain insurance companies prefer

is the first vehicle of its type, and may lead to a trend among

cheaper service shops that may not have the necessary

all OEMs to develop special editions for armoring purposes.

ballistic background to do a proper restoration. For that reason, we always recommend our clients bring their units

Only 2,000 units of all vehicles sold in the domestic market

back to us, even if it represents an additional cost.

go through armoring processes. Auto Safe has two client segments, the public and the private sectors. Unfortunately,

Q: How are you working to decrease wait times for

the government has not acquired a significant number of

customers who buy customized vehicles?

units in two years, which has dented the sector because

A: Clients are increasingly choosing immediate delivery over

public clients represented approximately 30 percent of

customization. Today at least 50 percent prefer immediate

the market.

delivery units, resulting in at least one vehicle sold per week at our dealership. Few clients want to wait 12 weeks to get

Q: How can you adapt your solutions to products that

another vehicle after an accident. Nevertheless, armored-

have not been designed for armoring purposes?

vehicle clients are varied, so we must have a broad offering

A: Unless OEMs create a version of their vehicles for

for immediate delivery to cover at least the basic demands

armoring purposes, we cannot really intervene in their

from our users in terms of colors and features. The easiest

design process. However, we have become stricter when

way to reduce wait times is having all the components

looking for lighter materials and we work hand-in-hand

available. Steel and metal components are easily obtainable,

with suspension manufacturers to replace intelligent units

but our ballistic glass suppliers are abroad and manufacturing

that cannot be armored with mechanical, more robust

the components takes three to four weeks. We have a rental

components. Glass suppliers are crucial partners in the

service for any eventuality and a substitution policy if the

process, along with brake and electronics producers.

client has a problem with their vehicle.

271

AFTERMARKET & DISTRIBUTION

When deciding which vehicle to buy, a prospective customer no longer only looks at the sticker price. Almost as important are the costs generated after the purchase. Consumers are investing more time in finding the best quality at the right price and increasingly taking maintenance services into account in the decision. Thanks to the Internet they have more information than ever at their fingertips. Technological advances have boosted connectivity and heightened the influence of mobile devices for improving customer service, which has also drawn attention to post-sale customer service. Dealerships and service shops face fierce competition and better informed customers, encouraging carmakers to extend service guarantees and find new ways to connect with final users.

This chapter delivers insights into the changes that are being made to distribution networks and aftersales to better serve clients in an increasingly connected world, whether at a dealer or in a service shop.

273

CHAPTER 10: AFTERMARKET & DISTRIBUTION 276

VIEW FROM THE TOP: Fernando Murguía, TecAlliance

277

VIEW FROM THE TOP: Gerardo Varela, ZF Services

278

INSIGHT: Jesús Calderón, Autopartes Calderón

279

INSIGHT: Bernardita Díaz, Sustrend

279

INSIGHT: Ignacio Valencia, Pochteca

281

VIEW FROM THE TOP: Eduardo Tamer, Mikel’s

282

PLANT SPOTLIGHT: Scania Queretaro

284

VIEW FROM THE TOP: Hideki Ono, Pioneer Electronics de México

285

VIEW FROM THE TOP: Sergio Álvarez Cantú, Hankook Tire de México

286

INSIGHT: David Dauajare, TBC de México

287

VIEW FROM THE TOP: Juan Alberto González, Double Coin

288

VIEW FROM THE TOP: Octavio Azcoitia, OSRAM

289

VIEW FROM THE TOP: Viridiana Elías, Grupo Elías Motors

290

VEHICLE SPOTLIGHT: Volkswagen Beetle Dune

275

VIEW FROM THE TOP

A FOOTHOLD FOR AFTERMARKET ELECTRONIC INFORMATION FERNANDO MURGUÍA Country Sales Director Mexico of TecAlliance

Q: What conditions enabled TecAlliance to target the

Q: TecAlliance has three main solutions. How do these

Mexican market and what are your goals?

help workshops and fleet managers have a closer

TecAlliance,

communications

276

which

provides

automotive

the

information

and

aftermarket,

relationship with their suppliers?

A: Each solution is designed to solve specific problems

expanding in Latin America. We successfully launched in

in the car repair value chain. TecDoc has vehicle

Brazil in 2014 and this year we entered Mexico while also

reference and software applications that collect data

establishing the foundations for a foothold in Argentina.

on parts, standardize that data across manufacturers

Market size is a key factor when opening new subsidiaries.

and distribute it through the parts value chain. This

Mexico has a vehicle park of about 30 million units and

increases efficiency and reduces costs by automating

growing – just in the last 18 months new vehicle sales

business processes. It also enables market participants

jumped to double-digit growth. New OEMs are coming

to boost sales. TecCom provides procurement, inventory

into the country and new plants are gearing up. At

management and delivery and returns management in

TecAlliance we want to be close to our customers and to

the vehicle spare parts and repair market. TecRMI sends

take advantage of globalization to launch local services.

diagnostic and repair information to 60,000 workshops globally, which helps with installation and vehicle

Our short-term goal is to establish our TecDoc solution as

diagnostics.

the standard for parts catalogues. We are establishing a Mexican branch to prepare our technology and systems

Q: What challenges does Mexico present for the

for the local market. The company’s target customers

aftermarket due to the size, age and diversity of the

are parts manufacturers in the independent aftermarket.

vehicle park?

When the parts catalogue is ready, we will start offering

A: The average age of the park is 18. The market is comprised

our services to parts wholesalers, car repair service centers

of two categories: those sold in the domestic market by an

and repair technicians.

established dealer and used vehicles imported from the US. These variables represent an interesting challenge in

Q: What is TecAlliance’s relationship with original

inventories, diagnostic and repairs knowledge, product

equipment companies, suppliers and distributors?

updates and parts distribution.

A: Our relationship with components manufacturers is simple: most are shareholders in TecAlliance, the rest

Another important challenge is the implementation of

are customers and users. Our products and services

new technologies. These include apps containing vehicle

cover the full aftermarket value chain, including parts

repair manuals, online solutions to administrate the parts

manufacturers and wholesalers, car repair service centers

catalogue and to request replacements, user-friendly

and technicians. TecDoc, for example, is one of our must

systems for workshops, particularly small family-owned

successful products. It leads the aftermarket electronic-

businesses that represent an important segment in the

information industry in Europe. In North America, our unit

service and repair sector in Mexico.

OptiCat provides parts suppliers with access to global vehicle information, helping the aftermarket value chain in

There is also a difference in generational mindset,

and out of the region.

particularly toward online marketing. We are convinced that

auto

parts

commercialization

through

online

As a worldwide organization we work with parts

platforms is a must. The change of generations in repair

manufacturers around the globe. We have a presence

service centers is supporting this challenge. We believe

across 124 countries,

market inertia will develop online solutions in a natural

covering 28 languages, and we

support over 1 million users worldwide.

manner.

VIEW FROM THE TOP

MERGING ENTITY TO OFFER NEW CONCEPTS GERARDO VARELA General Manager of ZF Services

Q: How has ZF Services’s acquisition of TRW influenced

A: As ZF’s largest plant for shock absorbers is located in

both companies’ development of new technologies?

Mexico, we opened a development center here in 2015

A: The merger has been of utmost importance for the

to assist our suspension division. All our technology

companies and for the industry, leading to a complete

development efforts on suspension components take

set of products being newly offered as safety, efficiency

place in El Salto, Jalisco, where engineers from Brazil,

and connectivity technologies. Our client base has

Germany, the US and Mexico are working together on

increased for the group, adding to our existing clientele of

these projects. Moreover, TRW’s brake pads plant in Nuevo

Volkswagen, Scania, Volvo, and newly incorporating Ford

Leon is developing new technologies in collaboration with

and Kenworth. Our goal is to keep our clients happy and

engineers from the Friction Material Group located in

offer products with greater added value.

Spain.

TRW will introduce new product lines to the market,

Q: What do you believe will most affect the aftermarket

including several that would have been time-consuming

segment’s mission to offer superior service to end users?

for ZF to develop on its own. One of the greatest

A: We expected 2016 to be more complex than 2015 as

advantages of the merger will be the incorporation of

the devaluation of the peso will result in domestic price

new strategic concepts developed by TRW, such as its

increases. This may force us to create new ways to manage

Corner Module. This product integrates brakes, shock

our resources. We expect the fusion of TRW and ZF to

absorbers, steering and suspension parts. Although TRW

generate additional sales volumes without the need to

was already developing this technology, it was obliged to

duplicate our marketing investment.

acquire certain parts from third parties. ZF’s product lines perfectly compliment TRW’s and vice versa, leading to

The Mexican market is ready to professionalize the

our cooperative manufacturing of these products without

aftermarket structure by reinforcing service centers,

relying on suppliers. We will manufacture these modules

minimizing pirated and low-quality products and using

at our brake plant in Monterrey and shock absorber plant

technology to improve order communications, logistics

in Guadalajara.

and inventory management. Drivers and end users must be made conscious of parts that lack quality or important

Regarding transmissions, TRW has all the electronic

safety features. The lack of market data will be the first

components needed to manufacture these parts. ZF

challenge for domestic traders to achieve this goal.

has played a role in creating transmissions for European vehicles but our participation in the US market was low.

Q: How could the market moving from a small distributor

TRW, on the other hand, already has a large share in this

paradigm to a large corporation benefit ZF and TRW?

market. We believe our modular concepts will help us

A: This change will benefit ZF and TRW’s commercial

obtain a greater market share in the region and present

strategies, as component and service systems will be

an excellent opportunity for TRW to increase its presence

supplied instead of isolated spare parts. This will lead to

in Mexico. We will offer a complete package to our clients

more competitive prices and logistics costs, benefiting

in the original equipment segment by reducing emissions,

distribution channels as well as end users. In the case

increasing fuel efficiency and reducing the weight of

of a transition to a large distributor, the consequential

vehicles. The company will also offer a complete services

organization might lead to greater competition between

and parts package for our aftersales clients.

the largest aftermarket suppliers. We believe that large providers and distribution companies will create a shorter

Q: How do you intend to consolidate and expand the

distribution chain, displacing informal providers and

group’s R&D operations in Mexico?

resulting in more professional and competitive trade.

277

INSIGHT

ANALYTICAL APPROACH BOLSTERS SELECTIVE PORTFOLIO in its portfolio. Each time a new company wants to work with them, the team carries out a complete analysis on

JESÚS CALDERÓN

all aspects of the entity, researching costs, prices, delivery

Commercial Director of

times, quality, the image of the product and its compatibility

Autopartes Calderón

with the image of Autopartes Calderón. Once the team approves each aspect, they organize a launch for the new product line with a customized 360° marketing strategy.

Life in Mexico’s automotive segment is getting tougher

“This method has proven to be effective, as the decision

as an influx of new companies intensifies already fierce

no longer depends on the criterion of a single person and

competition. Today’s market is completely different to that

has led the company to reject complete product lines in

of 20 years ago, says Jesús Calderón, Commercial Director

several instances,” says Calderón. He cites past experience

of Autopartes Calderón.

as the reason for putting interested parties through the hoops. “We can be certain the product will be aligned to

278

To keep ahead of the game, the parts supplier has developed

our strategy and that it will be a success in the market.”

a strategic plan that focuses on the opportunities, strengths, weaknesses and threats to its business. “We

Having started as a distributor for electric and electronic

analyze the evolution of the market, our competitors and

components, the company was privy to the evolution of

clients, our product portfolio, the needs of our teams and

mechanical components such as the carburetor. It decided

even the conditions of the country itself from economics

to add mechanical or electromechanical parts to its

to politics,” says Calderón. “This allows us to come up with

portfolio, introducing spark plugs, filters and fuel pumps

the best course of action for our business.”

– products that were closely related to the company’s core business. “There are many components that do not

Only 3 percent of companies in Mexico follow a similar

have a direct relationship with the rest of our products,

process, he says, adding that the results show experience

meaning that we will most likely reject them, even if they

plays a key role. “Through this analysis, we have found that

are manufactured by the biggest company in the market,”

one of our main advantages is the experience we can offer

says Calderón.

our clients after 37 years of service. The market is familiar with Autopartes Calderón and many companies contact

There are more 35 million light vehicles and 350,000

us to distribute their products. Additionally, thanks to two

heavy vehicles in Mexico and that means opportunity for

surveys we conduct every year, we have a clearer idea of

Autopartes Calderón, which the company could further

what the customer wants from us.”

segment into regions, make, model and year of fabrication. “We have a 6 percent market share in electric components

“We are convinced that

and an overall presence in the aftermarket of almost 1

quality should be the driver

the size of the market it is a considerable amount,” says

of the industry and any company that does not make quality a priority is bound to

percent. This might seem like a small percentage but given Calderón. Every year, Autopartes Calderón develops a marketing and sales program according to the participation of each state in the automotive sector. Mexico City and the State of Mexico alone have 26 percent of the market and only

disappear”

16 states make up 80 percent of the country’s demand.

Jesús Calderón, Commercial Director of Autopartes

deciding the best regions to target. To help achieve its

Calderón

goals, the company is focused on developing a stronger

Calderón says those numbers provide certainty when

sales force and more specialized training, a top priority Its aftersales team follows a similarly analytical approach.

over the past two years. “We are convinced quality should

The team includes purchasing, marketing, warehousing

be the driver of the industry and any company that does

and sales staff who decide which companies to include

not make quality a priority is bound to disappear.”

INSIGHT

CIRCULAR ECONOMY FOR DISCARDED PRODUCTS BERNARDITA DÍAZ Chief Project Officer of Sustrend Chilean consultancy firm Sustrend has its eye on Mexico. The

The firm believes circular and green economy concepts can

company is in the process of planning its entry with solutions

be applied to the automotive retreading sector, especially

that recycle and revalorize materials in different industrial

since the segment’s core process is the recovery of the

processes. In particular, it is focusing on tire retreading.

product once its useful life is over. A regular tire can be

When the company was established, its first project was to

retreaded up to seven times.

define standards for retreading processes in Chile. In Mexico, tire retreading is often confused with vulcanization. Both

Sustrend has broad experience in the retreading industry

treat tires during different parts of the product’s lifespan but

and has expertise in new trends that drive the international

vulcanization focuses on the tire’s manufacturing process

sustainability market. They have proven experience advising

while retreading applies to the remanufacturing process.

decision-makers and public entities and excel at adapting public policy strategies to future scenarios. Sustrend also

Sustrend’s goal is to highlight the environmental and

helps companies to link the environmental and financial

economic benefits of retreading. The company hopes

aspects of their business. Though it has not yet established

to replicate its Chilean lobbying efforts to promote it in

operations here, Sustrend is eager to initiate a collaboration

Mexico and to spread awareness about the importance of

with Mexican industry and act as catalyst for sustainable

incorporating sustainability in development plans.

businesses.

INSIGHT

LIQUID VALUE PROPOSITIONS

IGNACIO VALENCIA Director of the Lubricants Division at Pochteca Consumer chemicals company Pochteca has a nationwide

be competitive, consolidating an effective supply chain

coverage that includes an extensive logistics network of

increasing its productivity. The industrial solvents and

34 branches strategically located in states with strong

lubricants producer plans to continue acquiring companies

automotive infrastructure. The business handles more

that will boost its position in the chemical market, on top

than 5 million liters in inventory monthly.

of agreements set with companies including BASF to distribute its respected solutions Zetag, Magnafloc LT,

The acquisition of Mardupol in 2012 added 80 years of

Burst, Magnasol and Antiprex.

expertise in the chemical distribution segment, which was foreseen to increase Grupo Pochteca’s sales by 25

In the lubricant aftermarket segment of the automotive

percent. The group surpassed expectations, reaching

sector, Pochteca’s team includes experienced technicians

MX$6,079 million (US$358 million) in sales in 2015

and sales representatives who maintain close relationships

from its MX$3,729 million (US$221 million) sales before

with clients. Over 200 sales representatives are available

adding the Mexican Mardupol. Fluctuations in the dollar-

to assist customers, trained by certified technical advisors.

peso exchange rate have affected its customers such as

These advisors also support and train customers to

Shell, for whom Pochteca is a macro-distributor. These

ensure the most effective use of their products in their

conditions forced Pochteca to redouble its efforts to

installations.

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VIEW FROM THE TOP

56 YEARS CATERING TO THE AFTERMARKET EDUARDO TAMER Director General of Mikel’s

Q: How has the aftermarket’s development in Mexico

We still need more experience and professionalism in our

affected Mikel’s operations?

network. Some retailers focus only on a small number of

A: Service shops in Mexico have become increasingly

products that are easy to sell, neglecting those that need

professional in their service and equipment as automotive

a more dedicated aftersales approach. Nevertheless, we

electronics force them to update their technology to

have made the commitment to strengthen our network so

remain competitive, regardless of the vehicle segment.

that all our distributors have a reliable understanding of at

After 56 years, Mikel’s has become the brand with the

least 75 percent of our portfolio.

most complete offering in terms of equipment, tools and automotive accessories in our country. We want to

We also have a business model created for entrepreneurs

satisfy the demands of every service shop in the market,

and distributors that trust Mikel’s, so they can manage

as well as every tool and equipment requirement from

a large part of our inventory with all the marketing

OEMs. Since 2012, we have seen double-digit growth

support the company offers, finance alternatives to

and 2015 was a triumphant sales year. There were

acquire the products and a quality distribution point.

several challenges as well. The dollar exchange rate was

We already have 40 franchises of this type and they

among the most problematic and although 2016 looks

have been well received by the market, even by large

promising, we have to tread carefully to protect the

distributors that see them as partners and suppliers for

company’s finances.

their own operations.

In the light vehicle segment, for which we supply hydraulic

Q: How is Mikel’s devising its online strategy?

bottle jack systems and emergency kits to most Japanese,

A: All companies are facing the challenge of moving their

German and American brands, we have noticed a

operations to the Internet and in response we are working

remarkable increase in sales of 22 percent. Regarding the

to understand how online sales work in the market.

heavy vehicle industry, in spite of the slight setback in the

The biggest challenge will be devising a plan to deliver

export market, we have not suffered as our products are

our products in the most efficient way possible, but we

mainly targeted at domestic units. In Mexico, every truck

have established solid relationships with carriers such as

must include an emergency kit with a fire extinguisher,

Estafeta, DHL and UPS. Their service is perfectly reliable

a warning triangle, a hydraulic bottle jack and a wrench

but their prices are still elevated, so there is room for

wheel tool. Mikel’s supplies all of these and they are

improvement to favor our clients.

certified by the OEMs we work with. Part of our company’s success is that we are always renewing our portfolio,

Q: How has Mikel’s progressed toward its goals to enter

adding between 8 and 10 percent new solutions each year.

the North American market?

In 2016 we will release 100 new products across our three

A: There is fierce competition in Canada and the US, and

divisions. The main innovations we are offering are lathes

even though our prices are extremely competitive, it is

for brake disks, wheel balancers, aligners and several other

difficult to compete without a recognized brand name in

products that we expect will attract plenty of attention in

those markets. We have exported our franchise business

the market.

model and ProMéxico is promoting Mikel’s in new countries such as Peru and Ecuador, as well as 10 other locations.

Q: What are Mikel’s plans for expanding its distribution operations?

Apart from internationalizing our operations, we want

A: To date, we have 750 distributors and 78 points of

to take advantage of this situation and become a

service throughout the country. These latter locations offer

manufacturing partner to any company that wants to use

maintenance and repair operations for all our equipment.

our infrastructure and equipment.

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PLANT SPOTLIGHT

282

SCANIA QUERETARO The work of an OEM does not end when a vehicle is sold. Open lines of communication ensure the client has access to maintenance and repair services, which help develop client loyalty and new sales. The importance of these services is magnified in a country like Mexico that has an aging vehicle park. Scania, a global provider of transport solutions, knows this. It has established a strong service network throughout the country, supported by its headquarters and production operations in Santiago de Queretaro. The company's service centers are located in the cities of Monterrey, Torreon, San Luis Potosi, Guadalajara, Mexico City, Puebla and Cancun. Scania also has plans for other centers soon to come in Hermosillo, Culiacan and Veracruz. To support this network, the company has more than 40 service shops in client facilities that work in tandem with the bigger centers. Much of the heavy lifting begins in Queretaro. This is where the company’s technicians are trained before moving to other locations. New technicians spend a week at Scania’s headquarters learning the ropes. Even administrative recruits must spend at least a day in the workshop to become properly acquainted with the practicalities of the company’s business. Queretaro is the base of Scania’s control center for maintenance operations, which means tracking its fleet of vehicles, scheduling service visits and answering emergency repair calls when needed. About 60 chassis per month are manufactured at Scania’s Queretaro center while 15 trucks are repaired in the same period. Among its services, Scania offers engine, gearbox and differential repairs, as well as corrective and preventive maintenance. Prior to delivery, units undergo quality checks, electric repairs and powertrain reconditioning to ensure the vehicles are in optimum shape for their use by the client. The company's target for the end of 2016 is to achieve a 95 percent level of service availability with 99.8 percent quality rating. Its current average is 94.72 percent service availability and quality is rated at 99.26 percent. There is always room for improvement but general key performance indicators show strong compliance with the company's objectives.

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VIEW FROM THE TOP

RAPID TECH DEVELOPMENT KEY TO AFTERMARKET HIDEKI ONO President and Director General of Pioneer Electronics de México

284

Q: How important is the aftermarket segment for Pioneer,

Q: What challenges do you see for competition in Mexico?

especially in Mexico?

A: The biggest challenge is to remain price competitive,

A: Pioneer has two divisions in the automotive segment,

especially in light of the current peso to dollar exchange

OEM and the aftermarket. The latter is crucial in Mexico

rate. If we raise prices excessively, clients will not be

since it represents approximately 15 percent of our

attracted to our product. Unfortunately, Mexico has not

business for the segment in the NAFTA region. This

completely developed its Tier 2 and Tier 3 supply chain

is mainly because there are few places where the

and there are many companies that still import most of

aftermarket grows continuously. OEMs have increasingly

their raw materials, so the exchange rate has a greater

developed their sound system technology, which means

impact on them.

it is more difficult to replace their equipment. Our main target is used cars of at least 5 years old. The growth in

Mexico has always been known as a price-driven market

new car sales signals a window of opportunity for us once

but connectivity has largely changed the mindset. Trends

vehicle owners begin to replace older units. Car ownership

now tilt toward sophisticated products. Previously, the

per capita is still quite low in the country and the market

only purpose of headphones was to play music but now

is unlikely to move toward premium vehicles overnight.

they are a way to use smartphones safely while driving.

Although Pioneer might not see a double-digit increase,

Headphones integrated with CarPlay or Android Auto

we will definitely see year-on-year growth.

offer excellent navigation features. These are top-of-therange products for which we are working on lowering our

Q: How will the company compete with OEMs as they

prices as much as possible to trickle our technology down

continue to improve their sound system technology?

through our entire product line.

A: It poses a challenge, especially in more developed markets like the US. But in Mexico sound systems are

Q: What was behind Pioneer’s decision to establish a new

not yet integrated with air-conditioning features or other

plant here?

electronic components in the vehicle, so there is still an

A: We wanted to maintain the competitiveness of our

opportunity to upgrade. We also have the advantage

aftermarket segment but we were also keeping the

of aftermarket expertise. Instead of taking three or four

development of the Mexican OEM market in mind. Our

years to develop a technological update, we only need

main clients in this division are Japanese OEMs and most

about a year. We can offer our clients superior products

Japanese carmakers have established operations here.

than OEMs directly. That gives us a huge advantage,

Consequently, we also needed to establish ourselves

especially considering the rapid evolution of smartphone

locally to offer them better service.

technology. Our connectivity-centered vision appeals to our clients and we are the only aftermarket manufacturer

The plant is expected to begin operations in 2017 and by

in Mexico to feature CarPlay and Android Auto software

2019 we expect to employ approximately 700 people and

in our units. Even before CarPlay’s introduction to the

to make 2 million headphones per year. We also have a

market, we had a partnership with Apple that allowed

plan to manufacture speakers but this will be a secondary

clients to connect their smartphones to our systems with

phase in the project, as will navigation and amplifier

a dedicated user interface. Bluetooth technology has had

products. The plant will be located in Lagos de Moreno,

great market penetration as it allows wireless data transfer

Jalisco to target all the Japanese OEMs in the country. It

from any smartphone to the vehicle. As the market looks

will boost the aftermarket segment in terms of logistics

for better ways to connect vehicles and information,

because we can source our products in less than a day. The

clients now prefer larger displays with precise touch and

region is attractive because it also boasts an enormous

scrolling capabilities.

pool of skilled workers.

VIEW FROM THE TOP

PERFORMANCE, SAFETY, COMFORT SERGIO ÁLVAREZ CANTÚ Sales Director of Hankook Tire de México

Q: In 2014, Inho Choi mentioned that Hankook wanted to

offers clients far exceeds that of larger companies. It is

achieve an 8 percent market share in Mexico. How has the

not uncommon for top-level Hankook employees to help

company progressed toward that goal?

distributers directly, allowing us to channel information

A: Hankook Tire de México surpassed that goal and

much faster. We have product availability and invariably

reached double-digit growth in the Mexican market, after

stock original equipment replacements. We also send

the development of new distribution points and product

our stock portfolio to distributers at least twice a week,

innovation. We foresee 10 percent market share growth

so that they can react better to market changes. As our

in the pickup segment in 2016, coupled with 15 percent

market growth will be dependent on the relationships

growth in the truck segment.

we create with OEMs, Hankook Tire de México has established agreements that grant its automotive clients

Product availability is essential in this industry and our

with accidental damage warranties, which is innovative in

warehouse in Queretaro city has allowed us to service

our industry.

many regional distributers who are unable to purchase entire containers from South Korea on a regular basis.

We enthuse over creating tires that optimize fuel

The company has projected that by the end of this year, a

consumption without hindering a vehicle’s performance.

network of between 16 and 18 Hankook Tire stores will be

Low-cost Asian tire brands are locked into fierce

operating in Mexico, besides our 26 distribution centers.

competition but Hankook tires set themselves apart

Our commercial relationships with Hyundai, KIA, GM, Ford

thanks to superior efficiency and fuel economy.

and Volkswagen have strengthened our position in Mexico. Q: Given the importance of safety and environmental aspects for Hankook, has this focus helped or hindered the company’s share in Mexico, a cost-oriented market? A: Hankook Tire de México takes performance, safety,

2016 growth projections: 10 percent pickup segment 15 percent truck segment

comfort and environmental friendliness into consideration in its innovation processes. We are committed to the

Q: What proportion of the company’s US$6.68 billion net

environment and design our tires with this in mind. Our

sales comes from the Mexican market and what is your

products are distinctly varied, as some have long-distance

corporate strategy to increase that number?

applications while others are intended for regional use.

A: Hankook Tire de México is ranked fifth in Mexico

Almost 70 percent of Mexico’s journeys are short distances

behind Bridgestone, Michelin, Goodyear and Continental.

that do not reach 400km, which is taken into account in

We believe that recent events will improve our stance in

our product recommendations. Hankook Tire de México

the ranking by 2017. Hankook Tire’s plant in Tennessee,

has a technical specialization area that first focuses on

will positively impact our Mexican subsidiary and its

training distributers, while a second area centers on

operability, especially in terms of billing and response

selling our technology. Our technicians follow up on these

times. Our 10 percent and 15 percent growth projections

processes, increasing the benefits that Hankook tires offer

hinge on additional support received from the plant.

by providing timely feedback to our clients.

Hankook’s most economical product line, the Laufenn tire line, was also recently launched in the Mexican market in

Q: What added value does Hankook Tire de México offer

October 2015. Our Laufenn brand will undoubtedly help

over its competitors?

us attain these growth rates. This year is critical for the

A: We serve as a permanent contact point for our

company if we wish to position ourselves among the six

distributers. The accessibility that Hankook Tire de México

most dominant tire companies in the world.

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INSIGHT

E-COMMERCE CLICKS FOR DISTRIBUTOR to leading brands but cost only 40 percent of the price. TBC tires are popular among independent distributors, which sell mostly to the heavy vehicle market.

DAVID DAUAJARE President of TBC de México

An increasingly important outlet for the company is its e-commerce business. TBC owns the domain llantas.com, having paid US$9,000 for the rights six years ago. Llanta

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Tires are on a roll in Mexico, with the value of the industry

is Spanish for rim or tire. “Anyone that searches the word

here expected to see strong growth in the years to come.

‘tire’ in an Internet browser in Mexico will be directed to

The sector is projected to grow at a compound annual

our site,” Dauajare explains. “Since we have such a broad

growth rate (CAGR) of 10.6 percent during 2016-2021 after

offering, we can cater to a variety of clients in the country

a production increase in 2011-2015, according to a TechSci

and our goal is to become the Mexican equivalent of the

research report. That is good news for distributor TBC,

aspirational US company Tire Rack.” Dauajare says that half

which sees an opportunity to grab a larger market share

of Tire Rack’s online sales come via its website while the

through its emerging online business.

other half is clients who call the company after seeing its products online. They have highly trained personnel in their

TBC, which now has about 5,200 clients, fills both

call centers, who have tried every single tire personally.

wholesale provisions and consumer orders of just a few

This allows them to offer objective advice and adapt their

tires at a time. Its 42 branches are distributed in such a

recommendations and service to each customer.

way that in 90 percent of the country, you are never more than two hours away from a TBC distributor. “The national

“We would like to join forces with competitors to

coverage we boast is thanks to such broadly distributed

help comply with Official Mexican Standards or NOM

infrastructure and our reliable network,” says David

regulations and become Mexico’s primary online tire

Dauajare Johnson, Director General of TBC.

distributor by the end of 2016. We have spoken to Hankook, Michelin, Continental, Bridgestone, Goodyear

Tires account for 90 percent of TBC’s business. Heavy

and Pirelli to include their light vehicle tires on our website

vehicle tires are the dominant category representing

and several are already onboard,” says Dauajare. In Mexico,

50 percent of sales. Car tires cover approximately 30

tires must comply with NOM regulations to be imported

percent. The remaining percentage is divided between

in large quantities, and doing the paperwork can be

industrial, agricultural and specialty tires. But even the

cumbersome. The process is further complicated if a tire

smaller segments have a big impact. “While equipment for

is imported via a different company than its origin, which

workshops represents only 2 percent, the utility margin is

affects margins. For 2016, TBC’s priority is for llantas.com

very high for this segment., It remains important despite

to grow considerably. Having invested millions of dollars

being a small part of our business,” says Dauajare. In

in software, it has also dedicated financing to its mining

Mexico, TBC exclusively distributes Sumitomo, Triangle,

division to kindle targeted growth in the segment. Based on

Goodride, Golden Crown, Ling Long, Vikrant, Sailun,

upcoming results from its recent expansion to Guatemala,

Durun, Advance, and Hi-Fly products.

the company will decide at the end of 2016 whether to consolidate there or enter Panama or Costa Rica.

TBC also has strong relationships with several fleet groups, including CEMEX Transporte, CEMEX Concretos,

TBC has no plans to have tire shops or offer maintenance

Bonafont, Grupo GEN, Panamericana and Xcaret, and

services that would put it in competition with its clients.

is conducting pre-contract tests with Grupo Modelo,

It will focus on supplying service shops. “The overheads

Egoba, Transportes Monroy, Grupo Capricornio and Grupo

in Mexico mean it would not be worth having tire shops

Pullman. By negotiating directly with TBC, fleets can

for the amount that we would see returns on sales. The

obtain greater value for their money. “Our tires are more

business models must adjust between nations and we do

affordable than Bridgestone or Michelin products, and our

not intend to emulate our counterparts in the US.” Says

14 percent market share means that we supply more tires

Dauajare: “We aim to be the number one tire distributor in

than Goodyear and Continental in Mexico,” says Dauajare.

Mexico, and we expect that in two or three years we will be

The company’s Japanese-made tires have a similar quality

in a very enviable position.”

VIEW FROM THE TOP

SMART MONEY IS ON VALUE, SERVICE JUAN ALBERTO GONZÁLEZ Regional Sales Manager Mexico of Double Coin

Q: How has the Mexican tire sector evolved and what is

network. We are opening several points of sale across

Double Coin’s participation?

the country and extending our distribution channels. The

A: The tire market is organized in a pyramid. The top level

next step for Double Coin is to open an office in Mexico

is occupied by brands like Bridgestone, Goodyear, Pirelli,

to manage all invoicing and imports, which we expect to

Michelin and Continental that offer a wide portfolio of

do in the second half of 2016. Importing a tire requires the

high-quality products at higher prices. These players have

implementation of a specific norm for each model, which

extensive networks and customer service skills. The next

can cost up to MX$35,000 (US$1,900) per year. To import

tier has value products that offer excellent results for a

our tires, distributors must invest this amount for each

relatively lower investment, with brands like Yokohama,

model. Once we establish our regional office, these costs

Firestone and BF Goodrich. These companies might not be

will be centralized for all distributors in the country. The

as popular but they are already putting down strong roots

tire aftermarket is over 2.8 million tires, which means there

in the market. The lowermost level of the pyramid consists

is an enormous opportunity for Double Coin.

of hundreds of businesses that offer extremely low costs but equally lower quality. There is also a fourth tier in the

We aim to build a distribution center in Mexico to

pyramid formed by brands with no quality whatsoever.

centralize our inventory. All points of sale buy directly from our manufacturing sites so they need to store large

Double Coin participates in the value segment of the

quantities of all our products. The initial cost benefit of this

pyramid. We offer excellent quality for a reasonable price

is negated by higher logistics and warehousing expenses.

and we are considered the best-quality player in the Chinese market. Q: What added value does Double Coin offer customers? A: Our goal is to offer the client the best cost per kilometer, which is what most transport operators want. The highest operating costs for a company are diesel and tires. Demand for fuel is not price elastic but replacing a truck’s tires is a cost-reducing option that can improve performance by

Tire imports are subject to specific norms for each model, which can cost companies up to MX$35,000 (US$1,900) per year

30-40 percent. Rather than a disposable product, we offer an integral solution with two guaranteed retreads. In 2015,

Q: How has Double Coin developed relationships with

Double Coin was ranked sixth in sales in the US market

owner-operators and fleet managers to boost the brand’s

below only Bridgestone, Michelin, Goodyear, Yokohama

presence?

and Firestone. One reason for this is that our products

A: We have outlined specific commercial strategies for

comply with US safety regulations. We tested one of our

each potential customer in the market. Owner-operators

star products for highway applications and even though

go on recommendations from other users and want a

its performance was 10 percent less than Michelin and

close relationship with the company and the sales

Goodyear, it offers a 30-40 percent lower price, giving

person. Fleet managers rely on tests when deciding to

customers a more competitive cost per kilometer.

include a new tire in their operations. One of our biggest clients at the moment is Huevos San Juan, which is the

Q: How will Double Coin compete with companies that

largest independent egg producer in the market after

already have a strong presence in the market?

Bachoco. This company has already reported a 20

A: Having a brand representative here allows the company

percent improvement in its costs per kilometer thanks

to promote its products and coordinate the distribution

to our products.

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VIEW FROM THE TOP

DIFFERENT MARKETS, SAME QUALITY OCTAVIO AZCOITIA President and Director General of OSRAM

Q: How is OSRAM improving both the quality and

that compels our supply chain personnel to work closer

efficiency of its LED products and laser technology?

with companies’ commercial areas to detect market trends.

A: As one of the leading solid-state lighting manufacturers,

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OSRAM’s global R&D centers are constantly working on

OSRAM has a shared administration service center in

laser-based solutions for automotive applications. The

Mexico where we also manage our operations in Canada

core concept of Laser Activated Remote Phosphor (LARP)

and the US. We expect to cover Brazil and Argentina

technology is the combination of blue high-powered

soon. This center provides jobs to over 120 young Mexican

laser pump sources, directed at a phosphor converter to

professionals. We have 1,300 people helping us achieve

create high-luminance white light. Tiny optics can then

our goals in our Monterrey plant and I expect that number

be designed, paving the way for revolutionary headlamp

to increase over the next couple of months. Additionally,

designs. Our centers developed an energy-efficient Joule

our operations in Ciudad Juarez employ 900 workers

LED headlamp system that uses less energy than standard

and that number is set to reach 1,200 by 2017. OSRAM’s

halogens, extending the life of an electric vehicle or hybrid

willingness to bet on and invest in Mexico is the clearest

battery by 9.5km and reducing CO emissions.

example of what is yet to come.

Developments of this nature need repetition and constant

Q: How does OSRAM prioritize the aftermarket segment

experimentation under different circumstances, which not

and its relationship with OEMs?

every enterprise can afford. There are 110 years of research

A: OEMs and aftermarket companies display distinct

and hard work behind our brand.

consumer behaviors and needs and have different end

users. Aftermarket customers can be supplying up to Q: What does OSRAM need to stay ahead of competition?

the third user in a vehicle’s lifetime. OEMs are first-hand

A: As consumers have many options in the aftermarket

consumers that pay large amounts of money to receive

segment and may choose to keep their vehicle for two

a brand new component. We have the responsibility of

years or 20, we must be ready to cater to all types of owner.

providing OEMs with top-notch technology and we must

As a result, we have a variety of products in our portfolio

guarantee product availability in the aftermarket.

VIEW FROM THE TOP

READY WITH A SOLUTION EVEN BEFORE THE NEED VIRIDIANA ELÍAS Director General of Grupo Elías Motors

Q: How has Grupo Elías Motors developed in its

A: Our main priority has been the development of effective

distribution activities in the last year?

sales and aftersales services. Neglecting to

A: Grupo Elías Motors has enjoyed double-digit growth

client at all times makes them more likely to change to a

in both the production and commercialization segments

different brand. Even before a client identifies a need, we

since 2014. In 2015 the company saw 25 percent growth

have to be ready to offer a solution to their predicament.

in distribution and sales. Our focus on manufacturing and

We are working on strengthening our distribution network,

distributing parts for the heavy vehicle segment should

although our goal is not to operate hundreds of distribution

lead to the same growth in 2016. We aim to reach 28-30

points. Our company wants to manage committed

percent by the end of the year.

distributors so we train and support all of our partners.

Q: How do you plan to adapt your offering to heavy vehicle clients and to the owner-operator segment dominating the domestic market? A:

are

working

closely

with

the

engineering

support a

Target for 2016: 28-30 percent growth in heavy vehicles

departments of our client companies and getting involved in the design process. Grupo Elías Motors’ goal is to offer

Q: How does Grupo Elías Motors’ plan to expand the

integral support, which not only benefits the OEMs but

company’s presence in the international market?

also our own operations.

A: Grupo Elías Motors is a new company, replacing what was previously known as SYDA. This new corporation

The owner-operator segment is extremely important in

will manufacture its own products, focusing on rubber

the heavy vehicle sector and it has become a priority for

products including hoses and cardans, and will gradually

Grupo Elías Motors. Owner-operators use our products

grow until we reach optimal capacity. In the short term,

and recommend them to potential customers so it is

our expectations are to market 10-15 percent of our own

crucial to communicate with them directly. As a result, our

brand during the initial phase of this project.

strategy includes a strong marketing approach. Our plans for the near future will include a complete Q: What challenges do you expect to face once Grupo

strategy for Central America. Having our own brand will

Elías Motors begins to commercialize its own products in

contribute to the successful promotion of our services in

a consolidated market?

a new country. We are not prioritizing the possibility of

A: We expect to improve our manufacturing and

extending operations to other regions, although we may

distribution infrastructure for certain products including

have to expand our operations in Mexico and coordinate

clamps and pulleys. The biggest hurdles are the price

all international business from the capital.

and the quality of a product but we have worked hard to prevent this from becoming an obstacle. We offer fair

Nationwide, 2016 is expected to be a complicated year for

prices and Grupo Elías Motors’ core values include working

the auto parts segment. However, our vision to continue

with quality to make sure we do not manufacture anything

collaborating closely with our clients has fostered an

we would not buy ourselves. Our marketing campaign will

environment that encourages growth. We want to

help us go a long way, coupled with a new e-commerce

associate with partners that have the same vision so we

strategy from the first quarter of 2016.

can grow together, regardless of market conditions. For the moment, we have to change erroneous ideas about

Q: How has Grupo Elías Motors tackled piracy and low-

the Mexican market and focus on promoting the growth

quality aftermarket products?

and development of national manufacturers.

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VEHICLE SPOTLIGHT

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VOLKSWAGEN BEETLE DUNE The bug is back and it has grit in its belly. Volkswagen has a longstanding tradition in Mexico, so much so that its iconic Beetle earned the affectionate nickname Vocho, a contraction of the company name, during the height of its popularity here. When Volkswagen stopped production of the firstgeneration Beetle, the Jetta, Gol and other models rose in its place but the Beetle has held onto the hearts of many nostalgic Mexicans who also want an innovative vehicle with enough tradition in its veins – or engine to be precise. Volkswagen has delivered exactly this with the new Beetle Dune MY2016. 291

Volkswagen’s updated Beetle features a 4-cylinder, turbocharged, electronic direct injection engine. This bug is capable of delivering 210hp at 6,200rpm and 280Nm torque at 5,200rpm, and is coupled with a six-speed direct-shift gearbox. The engine offers a combined fuel efficiency of 15km/L. The four-seater is available in traditional white or black but the more adventurous can choose metallic dark bronze or metallic sandstorm yellow. The latter option and the black version combine perfectly with the Beetle’s new 18-inch sandstorm yellow aluminum rims. The bronze and white models also come with the option of installing silver-colored aluminum rims. Volkswagen added a chromed double exhaust, bi-xenon headlights with LED lights and a panoramic roof to complete the Dune’s young look inside and out. On the inside, the Dune's infotainment system has an eight-speaker unit with a 6.5 inch touchscreen, voice command and Volkswagen App-Connect for tech-savvy drivers. The seats are a leatherette-fabric mix finished with yellow stitching, playing on the color of the car’s exterior. The new Beetle also includes ambiance lighting surrounding the speakers and the front doors available in red, white or blue. Anti-lock braking, hill hold control, anti-slip regulation and electronic stability control systems give the latest bug extra punch. The black and sandstorm versions also feature an electronic differential sports lock. All versions include ventilated disk brakes at the front and disk brakes at the back, plus a MacPherson sport front suspension and a Fourlink sport rear suspension.

FLEETS & LOGISTICS

In a country with a land mass of almost 2 million km2, an efficient logistics network is key for any business to succeed. The automotive industry in particular is in need of companies that can meet delivery requirements. Even with new entrants to the segment, there is room for expansion. Sustainability is quickly becoming a buzzword for logistics operators. Businesses are more aware than ever of the importance of using green options. The government is also forcing the issue with new regulations targeting pollutant emissions. This has led to logistics companies and fleet owners developing eco-friendly solutions that increase efficiency, lower costs and protect the environment.

The important role logistics operators play across the spectrum of business in Mexico and the inherent infrastructure needs and opportunities, are the focus of this chapter.

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CHAPTER 11: FLEETS & LOGISTICS 296

VIEW FROM THE TOP: Piotr Zaleski, Hellmann Mexico

Honorio Rodríguez, Hellmann Mexico

297

PROJECT SPOTLIGHT: Lazaro Cardenas' Specialized Vehicle Terminal (TEA)

298

VIEW FROM THE TOP: Agustín Picado, UPS Mexico

300

VIEW FROM THE TOP: Arturo García, Grupo Bimbo

301

VIEW FROM THE TOP: Alex Theissen, FEMSA Logística

302

VIEW FROM THE TOP: Mariano Fiscella, Walmart México and Centromérica

303

TECHNOLOGY SPOTLIGHT: Sitrack's Predictive Telematics Solution

305

VIEW FROM THE TOP: Eduardo Alba, Expeditors International de México

306

INSIGHT: Jorge Torres, FedEx Express Mexico

307

VIEW FROM THE TOP: Óscar Benitez, Mercedes-Benz Vans

308

VIEW FROM THE TOP: Eduardo González Salce, Gonzalez Trucking

309

PROJECT SPOTLIGHT: X-BU Center

311

VIEW FROM THE TOP: Rudolf HesS, R.H. Shipping

312

INSIGHT: Jorge Almanza, Carga Tresguerras

313

VIEW FROM THE TOP: Jorge Almanza, ALMU

314

VIEW FROM THE TOP: Barak Gazit, Traffilog

315

VIEW FROM THE TOP: Alberto Aguiló, Sitrack México

316

VEHICLE SPOTLIGHT: Mercedes-Benz V-Class

295

VIEW FROM THE TOP

CUSTOM FIXES TOP INFRASTRUCTURE NEEDS

Piotr Zaleski President and CEO of Hellmann Mexico

Honorio Rodríguez Automotive Logistics Manager of Hellmann Mexico

Q: How has Hellmann adapted its approach to target all

automotive industry is based on productivity and Just-

newcomers to the industry and overcome the hurdles they

in-Time operations, so Hellmann’s teams need to act

might face?

accordingly. Having outlined our logistics process we

PZ: We take customers by the hand and help them

have enough flexibility to alter it in response to real-time

understand the intricacies of the Mexican market as well

complications.

as the advantages and disadvantages of each location. 296

The Bajio region is growing considerably but there are

Q: How does Hellmann tailor its operations to the specific

infrastructure issues as well as human capital availability

needs of each customer?

and supply chain development.

PZ:

are

not

tied

strictly

defined

services.

Understanding that every situation is different and Many Tier 1 and Tier 2 companies already have an

collaborating closely with each client is vital to developing

international relationship with Hellmann, so our experience

the best solutions. Our role is to be a consultant for our

with their operations allows us to offer support throughout

customers, offering the best solutions and letting clients

their transition into Mexico. We are not limited to logistics

concentrate on their core business.

operations and we support our clients in any way we can. This includes putting them in contact with embassies and

HR: We focus on supply chain re-engineering, differentiating

consulates when necessary and advising them on the

ourselves by looking beyond the logistics division. Hellmann

Mexican legal and trade environment.

aims to understand clients’ manufacturing, sourcing, financing and administrative processes. We always start

HR: Hellmann is prepared for the growth the automotive

by tweaking their existing operations so the client can see

industry is experiencing and is ready to redirect resources

improvement. Subsequently, we implement new solutions

to support the sector. Our commercial efforts are

that require an added investment and will generate even

supported by other Hellmann departments, which are

greater returns. Companies tend to cut corners in logistics

allocating technology and resources to our clients. The

to reduce their costs, so we rely on our creativity to improve

company isalso

our processes and reduce costs as best as we can.

investing in human capital. Becoming

the best logistics solutions provider for the automotive industry will require highly specialized people who are

Q: Where do you see the biggest opportunity to improve

fully dedicated to this sector.

the country’s logistics infrastructure? PZ: The authorities need to continue developing roads

Q: What challenges does Hellmann face specifically in the

throughout the country. Security concerns need to be

automotive industry?

addressed and rail infrastructure must evolve. Despite its

PZ: We face the same challenges as our clients. Finding

many advantages, Mexico is still one of the most expensive

the right people for our operations and training them to

countries for logistics, specifically referring to roads, ports

become experts in the industry are the first hurdles most

and airports. The government could greatly improve

automotive companies must jump. This requires time and

customs to make it as competitive as that of any European

a substantial investment. Fortunately we have years of

country. Moreover, additional investment to construct a

expertise and we have integrated the best practices from

rail network would replace trucks and reduce transport via

our international network.

highways.

HR: Our strategy is to create a bond with customers,

For sea freight we have four main ports. Veracruz and

building relationships at a personal level. Our 24/7 service

Altamira are in the Gulf of Mexico while Manzanillo and

is crucial to satisfy all our clients’ needs promptly. The

Lazaro Cardenas open our communications to the Pacific.

The government is now opening Tuxpan as a third port in

Q: How has Hellmann innovated to help its clients improve

the Gulf, which we expect will decongest operations in all

their operations?

other ports. While the country advances in all means of

PZ: In 2016 we are introducing our own real-time, end-

transport, the greatest logistics opportunity is certainly in

to-end cargo monitoring system for sea, air and road

rail infrastructure. There is no existing plan to develop this

transportation, named Hellmann Smart Visibility. This will

system, but it would be a boon for Mexico. World-class

allow our customers to track their shipments at any time

logistics links would enable Mexico to compete against

and monitor all conditions of cargo such as temperature,

other global leaders in all sectors. This would be a key to

humidity, shock, atmosphere detection, light exposure and

reducing operating costs and a great incentive to attract

movement, among other factors. This platform requires

even more foreign investment.

neither installation nor software integration, considerably reducing all kinds of insurance-related costs.

HR: Along with infrastructure development, Mexico needs to improve its customs operations. Free-trade agreements

HR: The main obstacle we have found during the launching

with more than 40 countries together with the NAFTA and

phase of the device has been the customs process we

the TPP agreement offer excellent fiscal benefits for all

must follow to import it. Being such a new system, there

companies exporting and importing their products.

seems to be many impediments at customs, forcing importers to pay all kinds of duties and taxes for every

The government has done an excellent job of improving

device in their shipment. Instead, this should be treated as

customs operations, especially for pivotal sectors such as

a temporary import or even considered as an accessory

the automotive industry but there are still many areas of

of the transportation equipment, incurring no taxes at all.

opportunity that should be addressed. Deficient customs regulations diminish the benefits these companies might

PZ: As logistic providers specialized in the automotive

expect. But the government has implemented procedures

industry, we are aware not only of the challenges in

that are similar to European standards and inspections

the supply chain but also of each client’s needs and

at origin have proven to be an excellent solution for the

opportunities. That is why at Hellmann we try to accompany

automotive market. These operations require previous

our customers in their different processes to build toward

certification but significantly reduce the time that

mutual growth. That allows us to become an authentic

products spend in customs, lowering import and inventory

commercial partner rather than a regular supplier. Our

costs for clients.

clients’ success is our own success.

PROJECT SPOTLIGHT

LAZARO CARDENAS BECOMES A TRUE AUTOMOTIVE LOGISTICS HUB The first unique cargo terminal specialized in vehicle

departing from Acapulco, 55 percent from Manzanillo and

transportation in Mexico will begin operations in mid-2017.

Veracruz and 20 percent from Lazaro Cardenas. According

The Specialized Vehicle Terminal (TEA) addresses the

to the Ministry of Telecommunications and Transportation

needs of the booming automotive industry as the country

(SCT), the port located in Lázaro Cardenas moved 357,803

strengthens its 2015 ranking as the world’s fourth biggest

of the 1.27 million vehicles transported by sea in 2015, mainly

automotive exporter. The availability of sufficient space to

for Honda, Toyota, Ford and GM.

perform all operations in one place will reduce transport and storage costs for OEMs.

Once the new terminal is finished, SSA Mexico will control 70 percent of vehicle transportation in the country, according

Located in Lazaro Cardenas, Michoacan, the project is led by

to El Financiero. The terminal involves a US$56 million

Stevedoring Services of America (SSA) México, a subsidiary

investment for 21Ha of land, a 600m dock and six railroad

of Carrix Group that transports over 550,000 vehicles per

tracks in its first stage. Manuel Fernández Pérez, Director

year through its seven ports in Acapulco, Cozumel, Lázaro

General of SSA Mexico told El Universal than once the first

Cárdenas, Manzanillo, Progreso, Tuxpan and Veracruz. SSA

stage is finished, the terminal will process 400,000 vehicles

Mexico handles the transportation of 42.7 percent of vehicles

per year. Subsequent stages will expand the terminal to

manufactured in Mexico. It transports 100 percent of vehicles

40Ha and increase its capacity to 750,000 vehicles.

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VIEW FROM THE TOP

LOGISTICS SOLUTIONS FOR MEXICAN EXPORTERS AGUSTÍN PICADO Country Manager of UPS Mexico

298

Q: As the largest logistics company in the world, how is

What

are

the

main

challenges

that

Mexican

UPS supporting local manufacturing?

manufacturers face when exporting?

A: We have created a comprehensive solutions portfolio

A: One of the challenges for Mexican exports is efficiency

including air, ground and ocean transportation for

in customs procedures. This is one of the most defiant

packages of all sizes and weights. Beyond transportation,

areas for logistics, as truckloads may have to wait weeks

UPS offers warehousing, aftersales, redistribution and

at the border before they can cross. We are approaching

inventory management. In Mexico, we are emphasizing

government officials along with other logistics companies

the optimization of cross-border solutions as 76 percent

to help them understand the needs of our industry and

of local exports head to the United States.

promote streamlined processes, which would facilitate exports and imports.

In a recent study called UPS Exports in Mexico: Challenges and Opportunities, undertaken by Grupo Expansión, we

Customs would benefit from establishing preclearance

discovered that half the surveyed decision-makers were

processes to speed up product transport. Another solution

using one logistics provider and the other half used two or

would be to incorporate new technologies such as Target

more. Among the first group, we observed that 95 percent

Search, which allows company organization under certain

were satisfied with the service, while only 55 percent

criteria. UPS has developed several technologies to

of those that use two or more logistics providers were

streamline these procedures, which are already in use in

satisfied. This indicates that involving a larger number

many countries. For example, UPS’ air hub in Louisville,

of transport companies decreases satisfaction. Last year

Kentucky holds a comprehensive database of all incoming

we performed a survey of over 470 decision-makers

flights including the data of origin and transported goods.

from several manufacturing areas including technology,

This allows UPS to pinpoint potential issues through

automotive and aerospace, which placed speed and

simplified procedures.

reliability in deliveries as their main concerns, followed by product integrity and efficiency in customs procedures.

When exporting, it is necessary to analyze both the size

Clients are often unaware they are using incorrect logistics

of the package and its urgency. Transport time can range

solutions and of the additional costs incurred as a result.

from a day to a week depending on these factors. Some

Our portfolio of solutions is aligned to solve these

clients might spend up to US$80,000 on chartered flights

challenges.

to send a set of pieces in a day and avoid production losses. They could shift to UPS Worldwide Express Freight, which provides this overnight service at a fraction of the cost. This service is growing, as emergency shipping is common in a sector without a consolidated supply chain. Q: How are long wait times at customs affecting local manufacturing? A: Since the process at the border can be long and complex, most export companies prefer to make a single trip. They often need to consolidate several suppliers but this can impair customer satisfaction. UPS

Ground cargo to the United States represents US$20 billion

offers diverse guaranteed services to avoid the need for several providers. When it comes to the manufacturing industry of automobiles, a missing part can stop a

299

production line,scausing immense financial strain. The

Logistics used to operate mostly in the US but after its

local manufacturing industry requires fast and specialized

acquisition, we are now able to build a Mexican client

solutions to ensure that essential pieces arrive on time and

database. This will benefit transport companies and their

UPS can provide them.

clients and it will reduce the need for extra UPS trucks in peak season, before Christmas for example.

Q: What were the main advantages of UPS’ acquisition of Coyote Logistics?

Q: What are your plans to grow alongside local automotive

A: Coyote Logistics is a company driven by technology and

companies?

not based on assets. With its acquisition, UPS coordinates

A: While Tier 1 and 2 companies generally have a global

the transport of goods across the border. Many major

presence, Tier 3 to 5 can be of any size. We hope to

and medium suppliers send their cargo to Mexico or the

improve the way products are transported in the market.

US and return with an empty truck. Coyote Logistics has

Carriers sometimes wait up to a week for a truck to be

a database to identify the origin and destination of the

full before crossing the border, creating extra inventory

trucks. With this information, they can connect clients

costs, which are not usually considered. UPS uses a

without a truck fleet interested in transporting their

method of Supply Chain Mapping to optimize companies’

products. This creates significant extra profit for truck

logistics procedures to reduce expenses and position their

owners that would have made the trip either way. Coyote

products anywhere in the world.

VIEW FROM THE TOP

BREAD MAKER DELIVERS GREEN TRANSPORT ARTURO GARCÍA Director of Technical Development at Grupo Bimbo

Q: What is behind Grupo Bimbo’s new transport solutions

daily trips average 70km. Of the 30,000 vehicles in our

for the domestic market?

2016 fleet, close to 1,000 are EVs. Mexico City, Guadalajara

A: Innovation has sustained Grupo Bimbo’s growth for

and Monterrey’s new ecological agencies are home to the

80 years. Given Mexico’s protectionist approach and

largest proportion of Bimbo’s EVs.

decades of keeping its borders closed against commercial

300

activity, domestic innovation became a keystone for

Q: Who are the principal suppliers for Grupo Bimbo’s EV

local enterprises. Under those circumstances, companies

components?

belonging to Grupo Bimbo were asked to develop their

A: The powertrain is completely developed by Bimbo

own technology, especially machinery to eliminate limits

but the chassis and a good portion of the bodywork

to growth by the political and commercial context of

are supplied by Giant Motors. Their vehicles are some

the time. Bimbo, a bread-making company, had always

of the lightest in the world, which was crucial for us.

envisioned a clean transportation system for its deliveries,

Being a Mexican manufacturer also significantly lowered

which led to it manufacturing its own electric vehicles

costs, while increasing flexibility for Bimbo’s individual

(EVs). We embarked on this adventure 10 years ago.

specifications, such as brakes and suspension systems.

Making major cities more sustainable has always been challenging, particularly considering mobility issues. At

Bimbo gets the energy for its EVs from its wind farms in

the time, the EV market was very expensive, pushing our

Oaxaca, which led to the company’s motto that its vehicles

ROI back by 20 years.

are “moved by the wind.” We use the overcapacity from our farms to supply other companies. I do not see Bimbo

Q: How did you develop your electric units?

running short of resources regardless of how much its fleet

A: Moldex is Grupo Bimbo’s only metal-mechanical

grows but we can always improve efficiency and reduce

company. It oversaw the operation as the group moved

costs. Meeting these two challenges will increase the

toward vertical integration. After years of display building,

viability of transitioning to environmentally friendly fleets.

Moldex transitioned to technologically advanced product manufacturing, which eventually led to EV specialization.

Q: Considering how advanced your project is, what are

With the help of the Ministry of Environment and Natural

the chances you will supply other companies?

Resources, we adapted 60 Nissan trucks to EV specifics.

A: That is the objective. We expect Moldex to become

Although the vehicles were not ideal due to their weight,

one of the transport industry’s biggest EV suppliers. But

their availability was a determining factor. Our vehicle’s

first we must secure Bimbo’s EV demand while making

autonomy was groundbreaking, attained through lead-

the most of our competitive advantage. We also have

acid batteries imported from the US. Engines and

gas engine vehicles and factoring in the number of

batteries are often supplied through third parties but a

environmentally friendly technologies in the market, we

Grupo Bimbo subsidiary patented its own software and

are unlikely to completely transition our fleet to electric-

computing system to supply us directly.

powered technology.

Despite the superior performance of lithium batteries,

Moldex

troublesome recycling processes would dent our vision

weight. Ecora, or Eco Madera, is a type of artificial wood

for EV growth. In contrast lead-acid is 100 percent

infused with organic matter that we can use for our

recyclable, which convinced us to use that technology.

vehicle’s flooring. Wrappings can also be converted into

To date we have reached 120km of autonomy for every

lightweight panels for our vehicle’s boxes. These types

ton commercialized, directly related to our software’s

of developments reduce fuel consumption, minimizing

programming. This far exceeds our needs considering

negative environmental impact.

has

also

developed

materials

that

reduce

VIEW FROM THE TOP

EXPONENTIAL GROWTH FOR LOGISTICS DIVISION ALEX THEISSEN Director of Logistics Solutions at FEMSA Logística

Q: How is FEMSA developing its logistics division and

now being certified by Lloyd’s Register Quality Assurance

how is that helping the company’s overall operations?

(LRQA). We understand the importance of due diligence

A: FEMSA’s logistics division has grown exponentially,

not only as FEMSA Logística but the company as a whole.

which is extremely important for the company’s overall operations. In 2015 we acquired two logistics companies.

From an environmental standpoint FEMSA Logística

ZIMAG is a Mexican entity with over 36 years of experience

is focused on vehicle emissions. We are constantly

in warehouse, distribution and logistics. Atlas Transporte

stressing the importance of using better equipment and

e Logistica in Brazil has over 60 years of experience in

the right combination of technology in our trucks. We

handling and product distribution. The integration of both

perform maintenance on our trucks on a regular basis,

companies has been a success and we are excited about

improving their efficiency while reducing their impact on

the future. It is our responsibility to serve their clients

the environment. We have our own sustainable mobility

with the same level of quality and determination we give

program, which implements enhanced technological

our own. These companies will bring a whole new level

developments in the company’s vehicles. The evaluation

of specialization to complement our operations, making

is not only done from a cost-effective standpoint but also

us a stronger logistics company. We are expecting growth

takes into consideration the effectiveness of clean energy.

in Colombia, another major market for us. Peru, Brazil

When FEMSA Logística can prove newer technologies

and Mexico are the most important markets for FEMSA

such as electric vehicles can be used efficiently, we will

Logística and although Brazil is experiencing a difficult

bring them into our operations. We are evaluating the

economic environment we believe the tide will change in

viability of implementing electric vehicles in our light

the short term.

vehicle fleet but Class 8 trucks might still take a while to include these advances. Double trucks need too many

Q: How has FEMSA Logística improved its maintenance

batteries, meaning we would lose our efficiency. We

operations?

have evaluated different alternatives, such as natural gas.

A: This is a fundamental business area that is only

FEMSA Logística has already tested vehicles that use a

operational in Mexico, although we will soon expand to

mix of diesel and natural gas. Our initial tests have been

Colombia. If companies are not willing to outsource their

extremely favorable. For small distribution trucks, hybrid

logistics processes, we can still offer fleet maintenance.

and electric vehicles seem to be the best alternative.

We developed a broad network of maintenance shops across the country with standardized processes and

Q: How does FEMSA Logística sytematically renovate its

we service over 35,000 vehicles. Given that Colombia’s

distribution fleet?

market is similar to Mexico, we expect many opportunities

A: FEMSA Logística systematically evaluates the total cost

there. FEMSA Logística will open its Mecánica Tek division

of ownership of all its units. If we can retain our vehicles

in Colombia in 2016.

for a long time, we do. This is a natural way of doing business. Nobody wants to invest more than needed,

Q: In what ways has FEMSA Logística worked on its

especially if the equipment is still reliable and functional.

environmental strategy?

Safety, lawfulness and productivity must be kept in mind

A: FEMSA Logística has its own sustainability report, making

at all times. All in all, it comes down to fuel efficiency,

us pioneers in Mexico since not every company does this.

maintenance costs, vehicle costs and productivity. These

Our standards follow the G4 of the Global Reporting

variables are always there they shift constantly, which

Initiative methodology. We are committed to improving

forces us to keep a close eye on market trends. Of course,

the environment. Our sustainability report has improved

the ideal scenario would be to renew our fleet every year

over the years and so have our internal practices. FEMSA is

but this is not economically feasible.

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VIEW FROM THE TOP

EASIER, FASTER CUSTOMERFOCUSED LOGISTICS MARIANO FISCELLA Logistics and e-commerce Director of Walmart México and Centromérica

302

Q: In a company as big as Walmart, how do logistics come

One of these divisions consists of midsized and family

into play?

owned companies that could grow with further investment.

A: In a market in which almost 80 percent of all trucking

This makes them perfect long-term allies. We have other

companies are managed by owner-operators, being a leader

carriers that might not be ready for that commitment but

in logistics is more a necessity than a choice to guarantee

who are experts in certain regions, offering us competitive

the smooth running of our operations. We have one of the

advantages. The company is planning to double its business

most complex logistics networks in Latin America since our

over the next 10 years but there is still a gap in the market

deliveries have to be perfectly on time to more than 2,400

when comparing growth opportunities with the available

distribution points, more than once a day.

equipment. Our responsibility as part of the private sector is to ensure the industry’s growth capacity keeps pace with the

From a global perspective, logistics have been among the

market. Even though we are not in an equipment availability

key pillars of Walmart’s success and three of our previous

crisis, we expect a couple of years of shortage in vehicles and

CEOs had backgrounds in logistics. Although we do not own

drivers to catch up with market growth.

a fleet in Mexico, over the past few years we have strived to have control over our transport operations as a private

Q: Considering the variety of carriers subcontracted by

fleet would. We help our customers wherever they might

Walmart, how do you integrate numerous companies into

be and regardless of the region’s infrastructure conditions.

a single logistics plan?

The efficiency of our fleet determines how well we serve our

A: We are working with approximately 200 companies, so

customers, as well as the flexibility of our entire company.

we need a strong combination of technology and process engineering to integrate them. Technology is the area in

Q: How much input does Walmart have in equipment

which we are investing most and globally Walmart has the

management and selection?

advantage of a dedicated IT department at our Bentonville

A: Rather than just selecting which vehicles to use, we want

headquarters that develop the best tracking, routing and

to participate in the development of new equipment, from

management tools for our operations. We continuously learn

special refrigerator boxes that target large distribution

from our parent company’s experience in the US and adapt it

points to specific solutions that help the final client through

to international market environments and conditions.

e-commerce activities. Needs differ across business divisions. We now work with a specific company that designs 3.5-ton

Process engineering requires talent development. Our

trucks to address the growing e-commerce market. Within

international logistics academy program facilitates the

our fleet, we have specific units that target small distribution

recruitment of either Mexican talent studying in the

centers like Bodega Aurrera Express or Mi Bodega, which

US or Canada, or to send our current associates to our

are sometimes located in areas with no highways. We also

headquarters for a 12-month training program. Both

want our operations to be as green as possible so we are

approaches help us implement the best international

now pushing the use of double-trailer 12m trucks.

practices, adapted to the realities and restrictions of the Mexican market.

Even though we outsource our fleet operations, we do have full control over equipment procurement. We are striving

Q: As manufacturing vehicles is not Walmart’s core

for a more dedicated fleet that actively participates in the

business, how did the company acquire expertise for its

equipment selection process for each operation. We have

3.5 ton truck company?

a detailed program separating all available carriers into

A: Walmart de México y Centroamérica partnered with

three different segments, all of which are crucial for the

manufacturers and trucking companies interested in

development of Walmart in Mexico and Central America.

working with us and improving logistics processes across

the industry. Walmart has a huge private fleet in the

centers, light and water saving measures in our entire

US and a dedicated team that implements the most

infrastructure and our own reusable plastic containers,

advanced trends in the market, so we try to appropriate

completely designed by Walmart.

that process as much as possible. The Walmart Advanced Vehicle Experience (WAVE) concept truck is the result of

Even when we consider several macroeconomic trends

a partnership between many vendors and represents the

hindering the market, such as oil prices and China’s economic

latest development in our fleet efficiency program. This

situation, Walmart remains a market leader. We are working

prototype combines aerodynamics, microturbine-hybrid

to become the biggest e-commerce player, having detected

powertrain, electrification, advanced control systems and

interest from several carriers and automotive companies

cutting-edge materials like carbon fiber all in one vehicle.

to participate in this segment. Just as digital media once revolutionized the way we lived, e-commerce is driving

Q: Where do you see the biggest opportunities for

market trends. This presents a significant challenge in

Walmart’s logistics division in the years to come?

logistics and we will have to focus on accelerating our

A: We want to continue being a competitive advantage

e-commerce strategy. Our long-term priority is creating the

for Walmart, offering a world class service to our stores

best-designed logistics network in the country.

at the lowest possible cost. In line with that, apart from focusing on a dedicated fleet for our operation,

Talent and technology will remain one of our foremost

we offer reverse logistics services to our clients and

concerns as we strive to make things easier, faster and

providers. This has won us recognition from the Ministry

completely customer-focused. We will continue exploring

of Environment and Natural Resources (SEMARNAT)

new trucking designs as well as fleet management and big

and the National Logistics Award in 2014, as we are

data solutions to achieve greater supply chain integration

reducing the number of empty trailers on the road. We

and connectivity. We are already working with the main

use them to move cardboard, metal, wood or plastic

regional universities and will continue reinforcing those

scrap to be recycled or reused, reducing our fleet’s

relationships. All these measures and challenges relate to

overall impact on the environment. The company has

the Walmart way of working, which focuses on the healthy

a strong sustainability strategy. This includes the use of

development of relationships, integrity in our processes

sustainable energy in vehicles from certain distribution

and a continuous search for excellence in everything we do.

TECHNOLOGY SPOTLIGHT

DIGITAL FUEL THEFT PREVENTION Automatic vehicle localization (AVL) systems have evolved

when fuel is adulterated with burnt oil or water forming

immensely since their inception in the 1980s. Within

huachicol, not only is the extra cost related to the stolen

the last five years, this technology has seen lightning-

fuel but the potential overhaul of the whole engine if

fast development but it is still far from meeting industry

damaged by substandard fuel.

requirements. As road transportation grows in Mexico, it represents a crucial part of most industries’ logistics

To counteract this, Sitrack developed a predictive telematics

operations. Clients demand more precise solutions at

solution based on state-of-the-art sensors connected to the

lower costs. Vehicle location and availability is already a

engine’s computer. While most conventional AVL solutions

must for all AVL companies, as well as route optimization.

allow drivers to keep track of a unit’s location, Sitrack goes

Determining driver habits has progressively become equally

a step further. Online parameters, big data tools and the

important, leading to precise maintenance planning and the

use of in-house algorithms support the system to analyze

minimization of accidents per vehicle. All these factors can

the driver’s behavior, predict potential flaws and even

lead to a reduction in a vehicle’s total cost of ownership.

detect unauthorized access to the fuel tank. Any event is pinpointed to a geographic position with a precision of 5m,

However, Mexico suffers from an endemic fuel theft

allowing fleet managers to determine the exact location of

problem. This resource normally represents 60 percent

the vehicle. The system delivers reports automatically in

of a truck’s operating cost and fuel theft might reach up

real time to the email address of the person responsible for

to 20 percent of the total consumption of the vehicle.

the fleet. The solution facilitates fuel theft prevention and

Either through direct theft by the driver or by gas stations,

helps managers take corrective measures before a problem

fleets can experience a 12 percent cost upsurge. Moreover,

even arises.

303

VIEW FROM THE TOP

SINGLE PLATFORM FOR RELIABLE BUSINESS EDUARDO ALBA District Manager of Expeditors International de México

Q: What solutions have you created for the automotive

human resources. Since the company offers an internship

manufacturing industry?

program and we hire mainly from Mexican schools. In-

A: We have a number of different solutions for all industries

house training motivates our employees and we have

but our core offering includes our single platform and

a very low turnover rate. Our staff’s consistency creates

business solutions. We have a single system for all

stability within the company, which is as important as

branches no matter where customers are in the world. It

client retention for a business to prosper.

is electronically integrated, which allows us to have a wide

305

variety of different measurement tools for clients. The

Q: What are the main challenges you face in the Mexican

single platform is reliable and gives real time information

industry?

for tracking from all branches with access.

A: Infrastructure problems are the main challenge, especially for airfreight, which has been developing in pace

Our business solutions department integrates end-to-end

with the country’s growth. The lack of direct international

solutions for automotive customers. Although airfreight

flights from most Mexican cities results in expensive and

is our strongest sector we consider ourselves to be

time-consuming cargo changes. Old infrastructure, such

logistics integrators. The more our business solutions

as the Mexico City airport with its limited customs holds

department can integrate different areas for customers,

areas and insecure areas, makes it more difficult for

the stronger our solutions will be. We manage a large

companies that manage airfreight.

quantity of airfreight for the automotive industry and we have new technological tools to help them with reliable

The airfreight market is growing in Mexico, especially

tracking. The automotive industry almost always requires

compared to the rest of Latin America. Our market share

airfreight services, especially since they must react quickly

is below 5 percent so there are enormous opportunities

to changes in orders to keep production going. Besides

for us to grow. Since we are a service integrator and want

vehicle manufacturers, Tier 2 and Tier 3 companies also

to provide flexible and varied services to customers, we

require airfreight solutions.

have had to develop strong partnerships with a wide variety of companies. We have excellent relationships with

The

all the airlines, trucking companies, and warehouses. We

their budgets and the industry’s needs. The contract

shipping

methods

clients

prefer

depend

also develop solid partnerships with other companies not

manufacturing industry produces high-value products

related to airfreight.

with short shelf lives, while the healthcare industry moves expensive products that often require temperature control.

Q: What are your expectations for 2017?

Automotive has production constraints so companies

A: We have very high expectations for next year. Our

need to move products quickly. All these industries need

customers’ growth has not slowed and this is encouraging

a fast airfreight service. Trucking is another option for

for our business. Our own growth in the past five to six

industries that do not have these restrictions, assuming

years has been rapid and there are still some industries

they ship to the US and Central America.

and markets we intend to penetrate. We expect 2017 to be a big year for Expeditors in Queretaro and we hope to gain

Q: What are the main competitive advantages you offer

more business in the Bajio region.

to clients? A: Our main advantage is our organic growth with our

Q:How are you managing your growth?

systems and staff. That we have not been sold, bought

A: Expeditors is a company that grows organically based

or merged with other companies has allowed us to have

on opportunities and we have a strong sales presence

a single platform. This also ensures a clear strategy for

based on expert knowledge and experience.

INSIGHT

FEDEX PACKAGES STRATEGY FOR NEW ENTRANTS in major cities, so all maintenance on FedEx vehicles can be organized around a clients’ schedule.”

JORGE TORRES President of FedEx

FedEx has worked intensively to translate its experience,

Express Mexico

flexibility and adaptability to its services, allowing clients to develop tailor-made logistics solutions. “Innovation is a strong suit for the company,” Torres says. “It is focused

With its multiple free trade agreements (FTAs), including

on creating cargo consolidation services, personalized

the Trans-Pacific Partnership (TPP) deal, Mexico has an

customer attention and support for paperwork for all

open door for auto parts manufacturers looking for a new

imports and exports.” SenseAware, one of its products, is

production or distribution site. A booming automotive

an information and tracking system that monitors the status

industry and a prime location at the doorstep of the US

of every shipment and sends an alert for any critical event.

add to its advantages. The auto parts market is valued at 306

approximately US$85.5 billion, according to Óscar Albin,

As the industry evolves, so do commercial agreements

Executive President of INA. US$65 billion of this production

between economies. The TPP is the perfect example of how

is exported to other markets and 90 percent lands in the

new relationships will impact exports and imports, pushing

US. For logistics companies there is a clear opportunity

companies like FedEx to innovate and improve their

to target all levels of the production chain. FedEx is

operations. “The agreement specifies customs releases of

among those, as it looks to tap partners among the latest

express deliveries must be ready within six hours,” explains

entrants to the market. “The company is taking advantage

Torres. “This will help our clients put their products in the

of its global contracts and agreements to target all new

hands of their customers much faster, leading to an overall

companies in Mexico, aligning cross-border team efforts,”

increase in competitiveness.” The agreement will amplify

says Jorge Torres, President of FedEx Express Mexico. “We

opportunities for service providers such as FedEx to operate

do information distribution. From the first flashes of an idea

abroad and has new dispositions that will help ensure the

to the ultimate design of a product, we offer key solutions

correct operation of the TPP region’s supply chain.

to all our automotive clients.” With growth, however, come new challenges. Sustainability Just-in-Time operations are crucial for maintaining the

practices have impacted the production chain, including

profitability of all manufacturing operations. Nissan’s

logistics. To address these issues, the company created the

plants in Aguascalientes, for example, deliver a finished

Mobility and Accessibility Program (MAP) in collaboration

vehicle every 37 seconds, according to the Japanese auto

with EMBARQ. “MAP is a corporate social responsibility

maker. This means that losing even a minute could cost

model based on shared values and the commitment of

thousands of dollars for the company, Torres says. “With

high-quality employees,” says Torres. “It takes advantage of

that in mind, FedEx has developed solutions designed to

FedEx’s expertise in vehicle management, telematics, fuels

accelerate the supply chain. The company has significant

and automotive technology, branding and marketing, as

experience in the auto parts sector and has specialized

well as driver safety to create mobility and accessibility in

solutions for urgent deliveries. We also have service shops

the least harmful way to the environment.”

VIEW FROM THE TOP

MERCEDES SPRINTS AHEAD IN MEXICO ÓSCAR BENITEZ Marketing Manager at Mercedes-Benz Vans

Q: What fueled Mercedes Vans’ MX$433.2 million

We also developed Vans Connection in collaboration

(US$23.7 million) 2016 Q1 sales results in Mexico?

with Geotab as an operational program that supports

A: Our first-quarter results are thanks to a global effort

fleet management. The platform offers information

that included Mexico’s contribution. Each market requires

about the vehicle’s performance, location, route and

different strategies that may include specifications,

maintenance needs. In the past, these systems were

product offers, financial plans or specialized marketing.

expensive

We reached a substantial market share in Mexico

courses to learn how to use them and they required a

because Mercedes’ vans are versatile and offer multiple

minimum number of vehicles to justify the investment.

configurations. The Sprinter has been welcomed by the

Today, even businesses with only one van have the option

Mexican market because of its versatility. This is one

of using Van Connection in a friendly environment with

of the most agile, flexible and safest vehicles on the

key information for making decisions in real time. The

Mexican market. Another factor for success is our sales

tool also allows owners to program vehicles to react

strategy. Demo vehicles are available to be used in real-

automatically in particular situations. A speed limit can

life conditions. It is important to establish a presence and

be set up to avoid accidents in extreme conditions and

inform clients about product highlights.

the vehicle’s lights can be configured to turn on when

and

complicated.

Many

managers

took

certain parameters are met. Q: How have the company’s financing services delivered results in new markets?

Our superior products constantly set new benchmarks.

A: Mercedes-Benz México has a financing program aimed

Our vehicles were the first to run on diesel in this segment

at retail and small fleets, mostly for tourist transportation.

and now the sector is 80 percent diesel. This fuel registers

Most larger fleet companies have their own international

better mileage and the new technology in our engines

financing. Retail customers and small fleets choose us

makes a four-cylinder diesel engine equally powerful to

because our products can be customized with technical

an eight-cylinder gasoline unit. This allows our vehicles

support from our specialized team. Financial packages

to be slimmer, providing larger capacities with smaller

have a more significant impact on the retail segment since

environmental impacts.

these are one-time purchases and they help Mercedes reach younger markets.

Q: What strategy is the company following to maintain its position as a pioneer in the industry?

Q: How has Mercedes-Benz Vans improved its vehicle

A: Mercedes-Benz México plans to continue its Vans

technology and how have innovations been passed on to

Connection program, which will include even more

customers?

vehicles. Considering how quickly technology is advancing,

A: Mercedes-Benz Vans’ product range includes a large

we expect to develop a more sophisticated system in the

variety of models with several size, engine and payload

short term that provides even greater cost reductions.

variants in the cargo, passenger and special vehicles

Autonomous driving is also an important project being

segments. The assistance systems available in our vans

incorporated into our product lines. This technology took

enhance driving safety and comfort. Our trademark

its first steps 30 years ago and is finally starting to reap

Adaptive ESP (Electronic Stability Program) increases

the benefits. Vehicles react faster and new technology

stability in critical dynamic situations. The system has a

helps avoid human error. Over the next few years the

further safety advantage when braking with new functions

automotive industry will be closer to creating self-driving

such as Brake Disc Wipe and Electronic Brake Prefill.

cars with the implementation of intuitive technology.

Additionally, Adaptive ESP includes Crosswind Assist,

Technology changes occur practically every month and

which significantly reduces lateral drift.

we are conscientious about staying up to date.

307

VIEW FROM THE TOP

SATELLITE TECH HELPS KEEP TABS ON SHIPMENTS EDUARDO GONZÁLEZ SALCE Director General of Gonzalez Trucking

Q: What are Gonzalez Trucking’s goals with the

being able to provide them with information on their

automotive market gaining ground in Mexico?

shipment’s location and state at all times.

A: Many well-established transport companies compete

308

in the local market and there are new entrants looking to

Q: How does Gonzalez Trucking personalize its business

increase their market share. Each has its own niche and

strategy according to changes in client portfolios?

Gonzalez Trucking is no exception. We want to be the

A: The company operates four lines of service: refrigerated

best transportation company in our segment, maintaining

cargo, dry cargo, cargo exchange at the border and an

steady growth and attractive operations that generate

automotive division that caters to several OEMs. The

value for our clients and stakeholders. Considering the

automotive sector in particular demands high levels of

market’s conditions, we are expecting 2016 to be a

precision and efficiency but our background in refrigerated

consolidation year. For 2017 we forecast growth between

logistics has given us expertise that is the foundation for

12 and 15 percent.

competing successfully in this market.

Q: How has Gonzalez Trucking built its strong presence

Our strategy is based on consolidating our business with

in the market?

automotive companies. While we have the capacity to

include more clients, we are focused on offering the best

transportation equipment. Gonzalez Trucking has highly

try

implement

the

best

technology

service to industry leaders. Our plan to grow in line with our

qualified operators and the company has constantly

clients will support the company’s long-term operations.

invested in technology and communication solutions.

We are carefully analyzing the option of reinstating our

We are pioneers in these systems and we manage it

port services now that the market is more stable. We also

on a platform from Omnitracs. Most similar brands

implemented a corporate structure in 2015, pre-empting

base their solutions on GPRS technology. This means

the problems family companies often face.

wherever there is no cell phone coverage, the company loses communication with its units. Omnitracs offers full

Q: Does Gonzalez Trucking have the authorization to

functionality 24/7, 365 days a year via satellite. This gives

cross the border with its trailers or does it outsource

our clients the confidence to invest in our services. Our

these cargo operations?

mission is to tend to our clients’ every need, which means

A: We are certified by US authorities to cross the border and can travel to Canada if necessary. But US regulations state that the same operator must drive the truck at all times once it enters the country, which makes the journey highly inefficient. Therefore, we have agreements with the main transportation companies in the US to make these trips more efficient. Our corporate offices are in Aguascalientes and our main operative branch is in Nuevo Laredo, Tamaulipas, complementing our other terminals in Queretaro and

12-15 percent growth expected for 2017 after 2016 consolidation

Guadalajara. We can address all urgent needs at the border, while managing all maintenance and repair operations in Aguascalientes. Queretaro and Guadalajara are two strategic locations from which we cover the rest of the country.

PROJECT SPOTLIGHT

NEW X-BU CENTER A CENTRAL COG FOR CONSOLIDATION Cummins opened its new X-BU logistics center in San

budget, exceeding expectations. “The San Luis Potosi

Luis Potosi in July 2016 to help consolidate all logistics

facilities are world-class plants and the new building will

operations in the region, leading to more efficient

be a world-class logistics center,” says Tom Linebarger,

component distribution across the country. After more

CEO of Cummins Inc.

than 50 years in Latin America and five manufacturing sites in Mexico, Cummins is betting on logistics as a central

Ensuring high availability of spare parts, providing technical

cog in the consolidation of the Cummins ABO Mexico

training

and Central America business. The center is part of the

guarantees within reasonable time frames and optimizing

company’s ambition to provide exemplary support and

repair and maintenance operations are the center’s four

solutions for its clients.

main priorities. This facility plays a key role in reducing

for

the

distribution

network,

implementing

delivery times, allowing Cummins to centralize logistics The location of the new center in San Luis Potosi is not

operations in one building.

coincidental. It is strategically located to meet the needs of its growing customer base in Mexico City, providing

The construction of the San Luis Potosi center is proof

help and support to the increasing number of exports the

of Mexico’s importance as a global manufacturing hub

company oversees on a daily basis. Cummins’ production

for Cummins. This center represents more business

in Mexico accounts for more than US$1.2 billion. Half of

opportunities for Mexico, more jobs for local communities

these resources are destined for the domestic market

and an invaluable tool to help Cummins’ customers

while US$600 million is exported.

succeed in their businesses, says Linebarger. “Buildings are not why we are here,” he adds. “It is the customer

The construction of the X-BU center was an achievement

relationships. It is the business growth opportunities that

in itself. The facilities were delivered on time and on

we are trying to build.”

309

VIEW FROM THE TOP

BRINGING MEXICO AND THE WORLD CLOSER RUDOLF HESS President and CEO of R.H. Shipping

Q: What advantages does R.H. Shipping offer to the

we can deliver much more personalized services at a fair

automotive industry?

price. Clients often need to deal with dozens of people

A: This sector’s unique characteristic is that everything has

in international corporations. R.H. Shipping’s customers

to be delivered punctually. The automotive industry does

have direct contact with their sales representative and the

not normally stock large inventories because spare parts

person in charge of their operations. Unfortunately, many

are expensive. If the production line stops, the company

companies give their business to the cheapest company

will incur stratospheric costs. The complete product

in the market or they prefer a global company capable

offering we present to our clients includes management

of backing up its operations in case of any mistake. We

of air, sea, land and rail freight, as well as hand-carrier

offer that same assurance to the client, but we cannot

operations

components

subsidize our rates. For now, we will focus on individual

personally to the client. We also offer customs support

where

our

people

deliver

businesses but we will eventually start to participate in

services and insurance consultancy if the cargo is lost or

large automotive tenders.

suffers any damage. We manage transportation operations for Volkswagen, which is a demanding client in terms of

Q: How is R.H. Shipping making its operations more cost-

quality and efficiency, and we believe our product portfolio

effective?

will help us increase our presence among automotive

A: We are establishing closer relationships with air carriers

clients. Our rail presence is particularly strong since R.H.

in Europe and Asia and we are already working with the

Shipping transports approximately 40,000 containers

most important agencies specialized in air freight. For

from Asia every year and 90 percent are sent by rail to

export operations, we have also built strong bonds with

Guadalajara, Mexico City and Monterrey.

local and international air carriers thanks to our membership with the International Air Transport Association (IATA).

Q: How important is the sector to your business and what is

This entity regulates all airfreight operations and payment

your strategy for the industry?

collections on behalf of airlines. In 2014, the association

A: It has been a crucial sector for us and our goal is to increase

ranked us eighth among other freight forwarders in the

our list of automotive clients. We want to increase revenues

market, all of whom were global players. In January 2016,

from this industry tenfold. For this, our sales strategy is

we reached third place and one month later second place,

focused on automotive companies through our offices in

just behind Kuehne + Nagel. We have a strong position in

Queretaro and Leon, Guanajuato. We are strengthening our

terms of exports and that gives us excellent bargaining

operations in Leon and considering opening new offices in

power with all airlines to reduce costs.

Aguascalientes and San Luis Potosi. We also have an office in Monterrey to target the north of the country and the US

Q: How does R.H. Shipping divide its business areas?

and we are expanding our workforce in that region. The

A: Approximately 50 percent of our revenue comes from

company just hired a new branch manager for this office to

imports from China and Asia, via both air and ocean freight.

develop the northern and northeastern part of the country.

This includes products from the electronics, oil and gas, automotive, consumer goods and general manufacturing

Q: What do you need to do to cultivate your participation

sectors. Ten percent of our operations focus on domestic

in the sector?

and international land logistics. We have an office in

A: We need to improve our workforce in the Bajio region,

Houston that focuses on oil and gas freight, as well as

which is a challenge the whole industry faces. We also

cross-border business. Around 20 percent of our business

need to plan how to compete with international companies

comes from European companies and the remainder

that offer the same services at much lower costs. We do

comes from South America. This makes our operations in

not have unlimited funds to subsidize our operations but

Mexico key to our development.

311

INSIGHT

SHIPPER AVOIDS FULL FORCE OF LABOR SHORTAGE Established in Celaya, Guanajuato in 1935, the company

JORGE ALMANZA

has 1,000 heavy cargo units, 104 warehouses across the

Director General of

country and 380 local distributors to help it cover 95

Autotransportes de Carga

percent of the country, according to its website. Most

Tresguerras

operators learn on-the-job, which increases the risk of accidents, says Almanza. That is one reason its recruitment and training process is so stringent. “Transport operators

Demand for human capital in the Mexican auto industry is

go through an internal training process that goes beyond

an ongoing issue plaguing many links in the supply chain.

their operational activities, including health seminars

While some segments are feeling it worse than others,

to help them take care of themselves,” says Almanza.

freight and shipping expert Tresguerras is among those on

“Tresguerras also carries out random drug tests twice a

the positive side of the ledger.

year. This program was established 10 years ago and our transport operators know that drugs will not be tolerated.”

312

“We have not felt the full force of the systemic unavailability of human capital,” says Jorge Almanza, Director General of

The shipper holds yearly talks on topics such as defensive

Tresguerras. The company says it needs to fill just 150 new

driving, operational technicalities, time management and

operator positions every year. “Contrary to the industry

lawful practices. Says Almanza: “It improves operator

norm, Tresguerras’ turnover is low, helping the company

driving behavior and positively impacts logistics times

maintain excellent levels of service.”

and costs.” Almanza says the company also is keenly aware of the impact the industry can have on Mother Nature. Tresguerras has over 1,800 vehicles with an average age of 2.5 years, all equipped with efficient engines. “We are well aware of the impact Tresguerras’ fleet has on the environment so we strive to include top-notch technology in our vehicles.” Unfortunately technology in the heavy duty vehicle segment

general

lagging

behind

present

environmental needs, mainly because of cost. “The market for gas and biodiesel engines is not sufficient in the segment,” says Almanza. “But Tresguerras plans to implement the technology once NOM-044 and NOM-086 regulations come into force to minimize the effect of their operations on the environment.” Tresguerras commercial activities continue to grow. It recently expanded storage and inventory control services and it has offered courier services since 2015 for packages with an 80kg weight limit. It has opened several dropoff stations in strategic city locations and has created additional partnerships to cover demand. Its partnership with parcel-delivery company UPS complements its own services, but it is also branching out. “Our eight-year relationship with UPS is growing stronger, while we build others with CEVA Logistics, CFI Transportes and several US companies,” says Almanza. “We want to complement our service range, while simplifying international shipping for our clients.”

VIEW FROM THE TOP

ENERGY REFORM CREATES OPPORTUNITIES, QUESTIONS JORGE ALMANZA Director General of ALMU

Q: How have you diversified the business into different

no older than 2.8 years and the scrappage scheme will be

commercial areas to strengthen ALMU’s offering?

important for achieving this. We operate one unit that is

A: ALMU was established 39 years ago to cater to a

almost 10 years old and will be removed this year to respect

client of Tresguerras called Negromex, which needed

ALMU safety regulations, but the majority of the units we

logistics services for a specific division of its production

manage for our partners are an average of 3-4 years old. On

that Tresguerras was not able to provide. By fulfilling this

top of the obvious safety issues that characterize older units,

existing need, doors into other industries opened for us.

vehicles that have seen heavy use for more than six years

Tresguerras had been offered several business areas but

begin to cost more in maintenance than they can make for

never felt the urge to diversify. ALMU saw an opportunity

our partner companies. Thus, we plan to push ALMU toward

in the automotive industry and in 2004 we created

moving the 10 year age limit on trucks to seven years.

a division called ALMU Logistics to capitalize on the automotive boom in the Bajio region. The combined 60

Q: ALMU set a unit growth target of 10 percent in 2015.

years’ experience held by leaders of both Tresguerras and

Do you have the same goal this year and what short-term

ALMU was fundamental to swiftly consolidating processes

obstacles have you identified?

that would normally have been part of a long learning

A: We planned to reach the 10 percent increase in units

curve. Tresguerras remains our administrative company

by the end of 2015 and in the last three months of the

but every partner creates and manages a division.

year we added six tank trucks to the existing 45, meaning we achieved our target. Our projections for 2016 are less

We work closely with iron workers such as Ternium and

optimistic because of the Energy Reform and its influence

Steel Technologies and are negotiating with Posco.

on the petrochemical industry. It seems that having opened

These companies have specific automotive lines, so we

up the petrochemical industry, PEMEX will struggle to

are indirectly serving different parts of the automotive

maintain market share and its logistics division will change

industry by offering transportation services to automotive

its infrastructure considerably so we could potentially

suppliers. Today, we manage 56 units comprised of 45 tank

become direct competitors. We also expect tariffs to drop

trucks and 11 industrial platform trucks. The 11 platforms we

because there will be excess logistics supply. Nevertheless,

own are Volvos, four of which have Halcon platforms. We

we hope that new companies will arrive with logistics

have been considering including car transporters and small

requirements, for which ALMU has been preparing since

trucks in our range of services to serve Puerto Interior.

2014. ALMU began a certification process through the National Association of Chemical Distributors (AMIQ) last

Tresguerras has been an excellent example for us to follow.

year and is now officially SARI certified for the chemical

The fuel gauges used in their tank trucks require a precision

industry. This will undoubtedly help us attract the new

that is difficult to achieve, but after Tresguerras spent three

companies entering Mexico by providing quality assurance

years testing the gauges, ALMU can adopt the technology,

and sustainability as well as environmental responsibility.

allowing us to remain at the cutting edge of the industry while also enjoying the reduced prices and rates that our

Achieving our target of 100 units by 2020 depends on the

associates negotiate. We always try and pass on these

formality of companies in terms of payments. Normally,

savings to all our partners, from the smallest to the largest.

realistic growth would be 10 percent per year, but we hope to take advantage of the open market created by

Q: Is ALMU participating in the vehicle scrappage scheme

the Energy Reform. Ideally we would like to begin serving

and how do you maintain the highest quality in your units?

direct suppliers, such as those working with Mazda, Toyota,

A: Our participation offering capital and purchasing scrap

Honda, and Ford, as this would allow ALMU to be part of

will be extensive. Our long-term target is to operate fleets

the OEM supply chain.

313

VIEW FROM THE TOP

SOFTWARE KEEPS TABS ON FLEETS IN REAL TIME BARAK GAZIT Director General of Traffilog

314

Q: Given that 56 percent of the country’s logistics

efficiency with red, yellow or green lights. Solutions can be

operations hinge on road freight services, how has

implemented instantaneously, making improvement much

Traffilog been received in Mexico?

more attainable for the driver. Whether it is presented as

A: The response has been exceptional. The market is

a report, an alert or an event, the driver can receive this

extensive and the volumes of product and passenger

information live and on the go. To wrap all of our solutions

transport that travel across the country continue to grow due

into one, Traffilog also offers logistic models that are used

to Mexico’s proximity to the US market. Traffilog’s business

on the road. These include dispatch services and route

model is based on reducing our clients’ overhead, which

planning for distribution operations.

helps us run a profitable and successful operation. We do not simply provide customers with a GPS tracking system,

There are thousands of parameters that we can measure

as some companies assume at first. Traffilog is capable of

to provide a deeper level of understanding about vehicle

gathering a wide range of data from its customers’ vehicles,

efficiency. Through Traffilog’s active center we can

to analyze it and turn it into valuable information regarding

process this information and channel it to our customers in

maintenance, fuel consumption and driving habits, among

a timely manner. Our department of automotive engineers

other aspects that can reduce costs. Given its technological

analyzes data and offers fitting alternatives to our clients.

innovations, Traffilog separates itself from its competitors,

These may be immediate applications that need to be

which is evident in the quality and level of information we

implemented on the go or periodic adjustments to vehicle

can collect.

components. Our reports include failures, solutions and the monetary costs if solutions are not put into action.

Q: What is Traffilog’s business model and what steps is it taking to improve its market share in Mexico?

Q: Traffilog’s advantages are evident but how does the

A: Mexico’s transportation market benefits from healthy

company communicate the benefits to small companies,

competition. Everyone is looking for ways to improve their

owner operators and private car-owners?

profit margin. Either companies increase prices or they

A: To cover every opportunity in the market, the company

reduce costs. Traffilog helps them achieve the latter. The

also offers a solution designed for light vehicles. Traffilog

bigger the fleet volumes, the larger the urge to implement

has a solution called B on Track, a cheaper product that

a system like ours. Traffilog can produce preventative event

only covers specific functions, allowing customers to

forecasts, reducing technical impact and maintenance

monitor DTC codes and fuel-consumption efficiency

needs. This shifts the attention from a corrective stance to

through their mobile phone application. We created this

a preventative approach, reducing the unproductive time

tool for vehicle owners and inner city transportation, which

of a vehicle waiting at a service shop and minimizing the

makes it less robust than our original solution. Another

risk of failure in the middle of a delivery. Our system also

area that goes hand-in-hand with vehicle protection is

can improve maintenance scheduling by working with the

insurance. We have developed a collision detection system

appropriate information in a timely manner, knowing the

that allows us to record the details of any accident. These

vehicle’s technical status beforehand. Traffilog can even

include the what, where, and when of the hazard and the

evaluate the efficiency of a driver’s habits, including shift

approximate damage that was absorbed by the vehicle,

changes, clutch and braking and acceleration.

even when it is parked. Traffilog wants to revolutionize the insurance business in Mexico with its solutions. As part of

In terms of fuel efficiency, our DMAS product offers drivers

this approach, we are working with insurance companies

an evaluation of their performance through notifications

to create profiles that will determine the insurance policy

in the style of traffic lights. The device notifies them of

of each individual, which opens a new commercial area for

good or bad driving practices in terms of safety or fuel

insurance players.

VIEW FROM THE TOP

HIGH-TECH TRACKER PROVIDES LOGISTICS SOLUTIONS ALBERTO AGUILÓ Managing Director of Sitrack México

Q: What is Sitrack’s expectation for the local market and

Besides engine and tracking capabilities, Sitrack builds

what opportunities are opening?

driver profiles for each employee to simplify fleet analyses.

A: Mexico’s business landscape is demanding newer

This helps improve driving practices, the life span of the

technologies and enhanced managerial processes, forcing

vehicle and return on investment (ROI). Because fatigue is

players to evolve professionally. Sitrack is setting itself

a main causes of accidents, we developed a special camera

apart with smart solutions and high-quality installation

solution that knows when a driver loses focus and another

and maintenance services that use the Internet to track

that vibrates a vehicle’s seats when driving anomalies are

and monitor a company’s assets. Last year the company’s

detected. The platform provides information to insurance

local

companies regarding incident probabilities for each driver

engineering

programming

and

department

expanded,

development

improving Sitrack

so they can contact their customers and warn them of

increased sales by 30 percent year on year in 2015 and

processes.

possible risks. We can reach clients anywhere in Mexico

expects 37 percent growth by the end of 2016.

within 24 hours thanks to our rapid follow-up customer service.

There are enormous opportunities in multiple industrial segments. Sitrack has provided clients such as insurance

Q: How has Sitrack targeted its solutions to this market

companies with interactive analytical maps pointing out

and what hurdles do you face in Latam?

hot zones, as well as high-liability and safe zones, using our

A: Sitrack designed a business model with its commercial

own information and that provided by local police. Another

partner, MAS Seguros. The company entered the Mexican

app the company launched serves as a communication

market in 2010, and today we serve a fleet of more than

channel where logarithms pinpoint consumer trends,

30,000 vehicles. In 2014, leveraging the experience

allowing the user to understand the transportation market

from Sitrack’s other markets, the company expanded

and respond faster to satisfy tracking needs.

its safety and logistics solutions portfolio to specifically target Mexican carriers. We launched more than five new

Sitrack is far more than a GPS satellite company. Our

products in 2015 that increased our clients’ operational

technology now links with SAP’s invoice processing for

efficiency while minimizing risks and liability.

the gas industry, maximizing time efficiency and fuel consumption traceability. Mexico is not only ready for

The company was born into circumstances that are

this type of solutions but truly needs them, and Sitrack

particular to the Latin American market and it has adapted

is prepared to satisfy the market’s demand. In fact, given

accordingly. We have the expertise to adopt top-notch

Mexico-US transport relationship, we now serve as a

international technological trends. A lack of infrastructure

domestic satellite provider for foreign truckers, creating

and organic developments still hinder Latin America’s

a link between both economies and securing their

position as emerging leaders. If we can find a way to

operations on Mexican soil.

encourage innovation, the world will undoubtedly be surprised and impressed by the expertise in Latin America.

Q: What innovative products has Sitrack brought to market? A: Gasoline theft is one of Sitrack’s main concerns. We developed a solution that tracks a vehicle’s tank and publishes the data online with user-friendly graphs and reports. Besides helping prevent theft, Sitrack’s foremost advantage is that it can also monitor what goes into the tank to avoid damage to the engine.

37 percent growth by the end of 2016

315

VEHICLE SPOTLIGHT

316

MERCEDES-BENZ V-CLASS Big is the first word that comes to mind after seeing the Mercedes-Benz V-Class. Luxurious and powerful are close seconds. This is unsurprising considering the multipurpose vehicle (MPV) is 1.92m wide, 1.88m tall and 5.14m long. Its large dimensions pay off, providing a comfortable space for passengers and significant room for everything else. With the new V-Class, Mercedes-Benz is introducing a versatile MPV model that combines strength and dynamism. Its appearance helps the V-Class define new standards by introducing driver assistance tools and technologies, alongside its powerful engine. The V-Class can adapt to any load, road and destination. It incorporates features to optimize space such as an independent rear window and two loading planes, facilitating cargo loading and unloading. The V-Class is in line with Mercedes-Benz technology and standards of comfort. By including COMMAND Online, the vehicle has Internet access, a versatile navigation tool, radio and phone connection. The Live Traffic Information system helps drivers easily find the most efficient route. Mercedes-Benz’s Intelligent Drive supports operators and facilitates parking operations and difficult maneuvers. Through the Collision Prevention Assist the vehicle will use optical signals to prevent impacts by warning drivers of objects close to them. The V-Class can also measure the distance between vehicles to optimize braking power. All of this adds up to a hightechnology machine that protects passengers, acting as a right-hand man for the driver. For passengers, it offers multiple seat configurations. The MPV also can be enhanced with optional features including a panoramic roof, two iPad holders in the rear, LED-illuminated thermo-cup holders and rear-seat air conditioning. There are two versions available, the V220d and the V250. The V220 model incorporates an OM651 diesel engine compliant with Euro 4 regulations. It offers an output of 163hp, reaching a maximum 195km/h and releases an average 168.07g/km of CO2 fully complying with the Euro 4 Class III regulations on fuel consumption. On the other hand, the V250 has a M274 gasoline, Euro 5 compliant engine with 211hp, a maximum speed of 200km/h and an average of 191.64g/km CO2 emissions.

317

FUELS & MOBILITY

Mexico’s vehicle park stands at about 35 million and counting. As more and more big city streets become rush-hour parking lots, it is not surprising that mobility has emerged as a national problem. A dangerous spike in pollution in Mexico City in the first half of 2016 put the spotlight not only on the quality of air in the country’s capital, but also the mobility challenges its citizens face on a daily basis. Despite measures implemented in the first half of the year to address pollution, a comprehensive solution remains elusive.

This chapter focuses on the mobility problems faced by the country and offers insight from leaders across the industry into possible, imaginative and future mobility solutions, not only for Mexico City but for all urban areas.

319

CHAPTER 12: MOBILITY TRENDS 322

VIEW FROM THE TOP: Laura Ballesteros, SEMOVI

323

PROFILE: Overhauling Urban Mobility, World Bank

323

INSIGHT: Consumer Decides, Government Pays, Deloitte

324

VIEW FROM THE TOP: Fernando Páez, CTS EMBARQ México

326

VIEW FROM THE TOP: Bernardo Baranda, ITDP

327

VIEW FROM THE TOP: Bernardo Quintana, Bernardo Quintana Institute

328

VIEW FROM THE TOP: Jesús Padilla, AMTM & CISA

329

VIEW FROM THE TOP: Elias Dana, Transportes LIPU

330

VIEW FROM THE TOP: Alejandro Calvillo, El Poder del Consumidor

331

Daniel Zamudio, El Poder del Consumidor

VIEW FROM THE TOP: Alejandro Morales, Econduce

Eduardo Porta, Econduce

332

VIEW FROM THE TOP: José David Monterroza, Wheels

333

VIEW FROM THE TOP: Ricardo Weder, Cabify

334

VEHICLE SPOTLIGHT: Scania Long Distance R480 LA6x4

336

VIEW FROM THE TOP: Francisco Sordo, Uber

338

VIEW FROM THE TOP: Abraham Esparza, Biofuel

339

VIEW FROM THE TOP: Dessire Colina, Promotora Energética E3

340

VIEW FROM THE TOP: Stephan Wittig, Grupo Báltico

341

VIEW FROM THE TOP: Jorge Suárez, Volvo Group México

321

VIEW FROM THE TOP

TRAFFIC MAYHEM OPENS DOOR TO EFFICIENCY LAURA BALLESTEROS Undersecretary of Planning at SEMOVI

322

Q: What are the most conspicuous challenges of

account when designing policy. Around 45 percent of

implementing a new mobility system?

commutes in Mexico City end in the city center, namely

A: The biggest challenge facing Mexico City is sustainability.

in Benito Juarez, Cuauhtemoc and Miguel Hidalgo. An

For many years, 73 percent of the governmental budget

average commute using public transportation sees users

has been destined to grey infrastructure. This encompasses

taking four different modes of transport to reach their

urban roads, highways, bridges or second levels and parking

destination. This means that users have multi-modal

lots. Automobile drivers received privileged treatment from

consumption

public policy. The car’s dominance over public spending

generating a supply chain that offers several options for

tagged it as the most important means of transportation

commuters. Cars will undoubtedly be part of this plan but

in the city, leading the authorities to neglect investing

we hope to provide for those who already have a public

in public transport. Resource allocations generated the

transport mentality.

tendencies.

Hence

the

importance

consequences that we are experiencing today. Q: What has led the government to decide to renovate Q: What role does public transportation play in the current

public transportation and mobility options?

mobility plan and in improving the city’s environment?

A: Mexico City is characterized by its growing vehicle

A: Climate change has put the spotlight on the lack of

park. Our traffic levels are comparable to those seen in

government investment in public transport. Almost 83

enormous Asian or American cities and investment in

percent of the Mexican population lives in cities so one

public transportation is the only option to balance the

of the government's priorities is resource distribution to

city’s division of transport modes. If a street’s efficiency

mobility. The last government poll on commutes in 2007,

is the number of people able to use it at once, then public

indicated Mexico City's modal split at 10 percent pedestrians

transport is the most efficient method. For instance, a car

and cyclists, 20 percent using private vehicles and almost

uses the same space as 12 bicycles. A BRT can replace

70 percent using public transportation. Our forecasts show

250 cars. Integrated transport systems not only reduce

that the modal split has changed. Today 30 percent of

pollution but also traffic.

the population uses private vehicles and 60 percent uses public transportation, while pedestrians and cyclists remain

It is not enough to substitute existing buses. We need

unchanged. This is a consequence of previous government's

to improve the service model of public transportation.

public policy. The foremost problem caused by this shift is

The implementation of the Metrobús BRT system has

damaged air quality. The average speed of cars is 17km/h

become relevant as it helped to adjust the concessions

and slow moving traffic generates pollution.

held by microbuses. As we also face the disappearance of the individual concession, the city has been able to

Our city faces another challenge linked to road fatalities.

create enterprise clusters operating in designated areas

According to the authorities, 1,041 deaths are reported

of the city, thus simplifying supervision of these transport

monthly because of car accidents. Should we confirm this

systems.

data with the health system it may even be higher. Rational car use with shared infrastructure and a shared mobility

We acknowledge that people who use public transportation

culture will help reduce the number of accidents.

are also those who walk the most. Public transportation infrastructure

must

linked

for

pedestrians

and

Q: How do you plan to change infrastructure to support

incorporate new transport services such as Uber and

sustainable transportation?

Cabify. These mobile apps help users plan their trips,

A: We have to take the number of commuters using

while other applications can coordinate carpooling or car-

specific infrastructure to reach their destination into

sharing services.

PROFILE

OVERHAULING URBAN MOBILITY New ventures require large investments and, especially

500,000 inhabitants. That same year, the Federal Program

with infrastructure projects, a single company would

for Urban Mass Transportation (PROTRAM) was created

struggle to fund them alone. The World Bank plans and

within FONADIN to improve the sector's efficiency and steer

creates urban transport projects in collaboration with

it toward lower-carbon development. “PROTRAM and UTTP

federal governments. The organization tends to focus on

finance mass transport systems but UTTP also emphasizes

transformational transport projects, such as the BRT in

complementary measures, including investments in non-

Mexico City. Abel López, a World Bank Urban Transport

motorized transport,” says López. “The UTTP includes

Specialist, says the federal government and the Bank agreed

resources from the Clean Technology Fund at really low

to introduce the Urban Transport Transformation Program

interest rates, targeting public and private initiatives to reduce

(UTTP) investment initiative in 2010, worth US$350

greenhouse gases and promote cleaner technologies.”

million and managed by the Public Sector Infrastructure Bank, BANOBRAS, to implement these programs through

The Metrobús BRT is the perfect example of collaboration

concessional loans and technical assistance.

between Mexico and the World Bank. The latter worked with the Global Environment Fund and the Ministry of Finance and

UTTP is the result of a long history between the World Bank

Public Credit to ensure Mexico City would receive funding

and the Mexican government, starting in the 1990s when

to determine the project’s viability. A BRT system offered

the Ministry of Social Development (SEDESOL) decided to

a way to include transport operators in a sustainable mass

improve urban growth through a program called 100 Cities.

mobility solution, without the need for more complicated

The World Bank provided technical support and training for

infrastructure such as underground tunnels. The World

institutions in charge of urbanization and mobility. In 2008,

Bank envisions an overhaul of the country’s urban mobility,

under the umbrella of the National Fund for Infrastructure

with both tangible and intangible improvements to the

(FONADIN), also managed by BANOBRAS, the World Bank

infrastructure and the institutional framework. “The Bank

began working with the federal government to develop

thinks most transport laws should be updated to facilitate

a program to support transport in cities with more than

the introduction of innovative solutions,” López says.

INSIGHT

CONSUMER DECIDES, GOVERNMENT PAYS When it comes to transport mobility Mexico is swimming

Two perspectives need to be considered in mobility

against the tide. While European countries such as

planning:

Finland target reductions in their vehicle park, Mexican

manufacturing. While private vehicle demand expands

consumption trends suggest there will not be fewer cars on

the automotive industry needs to prepare for change.

the road anytime soon, according to Deloitte Mexico. The

GM’s acquisition of ride-sharing company Lyft proves

vehicle park will continue to grow at least until the federal

the industry’s vision may be changing, transforming car

government boosts investment in public transportation.

manufacturers into mobility companies. “It will become

the

user’s

opinion

and

the

impact

more common to see large OEMs shift their business The endemic focus on individual drivers might be positive for

model to fit the new mobility paradigms,” says Manuel

the automotive industry but it puts the country at odds with

Nieblas, Partner and Manufacturing Industry Leader at

shared-mobility systems. Still, there are signs that Mexicans

Deloitte Mexico.

are ready for a change, according to Alberto Torrijos, Partner and Automotive Leader at Deloitte Mexico. Car

As the old adage says, the customer is always right, and

sharing is growing in Mexico, as the market is ranked among

that may prove true for the auto sector. “A global shift in

the top three globally in Uber rides. While an encouraging

consumption will force companies to reinvent themselves

statistic, more needs to be done to alleviate traffic problems

and adapt to new consumer needs,” says Nieblas. In the

plaguing Mexico City. “The centralization of businesses

end, though, it also comes down to money and a shift in

and corporations adds to mobility problems,” Torrijos says.

Mexico’s mobility strategy is not likely to happen without

Centralization attracts people from other states looking for

investment from the federal government and from the

employment opportunities, which worsens the situation.

private sector.

323

VIEW FROM THE TOP

MORE INTEGRATION FOR A BETTER CONNECTION FERNANDO PÁEZ Director of Urban Mobility at CTS EMBARQ México

324

Q: What challenges are there to creating a transport

should have a metropolitan focus regardless of the

system that covers not just Mexico City but the entire

political-administrative

metropolitan area?

we have created a conceptual design to transform and

A: The ultimate goal is an integrated metropolitan

integrate Mexico City’s transport system. This can serve

transport system. Citizens and local authorities are

as the foundation to begin the process of transformation.

beginning to realize Mexico City is not isolated but

The creation of the Mexico City Constitution offers an

inextricably linked with many neighboring states. We

invaluable opportunity to regulate and set a precedent

believe an integrated metropolitan transport system

for public transport in the metro area. Our efforts were

is the only way to meet people’s mobility needs. We

rewarded with the incorporation of a clause on integrated

face challenge having neglected to collectively develop

transportation systems in the Mobility Law. It stated that

the concept of a metropolitan community or society.

the city’s administration should provide the necessary

The political-administrative divisions of each region

resources to reach our mutual goal. Change must

believe the problem should be solved locally rather

happen gradually and every mobility solution should

than regionally. Unfortunately, political divisions and

guarantee connectivity without considering political and

political objectives create difficulties for public policy

administrative limitations.

divisions.

CTS

EMBARQ,

on sustainable mobility. While there are some isolated efforts to find solutions, few connect the State of Mexico

We need to make consolidating political will a public

with Mexico City.

policy priority to make this solution work. There is little clarity about the necessary steps to implement a new

Q: How is CTS EMBARQ lobbying to create an integrated

mobility system. The approach local authorities are

mobility strategy for public transportation?

taking is still unclear. Beyond the issues of transport

A: CTS EMBARQ is raising awareness about this need

technology and vehicle engineering, the system should

in Mexico City that should include services, technology,

be well managed from an institutional perspective. We

city image, infrastructure and payment methods. It

need efficient institutions that can plan and operate the system with public and private funding. The system should be focused on the end user. There is the political will in Mexico City to make this happen but we need to expand these efforts to the rest of the metropolitan area. Integrating the transport system could begin in Mexico City with the BRT Metrobús, the suburban train and the metro lines. Privately owned collective transport in the city needs to be regulated and integrated both physically and operationally with stateowned transport.

CTS Embarq influences more than 20 cities worldwide through congresses on transport in cities

Q: What is the most pressing issue regarding mobility system changes? A: Pollution has put a spotlight on the public transport system’s shortcomings and has challenged us to change the current system. Fleet renovation must be considered as it will require an important investment from the

state and private transport owners. The federal government has announced it will provide a certain amount of resources. The promise of a new fleet should encourage the creation of public transport companies, which would simplify the process of defining standards. Financing this new system has several implications. Besides replacing old units with new ones, the right infrastructure needs to exist to provide timely maintenance. Q: How can the government ensure a healthy renovation

strategy

for

the

entire

public

transportation network? A: The city requires a clear fleet-renovation plan that considers all legislative, technical and financial aspects. We should define where the resources for the transport system will come from. The box fares only pay for fuel, the drivers’ wages, concession fees and minimal maintenance services. Certain aspects such as tax payments and social benefits are not covered by current box fares. These additional expenses should be covered either by raising ticket fares or government subsidies. This is a complicated decision because increasing user fares will have a significant social impact. Beyond the government’s own position, it is also important to consider whether transport owners are willing to make the necessary changes and adapt to a structured organization. No authority is enforcing the necessary regulations to achieve this as making the leap from a chaotic situation to an organized and regulated plan will incur extra costs. Q: How is CTS EMBARQ helping implement an improved transport system? A: Our objective is to promote integrated public transport systems. Our research indicates people have four main expectations about travel. The population expects reasonable commute times, personal and road safety, connectivity and open information about mobility options. We help transform institutional and technological plans by working closely with the city government, the State of Mexico and citizens. CTS EMBARQ suggests training the State of Mexico authorities to demonstrate the importance of having an intelligent

and

integrated

mobility

system.

It is important to enable decision-makers to assess and evaluate the expectations of public transport users.

325

VIEW FROM THE TOP

NEW RULES TO SHAPE A BETTER FUTURE BERNARDO BARANDA Director General of Latin America at the Institute of Transportation and Development Policy (ITDP)

326

Q: Known for promoting BRT systems, how is ITDP

to take full advantage of new technologies. We are seeing

addressing the fact that the Metrobús is already showing

major OEMs betting on this technology, indicating the new

signs of overcapacity?

direction the market is taking. Purchasing price remains the

A: ITDP is in favor of BRT systems since they can be quickly

main point of interest for consumers and, accordingly, until

constructed and made operational while costs remain

we see oil prices rise and electric vehicle prices drop, we

accessible and attractive to investors. There are subway

will not see major behavioral shifts. Nevertheless, ITDP is

lines transporting less than 150,000 passengers per day that

keen on implementing electric technology developments

represented a considerable investment, while BRT systems

especially in buses. We understand the advantages they

provide greater flexibility and easier implementation. The

bring to the table, not only in terms of pollution but also

current saturation of the Metrobús lines is a good sign

regarding noise reduction. We personally encourage these

because it shows the urgency for these types of solutions in

solutions although we cannot limit Mexican fleets to one

Mexico City. Having fallen victim to its own success, Metrobús

specific technology.

must now adapt accordingly and resolve emerging issues. Q: Mexico is part of the Vision Zero initiative. How realistic Cities with the best mobility solutions do not employ single

are zero fatalities considering the high percentage of road

transportation systems. They are integrated with subway

accidents in the country?

lines, BRTs and light train networks to name a few. If the

A: The Vision Zero initiative is more of an aspirational

system’s connectivity allows users to reach their destination

goal since it is unrealistic to believe that traffic-related

more rapidly while providing good quality service, the use

fatalities will drop to zero in the short to medium-term.

of privately owned vehicles will drop significantly. Mexico

On average, nine out of 10 accidents could have been

is one of the few countries with fuel subsidies, which

prevented. Improving driver behavior, infrastructural design

incentivizes private vehicle ownership. To counter this, the

and implementing appropriate regulation will support this

government should continue to invest in mass transportation

endeavor.

systems,while increasing the total cost of cars ownership. Society as a whole must realize that traffic regulations Q: How committed is the government to investing in new

are in place for a reason. Even though we have data

mobility systems, as well as improving the conditions of

that shows the importance of reducing speed limits in

existing solutions?

most streets, people seem reluctant to adopt them. We

A: The government has implemented interesting projects,

will hopefully soon develop an advanced safety culture

thought not limited to mass transit solutions, as non-

in Mexico City. It is not unusual to see cyclists putting

motorized transport systems such as Ecobici have also

themselves in harm’s way, despite traffic regulations

emerged. The involvement of the federal government is

trying to tackle this issue. Sanctions consist of mere

crucial. Allocating a percentage of their budget to mobility

verbal warnings. Similarly, pedestrians are accustomed

solutions and participating in local governments' decisions

to jaywalking, exponentially increasing the risk of an

is vital.

accident in spite of pedestrian bridges having been built. This is a complex problem that still needs a proper

Q: Given Mexico’s penchant for using fossil fuel, diesel and

solution. We have already worked with some of the

natural gas, how feasible are electric technologies in the

country’s biggest cities including Guadalajara, Monterrey

near future?

and Puebla, but right now Mexico City is ITDP’s focal

point. Given the hectic environment, cities with lesser

conventional sources in terms of competitiveness. The

Alternative

energy

sources

are

catching

problems can use our solutions as models to help them

right infrastructure must be created if the market wants

prevent future eventualities.

VIEW FROM THE TOP

TACKLING THE TRAFFIC JAM HEADACHE BERNARDO QUINTANA President of Bernardo Quintana Institute

What

are

the

most

important

mobility

and

A: Mexico’s urban planning has prioritized the use of

transportation projects in which the Bernardo Quintana

cars instead of creating functional public transportation

Institute has been involved?

networks, despite the fact that most people in our country

A: Although the Bernardo Quintana Institute has been

are not car owners. The overall solution must involve

operating for a year, its foundation is a 65-year-old family

both infrastructural adjustments and increased public

tradition. My grandfather was founder of Grupo ICA, which

transportation. As fruitful as the Metrobús BRT initiative has

created a think tank to find the most appropriate solutions

been, there is a lot of dissatisfaction regarding the service,

to Mexico’s infrastructure dilemmas. Mexico City’s subway

mainly due to oversaturation. We now see a completely

project was a result of these discussions including Line

collapsed system struggling to keep order and a timely

12. We want to solve problems and we have refocused

schedule, while the demand for its service continues to

on mobility. This sector is extremely important today and

increase. In light of this situation, the Bernardo Quintana

society increasingly demands better solutions. ICA and

Institute has evaluated the possibility of improving the

Steer Davis have worked together on a series of mobility

existing infrastructure with the construction of a monorail.

studies for both public and private transportation pointing

Per kilometer, a monorail requires an investment of

out some of the issues to Mexico City’s government.

US$40 million including train machinery, compared to a

We pioneered the idea of building the city’s ring road

subway that might cost up to US$100 million for the same

an upper level, and our assessment indicates that the

distance. Moreover, profitability and technical viability

dual carriageway, Viaducto, would also benefit from

remain virtually equal. Monorails would free up a whole

modifications.

lane for private transport, with a public transportation system on an upper level.

Q: How does the Bernardo Quintana Institute work alongside the government to enforce the best possible

Q: How can the government facilitate a smooth transition

solutions for Mexico’s growing vehicle park?

in the event of fares being raise?

A: Following the study performed on Viaducto, we

A: The government needs to make users aware that

realized this was one of the most troubled roads and the

if needed, financial support is available. Additionally,

most urgent to correct. Therefore, we are presenting a

mechanisms to prove the user’s financial status would

comprehensive plan to the government with strategies

need to be implemented. A standard ticket on the subway

to reduce traffic. We work hand in hand with the public

should be worth around MX$15 (US$1) and users currently

sector, as well as the Chamber of the Construction Industry

pay one-third of that price. There is no doubt that a fair

and the College of Civil Engineers that also support us to

share of individuals need help, but there are also plenty

reach our goals. The federal government has more than

that could help the system by paying the true value of the

enough technicians with highly competitive skillsets who

fare. The Metrobús is tackling this issue through private

are able to evaluate society’s worries. However, initiatives

concessions and some Metrobús lines across Mexico have

filed by state governments are usually founded on a very

tariffs of MX$30 (US$2). However, the service must reflect

narrow vision and therefore unfounded from a technical

the price. If fares continue to increase but the quality of

and socioeconomic standpoint. Our proposals provide

service does not, then contrary to the desired positive

solid technical foundations that can benefit the entire

mobility effect, users will stop using the service and

region with long-term infrastructure developments.

the vehicle park will grow even faster. Mexico City lacks comprehensive mobility solutions. The government needs

Q: Between infrastructure developments and public

not only to invest in infrastructure developments, it must

transportation initiatives, which solution could have a

also keep future subsidies in mind to cover its operational

greater impact on Mexico’s mobility concerns?

and maintenance costs with public transport fares.

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VIEW FROM THE TOP

INTEGRAL SOLUTION EVOLVING TO DISCOURAGE DRIVING JESÚS PADILLA President of the Mexican Association of Mobility and Transport (AMTM) and Director General of Insurgentes Corridor (CISA)

328

Q: How did CISA move from dealing with owner-operators

because banks granted us a 14.5 percent interest rate

to working with newly formed companies that oversee

which is far higher than the regular requirement. Most

larger fleets?

banks did not believe in our project but all these difficulties

A: In 2003, the government began outlining a plan to

provided the most effective training the company could

establish the Metrobús BRT in Mexico City. The existing

have possibly received. They allowed us to understand

bus Route One on Insurgentes Avenue was in great need

our business in greater detail. Cost structure, escrow

of improvement so we decided to develop our project

composition and payment priorities are all essential

there. One of the main influences in the government’s

elements of our operations.

decision to build on this stretch of the city was knowing an agreement with the transport union could be reached.

After CISA developed a reliable project, the government

We held long meetings and debates for almost two years

became

until reaching a consensus in June 2005, integrating 262

different states. Although they differ from Metrobús,

stakeholders that previously managed 150 buses and 102

they were developed based on our project. Metrobús

midibuses.

lines offer a fantastic level of security and an admirable

interested

introducing

BRT

systems

administrative system, which we hope other providers will After 10 years, our relationship is still strong. Through

continue to emulate. We are extremely careful to protect

centralized management, transparency and dialogue we

the environment, promoting innovation by demanding

provide a secure and regulated service. The Metrobús

improved components for future endeavors.

project now operates with nine companies and over 2,000 partners. CISA is the largest company involved, evolving

Q: How feasible are exclusive bus lanes, considering the

from 60 Metrobús units to a total of 100 BRT vehicles.

existing vehicle park and the available infrastructure in Mexico?

Q: What benefits does CISA offer its partners and clients

A: The only way to modify the situation is by discouraging

now that it has reached greater heights than expected?

people from driving. This will only work with a safe,

A: Mechanisms like the safety standard ISO-9000 ensure that

accessible and reasonably priced alternative, including

our service meets the quality standards that we strive for, as

a place to park before boarding a BRT unit. Additionally,

well as those expected by passengers and the government.

the system needs to connect users with their exact

We are a socially responsible company, committed to Mexico

destination.

City’s community. CISA works on multiple projects that

comprised of differently sized and powered vehicles

benefit people of all ages and backgrounds while ensuring

that cover the whole city. Town planning requires a lot of

that salaries accurately reflect workers’ responsibilities.

investment, and the construction of tunnels and bridges

Alongside standardized processes that safeguard our

to facilitate travel around the city is no easy feat. Moreover,

partners' assets our operators and associates are entitled

the lack of high-quality pedestrian infrastructure in

to a vast range of benefits, creating greater integration and

Mexico prevents people from using public transport. The

stability. Operators understand that our plan offers stability.

driving culture is unlikely to change unless the quality of

They work an eight-hour shift instead of 16 hours, have days

sidewalks and street lights improve to make pedestrians

off, paid sick days and receive profit-sharing. Additionally,

feel safe. For this reason, the Metrobús system is just the

they can protect their family with social security.

first step toward an integral solution that will help the

This

will

require

integral

solution

Ministry of Communications and Transport (SCT) change Q: What does the federal government require of CISA?

the mindset of Mexicans. We can be an ally to authorities

A: Initially, we were asked to show the government our

but we need the government to commit to a long-term

financial and technical capabilities, which were stalled

effort with us.

VIEW FROM THE TOP

LINKING MANUFACTURING SITES TO PROTECT EMPLOYEE RETENTION ELIAS DANA Director General of Transportes LIPU

Q: How has Transportes LIPU contributed to improving

companies in the region. Car manufacturers and suppliers

Mexico’s traffic conditions and developing an enhanced

see themselves obliged to provide their workforce with

mobility solution?

transportation services to retain them. This niche is

A: As road conditions have a tremendous impact on traffic

particularly important to us because 99 percent of our

conditions, especially in school zones, cities have huge

activities outside metropolitan areas are industrial.

areas of opportunity to improve transport. The benefits of mass transportation are evident since single buses may

Q: How does LIPU implement its fleet renewal strategy to

transport as many passengers as 20 or 25 cars in some

increase efficiency?

cases, such that an average of 20 buses can easily replace

A: Our strategy depends on the area, the type of service

400-470 cars, significantly improving the quality of life in

provided and the clients’ requirements. There is no set

residential areas. Although a single bus emits roughly four

policy in terms of renewals. Our buses have an average

times more CO2 than a car, emissions are actually cut by five

useful lifespan of approximately 1 million km and 20-30

considering the number of cars replaced. A few years ago,

years. At times, it may be necessary to renew our fleet for

the Mario Molina Center and Mexico City’s Ministry of the

legislative purposes but we strive for an average bus age

Environment (SEDEMA) carried out studies revealing that

of 5-6 years.

urban areas surrounding schools had the highest pollution levels. A complementary study showed that pollution levels

Our maintenance policy is in line with the manufacturer’s

in schools whose pupils traveled by car were abysmal

manuals and protocols, following a strict calendar. We

compared to those serviced by buses. School buses,

monitor our units to predict and correct future damage.

therefore, work in the interest of the environment.

We use an internal administration development system that automatically schedules maintenance sessions according

We started as a school bus company but have grown

to our operations. Standardizing our entire fleet can be

considerably beyond that mainly in the industrial and

difficult because we use different brands of buses and

corporate sector. The latter is as important as our

engines. While a single scanner can now monitor different

school division, if not more so. Companies have realized

codes from the many brands that LIPU uses, their efficiency

that transport services are highly appreciated by their

depends greatly on the bus manufacturer’s willingness to

employees, ranked at the same level as cafeteria services.

allow the codes to be deciphered by generic devices.

Furthermore, job switching is often fueled by length of commute. Thus the level of employee retention increases

Q: What are LIPU’s expectations going forward?

for companies that offer transportation.

A: The aggressive growth experienced by national industry provides us with an optimistic outlook on 2016

Q: How do you plan to further permeate the automotive

but at local levels, we are more skeptical. To maintain

industry as plants are built in unpopulated locations?

our presence and drive up our profit margin, we must be

A: Settling in unpopulated areas is an industry trend.

more efficient and remain at the forefront of innovation.

For the automotive industry, large supplier networks are

We aim to increase and improve our market presence

formed when carmakers enter the market. This means

by increasing our activities in explored regions, while

that LIPU’s comprehensive transportation systems must

entering new markets. Our focus for 2016 will be on

consider OEMs’ employees as much as their suppliers and

efficiency, directly linked with new technology models.

we expect plenty of demand for our services from new

This includes buses with lower fuel consumption, better

companies. Furthermore, we may have the opportunity

driving practices, more optimal routes, improved control

to establish links between manufacturing sites and

over our fleet, a decreased number of accidents and

nearby towns to supply sufficient human capital for all

enhanced communication with our operators.

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VIEW FROM THE TOP

BILLIONS LOST TO MOBILITY DEFICIENCIES

Alejandro Calvillo Director General of El Poder del Consumidor

Daniel Zamudio Efficient Transport Campaign Coordinator of El Poder del Consumidor

Q: To what extent does El Poder del Consumidor influence

hour has fallen dramatically in recent years, reaching

the transportation segment and its operations?

8km/h now compared to 30km/h in the 1990s.

AC: As a nonprofit, one of our main objectives is to

330

ensure that all users have the best possible transportation

Progress will always lag while other countries are

options, guaranteeing a safe, timely and comfortable

demolishing upper road levels and Mexico continues to

service that creates a positive shift in the city’s traffic

build them. In terms of norms and regulations, Mexico

flow and behavior with the least environmental impact.

is also still a primary destination for inefficient vehicles.

The subway network continues to be the city’s backbone,

The authorities must draw up suitable legal framework to

but we believe BRT systems are the best complement,

protect us from such practice. They should promote the use

because they require a lower initial investment and are

of non-motorized solutions, while keeping the landscape

self-sustainable through private management. El Poder

of the metropolitan area in mind and communicating the

del Consumidor also ensures that Mexico’s vehicle park

State of Mexico and Mexico City.

consists of automobiles that comply with international efficiency and safety standards.

AC: The primary reason behind our mobility issues is the unattractiveness and inefficiency of our public transport

DZ: Public transportation is important for urban mobility,

services, coupled with the lack of mechanisms that

also as it relates to pedestrian and bicycle infrastructure.

discourage car use. Mexico City’s vehicle park is growing

One of the main directives in our campaign is to design

by 200,000 units per year, which creates an impossible

and promote public policies that achieve sustainable

scenario for the future. Over 5.5-6 million vehicles

mobility practices. El Poder del Consumidor diagnoses

operate in the capital’s metropolitan area. That number

the state of the industry to develop studies that provide

is expected to reach 10 million by 2020. This will have

hard data, which can later be used to create appropriate

serious health implications not to mention the impact

regulations.

on public expenses. Mexico is ranked as Latin America’s most troubled country for road accidents and seventh

3.3 million man-hours are lost every year because of mobility deficiencies in Mexico City

worldwide, which will only worsen if the a vehicle park continues growing. Q: What has been El Poder del Consumidor’s primary focuse in terms of road safety? AC: We have been working closely with the Latin New

Q: What environmental, health and economic implications

Car Assessment Program (LATIN NCAP), a FIA subsidiary,

does the transportation segment have on the population?

to define parameters regarding car safety. According to

DZ: In Mexico City, we lose 3.3 million man-hours every

our research Mexico has some of the worst vehicle safety

year because of mobility deficiencies, which converts

standards in the world. Countries like Germany have

to a loss of roughly MX$33 billion (US$2.1 billion). We

policies that demand a minimum of seven safety systems,

use this statistic collected from the Mexican Institute

while in Mexico only seatbelts are mandatory. With

for Productivity to determine the impact of mobility

modifications to the legal framework, this requirement will

inefficiencies on other metropolitan areas such as

increase to three safety systems, which is still far behind

Guadalajara, Puebla, Toluca and Monterrey. Although

international standards. Car accidents are the main cause

people would rarely use time saved on their commute at

of death for children between 6 and 14 years old. Although

work, the extra time has a direct effect on the quality of

there are obvious priorities regarding road structure,

life of the population. Average vehicle speed during rush

vehicle safety is equally important.

VIEW FROM THE TOP

SHARED SCOOTERS TURN HEADS IN CAPITAL CITY

Alejandro Morales Co-Founder of Econduce

Eduardo Porta Co-Founder of Econduce

Q: How did you build Econduce’s shared-use business

A: We thought it would be a more popular option because

model given Mexico’s preference for car ownership?

it allows customers to pick up a scooter in the center of

A: Based on our background in electric vehicles and

the city, for example, and leave it wherever they want, even

having seen the motorbike market evolve since 2011, we

if there is no station nearby. Although some customers

realized that people were looking for alternatives to sitting

use the Bótalo service every day, most are more familiar

in traffic on a daily basis. The concept of shared economy

with the Ecobici model where the unit is returned to a

is changing many industries including the mobility sector.

station post-use. Our customers can leave the scooter

The development of sustainable intelligent cities is also

anywhere in the Econduce area and we will pick it up

going to have a significant impact, obliging governments

for an additional fee of MX$50 (US$3). We designed this

and

service mostly because of the weather. Obviously, there

broader mobility plans that promote responsible private

is an inherent risk in this service but we ensure our users

vehicle use. These factors led us to the idea of a shared

understand that the scooter is their responsibility until we

scooter business model. Scooters are a great alternative to

pick it up.

implement

efficient

transportation

systems

Mexico City’s traffic and their size makes them extremely practical.

Q: What is the process for reserving and using a scooter? A: Once customers take the orientation course, they sign

Ecobici was the best example we could follow. The city has

a contract and receive a radiofrequency card that allows

gradually embraced the cycling culture, there is new and

them to use the scooters. They can reserve a unit through

better infrastructure and mobility regulations have been

an app and pick up the unit assigned to them at a station.

put in place. Econduce is following in those footsteps,

If they had not reserved a unit, the station assigns the unit

promoting a responsible mobility culture among all users.

with the most battery life. Customers use that same card

We offer free orientation programs for all our customers

to start the scooter.

in which we explain how the scooter works and give them tips about safe driving.

Our electric system requirements are straightforward. The units have standard plugs that fit in any outlet and the

Q: How did you define the payment plan for your services.

user simply has to unplug the unit and plug it in again

Has it proved realistic in terms of running costs now that

after use. Initially, we approached large companies like

the plan is operational?

GE and Schneider Electric to help us with the electrical

A: We implemented our pilot program with defined initial

design for the scooter but in the end we developed the

prices, which is gradually changing as we learn more

entire station ourselves. We also designed our own fleet

about the business. The orientation is completely free of

management system to know how many scooters are in

charge. We also cover all the maintenance, charging and

use, the routes users are taking and the history of each of

insurance services. We know how much we have to make

our customers.

per user to cover costs so we made our business plan based on that strategy. In terms of maintenance costs,

The entire infrastructure belongs to the company. In mid-

our scooters come from China and there are no official

2015 we had 14 stations throughout the city, and having

shops for electric vehicles yet. Therefore, we manage our

received an order for 100 units, we closed the year with

own maintenance and repair operations, importing all the

30 stations. As a company that began with a fleet of 50

material we need from our vehicle supplier.

scooters and 1,000 customers, we have ambitious goals. We see Econduce as a solution for large and medium-

Q: How popular has the company's Bótalo service been

sized cities. We want to close 2016 with 500 units and

among Econduce's customers?

right now our priority is Mexico City.

331

VIEW FROM THE TOP

TECH ENHANCES CARPOOLING NETWORK ADVANTAGES JOSÉ DAVID MONTERROZA Country Manager México of Wheels

Q: How did Wheels decide Mexico was ready to embrace

among friends and colleagues. We also found that

a new approach to mobility?

many of our competitors offered their services as

A: Forbes Magazine published an article in 2015 labeling

closed communities within other organizations. As a

Mexico City one of the 40 cities needing a paradigm

result, we decided to develop Wheels as an open social

shift in its mobility strategy. When we built Wheels

network, making it more efficient by covering a broader

as a free platform to improve global mobility Mexico

demographic.

was a natural target for the service. Mexico City has a 332

population of over 20 million people but it is also a place

As an extra push, we decided to include taxi-sharing

where private vehicles are used inefficiently. According

services for people who either did not have a car to

to the UN, almost 80 percent of vehicles used daily in

offer or who did not know anyone to share taxis with.

the city are only transporting their driver, meaning that

We offer courses so that people can learn more about

31 million empty seats are moving across the city per

carpooling and we encourage organizations to create

day. We believe the market has huge potential.

a username for each of its employees. We are wellaccepted in Mexico, and some clients have even referred

Q: What advantages does carpooling offer over other

us to companies that are interested in embracing this

mobility alternatives?

culture.

A: Currently, public transportation demand exceeds supply. So when people start sharing their vehicle they are

Q: Since Wheels does not charge users, how does the

automatically helping improve the city’s mobility situation.

company’s business model work?

As fewer cars move through the city, the average speed

A: For our service to be completely free of charge, we

and functionality of roads increase.

The main obstacle

work with companies and sponsors that have a strong

to carpooling is that people do not want to share their

social responsibility and that want to make a bigger

vehicle with someone they do not know. However, Wheels

contribution to the country’s mobility. These sponsors

offers a service through which you can connect with

finance our operations for a certain period. In return we

people you already know. As on any social network, you

offer advertising spaces for their brand throughout our

choose your friends and the private groups that you want

activities. That way our users know that while Wheels is

to be a part of. Carpooling was already a social network,

helping them improve their mobility problems, we are

we only provided a technology completely free of charge

doing so with the support of these companies.

to enhance the service. Q: How do you project carpooling will develop in Mexico Having detected the need, we reviewed whether there

in the long term?

were other companies already providing the service. The

A: We expect people to be reluctant to embrace

competitors we identified were formidable companies

the service at first but most commuters are sick of

but most had been successful in countries without

the transport situation, which motivates them to try

security concerns. We made some adjustments and

new solutions. Latin America has close to 500 million

created Wheels as an incentive for safe carpooling

inhabitants, who account for almost 944 million journeys per day and represent a US$180 billion annual investment

31 million empty seats are moving across Mexico city every day

in mobility. A large part of this investment is allocated to road infrastructure that is unable to support the vehicle park. However, if we start using those resources for better mobility projects, we could guarantee quality conditions for the users.

VIEW FROM THE TOP

REFINING HOW WE NAVIGATE CITIES RICARDO WEDER CEO Mexico and Global Head of Growth at Cabify

Q: How does Cabify’s service stand out from other

We began offering services under a new category called

applications such as Uber, Easy Taxi and Yaxi?

CabiFLY, providing jets, planes and helicopters, having

A: Over 65 percent of our users did not use taxis before

identified a need among corporate customers for more

Cabify, citing a lack of comfort or security. Now society is

flexible and comprehensive transport options. We will

beginning to realize that using driver services like Cabify is

introduce a new category in 2017 to help companies

cheaper than owning a vehicle.

transport products or documents.

Our offering for both corporate clients and private

passengers differentiates us from competition. Within

governments and new players to develop an improved

the corporate segment, we can offer approximately 40

mobility infrastructure in Mexico?

percent in cost reductions and Cabify México can also

A: The inherent cultural preference for vehicle ownership

invoice customers directly, instead of relying on the

lingers in Mexico, and despite successful initiatives such

drivers. Our individual users benefit from being charged

as EcoBici, the government has not yet assigned enough

by distance instead of time, resulting in equal costs for

resources to satisfy mobility needs. Developing innovative

trips of a similar distance, regardless of the weather or

technology, sharing information and opening public policy

traffic conditions. We absorb those costs even in areas

decisions to all stakeholders, could improve this and vastly

prone to heavy traffic, with just an additional charge of

enrich quality of life across the country.

What

opportunities

have

you

identified

for

MX$20 (US$1) during rush hour. On top of our competitive rates, customer safety is the company’s number one

Companies like Cabify help reduce the vehicle park and

priority. All our units have comprehensive insurance for

are employment generators. Furthermore, we pay taxes,

the vehicle, the driver and the passenger. Finally, Cabify is

which was commonly unheard of among public transport

the only service in our industry that has a customer service

companies. The regulations that define our business model

call center operating 24/7.

were in dispute recently but citizens expressed their mobility rights by supporting our operations. Cabify has

Q: What are the most interesting mobility solutions that

always been a legal company, constituted in Mexico and

Cabify offers?

part of an industry of private drivers and limousines that

A: We can provide an integral solution for everything from

has existed for four decades. Nevertheless, should the

buses to armored cars. Our main service categories are

government decide that companies like Cabify are subject

Cabify Lite, which provides medium-sized cars, Cabify

to certain regulations, we are open to discuss them.

Executive for luxury cars and Cabify Access, launched as a way to serve customers with specific mobility

Cabify is growing at a rate of 20.5 percent per month, but

requirements. Around 7.7 percent of Mexico City’s citizens

we still have a long way to go. Our plans are to expand

have a disability, so Cabify Access vans are refurbished

further across Latin America, as well as into cities like

and the drivers undertake a strict training process and

Puebla and Guadalajara. Cabify is already the market

are certified by the National Human Rights Commission

leader in Queretaro and we have seen incredible results

(CNDH) so that we can guarantee the best service for

with our latest venture in Monterrey. In terms of diversifying

passengers. Of the people with disabilities in Mexico City,

the business, car sharing and carpooling still present a

45 percent have missed out on a part of their education

huge opportunity for us. We are also exploring the idea

due to insufficient mobility infrastructure. Cabify is working

of a tourist-centered approach to aviation in Mexico to

with nongovernmental organizations to develop more

generate a new entertainment industry on top of our

initiatives that provide children with disabilities with a way

CabiFLY division, which in turn would create more jobs and

to reach their schools.

greater mobility integration.

333

VEHICLE SPOTLIGHT

334

SCANIA LONG DISTANCE R480 LA6X4 Scania is keeping truckers in it for the long haul with its latest vehicle, a combination of top technology and high efficiency that also makes a point of prioritizing driver's comfort. The standard Scania DC13 101 Euro 4 engine in the R480 has a maximum power of 480hp at 1,900rpm, placing its upper ceiling of torque at 2,400Nm from 1,000 to 1,350rpm and its top braking power at 357hp at 2,400rpm. With four valves per cylinder, a turbocharger, intercooler and Scania’s SCR system, the R480 complies with Euro IV regulations. The owner can choose to upgrade the engine to the DC13 111 Euro 5 to comply with stricter environmental standards. The 12-speed automatic

OPTICRUISE

GRSO905R

transmission

featured in this model also has two ultra-slow gears plus two reverse speeds, coupled with a Scania R4100D retarder with 4,100Nm braking capacity. Supporting the engine and the transmission, the R480 has an electronic braking system and brake disks in all its wheels. The R480’s rigid chassis is adapted to long distances with a front 2x32 leaf spring parabolic suspension with a 7.5 ton load capacity. The rear pneumatic suspension has an electronic level control of 21 tons. Overall, the unit has a maximum traction capacity of 7.8 tons. In terms of fuel and efficiency, the truck has a 440L tank on the left and another 330L tank on the right, plus a 50L AdBlue diesel-exhaust fluid tank with an optional 100L double tank. The long distance R480 LA6x4 has a CR19H cabin, designed to offer the highest safety, visibility and comfort standards, and features seating with pneumatic suspension, a dashboard with an onboard computer and digitally controlled air conditioning, in addition to a complete bedroom. The truck has H7 halogen headlights with integrated LED daylight and LED rear lights. The R480’s auxiliary safety features include lane-departure warning, adaptive cruise control, advance emergency braking and Scania Communicator. Also included is a monitoring package for the truck’s first 10 years. This adds up to a lot of truck, and a sound investment for companies who wish to add a sustainable option to their fleet.

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VIEW FROM THE TOP

EVERYONE’S PRIVATE DRIVER SHIFTS GEARS FRANCISCO SORDO General Manager Mexico and the Caribbean of Uber

Q: How successful has uberPOOL been given recent

technology. We trust that positive regulations will

environmental conditions and traffic regulations in

continue to be implemented in the interests of urban

Mexico City?

populations as the government ensures access to

A: In only three years, Uber’s mission went from being

technology that improves people's quality of life.

everyone’s private driver to the much more ambitious

336

vision of improving cities around the world. Our goal is not

Q: How does Uber’s relationship with OEMs and

just to offer an accessible, safe and reliable transportation

dealerships help obtain cars at more accessible prices for

option at the press of a button but also to reduce

Uber drivers?

the number of private vehicles on the street. This will

A: Uber has a close relationship with dealerships and

eventually lead to less traffic and less air pollution.

distribution groups at a local and national level. This allows us to engage in agreements that provide more accessible

We released uberPOOL in line with our strategy to

conditions to entrepreneurs that want to work with Uber.

improve cities wordwide. It is an innovative product that

Nissan, for instance, said that 10 percent of its sales in 2015

allows people with similar destinations to share their ride.

were the result of a support plan for Uber drivers.

Commuters benefit from lower prices and vehicles are more space-efficient. This service is now available in three

Q: How is Uber coping with excessive demand for drivers

cities including Guadalajara, Monterrey and Mexico City.

as the company grows and how can it improve the recruitment process?

One in every four users in Guadalajara chooses uberPOOL

A: More people are applying to join Uber as drivers,

as their preferred service and although not all uberPOOL

allowing us to cover our increasing demand. Our

trips are shared, 50 percent of users were matched

technology helps us adapt to the market at all times and

with someone going in the same direction. In Mexico

our driver selection process is constantly being tightened

City, uberPOOL has accounted for more than 3.7 million

to implement stricter security filters that ensure passenger

carpools in the service’s first five months. This represents

safety. Before being cleared, all drivers must prove they

savings of 6.8 million driving kilometers.

have a clean criminal record for at least three months and they have to do a series of tests.

Q: How have mobility regulations evolved and impacted Uber’s position in the Mexican market?

The company also carries out random drug testing. Our

A: Uber’s growth is dependent on market demand.

best quality control is our shared rating system where

Many cities are now requesting our services, which

users can grade drivers, while drivers also have the option

has contributed to our local growth. We started 2016

to rate their clients. Uber has a customer service team in

operatingin nine cities and we now operate in more than

charge of revising all comments after every ride. They help

24. At the end of 2015, Mexico was ranked third globally

us detect unusual or inappropriate behavior and apply the

for most Uber rides having reached Aguascalientes,

necessary corrections.

Chihuahua,

Ciudad

Juarez,

Cuernavaca,

Hermosillo,

Merida, Mexicali, Saltillo, San Luis Potosi and Torreon.

Q: What does Uber’s expected capitalization of over US$60 billion valuation signal to potential investors in

The company supports any regulation that benefits

Mexico?

consumers and promotes their right to choose their

A: The company’s market value reflects our global growth

preferred transport solution. We also encourage any

and our development in number of users, partner-drivers

legislation

and new locations benefiting from our service. In the first

that

supports

entrepreneurial

and

self-

employment options such as those offered by Uber’s

quarter of 2016, Mexico reached 1.2 million users.

Q: What strategies has the company implemented to

have a huge chance for success. The implementation of

push the boundaries of innovation and customer service?

all our services from uberBLACK to uberPOOL is proof

A: One of Uber’s catalysts is continuous innovation, offering

of this. Our next challenge is to bring uberEATS to the

users service beyond what they are familiar with through

city. Mexico has a strong and varied gastronomic culture

the app. We look for new ways to surprise our audience,

so the natural step for Uber is to move from transporting

creating magical, unique and interesting experiences

people to delivering food to our clients wherever they are.

through alliances with other companies, brands and organizations. uberDONAS is an example of how the company creates products and services completely out of the ordinary. We delivered 120,000 donuts through this service and our overwhelming success resulted in 400 percent more ride requests than any normal Thursday.

Mexico ranked third globally for Uber rides in 2015

The initiative also had a positive social media impact for Uber and Krispy Kreme, generating over 5,000 Instagram publications. We have held over 30 multicity campaigns in the country plus many more local activities with several collaborators. This maintains the brand’s dynamic and innovative status and helps us get close to customers.

337

Q: How likely is it that projects similar to uberCHOPPER will be introduced for tourists? A: The uberCHOPPER project has been an effective way of using technology to connect tourist sites with an experience that highlights the Mexican spirit. We implemented uberCHOPPER in Guadalajara during the Mexican Independence Day festivities with excellent results. For one week, couples could travel to Tequila by helicopter, and experience hovering over the region. After the tour, users were driven in uberSUV to a buffet and a cultural ride around the distillery region. The initiative saw high demand and it was the longest uberCHOPPER service in Latin America. We only instated uberCHOPPER as a marketing strategy in Mexico rather than a fixed product. We would eventually like to establish it as a tourism service because the potential for these services in Mexico is enormous. Uber is perhaps one of the companies with the strongest local strategies in the world. Even though the experience is practically the same in the more than 470 cities we operate, we offer specialized services according to the needs of the customers in each of them. That is why we have uberMOTO services in Asia and uberCHOPPER solutions

the

Middle

East.

Therefore,

will

undoubtedly see new and exciting products and services in Mexico’s cities. Q: What specific services is Uber planning to bring to Mexico City in the near future? A: Given its size, diversity and dynamism, Mexico City is the perfect destination to launch innovative products that

VIEW FROM THE TOP

BLENDING INTO EFFICIENT BIODIESEL PRACTICES ABRAHAM ESPARZA Director General Mexico of Biofuel

338

Q: To what extent has biodiesel penetrated the Mexican

imported and the other 48 percent is manufactured here.

market?

Such quality is thanks to our experienced R&D department.

A: Biodiesel blends have not spread in Mexico the way

At this point, diesel in Mexico is mainly produced with a

they should, since national production has not been of the

sulfur content of 500ppm as next to no national refineries

best quality due to certifications. However, many countries

have the capacity to reduce sulfur levels to under 15ppm.

worldwide are using it more in cars, trucks and buses. The

Though diesel with 500ppm would not be accepted north

US is increasingly using biodiesel as many states such as

of the border, only Mexico City, Monterrey and Guadalajara

California heavily regulate CO2 emissions. Many US truck

have access to low-sulfur diesel.

service stations in large cities have pumps that contain 5-20 percent biodiesel and a significant number of US

Q: How can you generate awareness in Mexico about the

operators favor its superior performance.

advantages of biodiesel blends? A: It is necessary to create a culture that protects the

Mexican truck operators must refuel in the US and are

environment and encourages the use of biodiesel. We

therefore using biodiesel blends without noticing but the

must also generate awareness of the volume of CO2

penetration of biodiesel blends into the Mexican market

emissions generated by trucks and their environmental

has been slow because of misconceptions about the fuel.

impact. We see reticence among transport companies.

Many wrongly believe that it clogs engine filters. Biodiesel

Many people still have a negative perception of biodiesel,

actually cleans diesel residues in tubes and although

unaware that it is simply an ultra-low sulfur diesel. Through

these can accumulate in filters and clog them this can be

tests and demonstrations, we are gradually shattering

prevented with a simple filter change.

these misconceptions. We performed a series of tests for a large carrier that operates long, international distances.

Q: What are the main advantages that biodiesel offers

The carrier was fearful of the damage biodiesel might

over regular diesel?

cause its brand-new equipment. We convinced the client

A: Biodiesel blends emit lower gas levels throughout the

that biodiesel would have no negative impact on its

vehicle’s usable life and have greater performance. A major

equipment and over time, the client noticed the trucks

soda company tested a 30 percent blend and found it

used increasingly less fuel during trips.

enhanced performance 7-11 percent. Biodiesel blends also have low sulfur content, an added advantage for engine

We are developing proposals for two major companies with

valves, improving performance and durability.

extremely large and complex logistics processes. These companies are also dependent on public perception, in

Most manufacturers in the US recommend the use of

which sustainability practices and an environmental process

a 20 percent (B20) biodiesel blend. US carriers have

play an essential part. Large companies are realizing that

promoted the use of biodiesel blends for the past 10

biodiesel blends are cheaper and that environmental

years, as approximately 70 percent of trucks can use up

gains are significant in Mexico. We did a study for a large

to B20. Some trucks can even use 99 percent but this is

beer company and proved it could have reduced its CO2

rare and would require several engine modifications that

emissions by 17 percent in 2015 only by using B20. Biodiesel

are unnecessary for blends with smaller biodiesel content.

is gaining popularity as an alternative fuel especially in light of the environmental problems that Mexico City is facing.

Q: What differentiates the diesel you commercialize from

To address these problems, President Enrique Peña Nieto

others in the market?

generated legislation targeting a reduction in CO2 pollution

A: Our biodiesel blends have higher quality than any

of 30 percent by 2030. We believe that biodiesel blends will

other manufactured in Mexico. Fifty-two percent of it is

be used with increasing frequency to tackle air pollution.

VIEW FROM THE TOP

REFORMS LEAD TO STRONGER NATURAL GAS PARTICIPATION DESSIRE COLINA Director General of Promotora Energética E3

How

can

Promotora

Energética

support

the

Q: How do Mexican safety regulations for natural gas

development of the automotive market?

compare to international standards used in more mature

A: Our core business is to develop compressed natural gas

markets such as Argentina or the US?

projects for automotive and industrial applications. Clean

A: Promotora Energética E3 uses safety standards based

Energy Compression is a leading manufacturer of these

on international regulations that have stricter guidelines

solutions. The company has developed an innovative oil-

than those required by Mexican law. Local regulations still

free design that makes gas cleaner, preventing oil particles

have several loopholes that we avoid by using international

from entering the system and damaging the equipment’s

best practices. Safety concerns and public perception

performance and usefulness. Promotora Energética E3 is

are particularly important in Mexico, where natural gas

Clean Energy Compression’s exclusive distributor in Mexico.

compression stations tend to be associated with LPG, a

We are proud to say we are working in 60 percent of the

completely different product that requires its own safety

natural gas stations in the country. We are also working

guidelines. We have been actively participating in the

with a wide network of local partners to complement our

natural gas compression regulations to improve the norm

offer with additional services. Mexico's vehicle park is over

through the Mexican Natural Gas Association, taking

35 million units, which opens business opportunities related

advantage of our team’s expertise in this sector.

to vehicular natural gas. Q: To what extent will Mexico’s plan to expand its natural gas pipeline network affect your business and how are you adapting? A: The government’s ambitious five-year plan to expand the national pipeline system to all Mexican states will directly affect our virtual pipeline segment. We believe virtual pipelines will remain important as the national

Promotora Energética participates in the conversion of 10 percent of the 11,000 traditional gas stations in Mexico

network will not cover all regions in the medium term. To cope with these changing conditions and take advantage

Q: How was your experience with Natgas in Queretaro,

of the Hydrocarbons Law that allows multimodal gas

after opening the city’s first natural gas station?

stations starting in 2016, we are diversifying our portfolio

A: Natgas is a success story in the sector, as well as an

by strengthening our share in automotive applications.

example of collaboration between private and public

Increasing the availability of vehicular natural gas in the

entities. The initiative emerged as a joint effort to improve

country will not only improve the sector’s competitiveness

Queretaro’s air quality while offering citizens an affordable,

but also have a positive impact on air quality in cities.

safe and more sustainable mobility option. Natgas’ first compression station uses Clean Energy Compression

There are multiple efforts between the government and

equipment sold and installed by us, including aftersales

the private sector to promote the use of natural gas-

services. The first station's capacity was oversubscribed

fueled vehicles together with investment in multimodal

in six months leading to the opening of a second service

stations, which must be supported by regulations. There

station with five compressors. Most of the natural gas

are still areas of uncertainty that need to be addressed to

demand came from Red Q buses, a public transportation

allow vehicular natural gas to reach its full potential. With

system opened by Queretaro’s government. Natgas is

this in mind, we expect to participate in the conversion of

already planning to open two more stations in the city

at least 10 percent of the 11,000 traditional gas stations

and is considering the possibility of expanding to Celaya,

in Mexico.

Guanajuato.

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VIEW FROM THE TOP

ETHANOL REPLACES CARCOGENS IN GASOLINE STEPHAN WITTIG Chief Strategy Officer of Grupo Báltico

340

Q: How did Grupo Báltico devise its growth strategy since

Mexico passed a law for the promotion and development

leaping into the energy sector from food and beverages ?

of bioenergetics in 2008, raising the legal framework.

A: The company has grown by reinvesting 90 percent

The next milestone for the sector was PEMEX’s tender

of its profits in new projects and processes. We began

for ethanol suppliers that complied with minimum

producing 10,000L a day in small distilleries but increased

percentages established by the Mexican Institute of

our production considerably by following our reinvestment

Petroleum. The auction raised little industrial interest in

strategy. When developing the company’s five-year plan we

2009 due to the low prices offered. The failure of this

started looking for other suitable segments as possibilities

tender encouraged us to acquire a fleet of flexible-fuel

in the alcoholic beverages industry were limited.

vehicles to capitalize on investments made in fuel-grade ethanol equipment.

Brazil is home to a successful ethanol market developed for energy purposes in the 1970s, To counter increasing

All our vehicles have reached over 180,000km running on

gasoline prices ethanol emerged as an alternative because

100 percent anhydrous ethanol without any fuel-related

it was already being produced in the country. The Brazilian

problems. We want to offer other drivers the same option

government established a partnership with the automotive

to choose between gasoline or ethanol. We suggest users

industry to start producing flex-fuel vehicles that could run

start with a 12 percent blend and gradually increase it to

on gasoline or any blend containing up to 85 percent ethanol.

50 percent, which has provided excellent results for taxi

The US also successfully started a program to phase out

drivers in Veracruz, for example. Oxyfuel, the commercial

methyl tertiary butyl ether (MTBE) from its gasoline in 2007

name for our fuel-grade ethanol, provides 113 octanes, 26

when MTBE was discovered to be a carcinogenic agent.

more than regular gasoline, optimizing the car’s conversion

Now gasoline in the US has 10-15 percent ethanol content.

system. Oxyfuel is not only a renewable fuel but is also carbon neutral, as the crops used to produce the alcohol absorb the CO2 that is emitted during the combustion

Mexico consumes 120 million liters of fuel per day

process. We want to offer customers a more efficient fuel that can extend the life of their vehicles. Oxyfuel’s higher octane content offers our clients 30 percent more horsepower using the same amount of fuel. Q: How does Grupo Báltico plan to compete against other hydrocarbon producers in the fuels market? A: We are looking for investment to finance and expand our network of service stations to dispatch Oxyfuel

Q: What challenges do biofuels producers face in Mexico?

across the country. The Energy Reform has helped us

A: Fuel-grade ethanol needs to be less than 1 percent water.

raise awareness and created momentum for initiatives

To enter the energy sector we acquired new technologies

like Oxyfuel. At a national level, we expect a new set of

that guarantee our final products comply with legal

regulations allowing us to increase the blend of ethanol

standards. We integrated Molecular Sieve equipment,

used in gasoline. Our ethanol demand projections are 200

which is a cutting-edge technology that separates water

million liters per year, which could rise to 3 billion liters if

from alcohol molecules in its gas phase.

a 6 percent ethanol blend for all national gasoline is taken into account. Using higher blends such as the 85 percent

In Mexico, we consume around 120 million liters of fuel

in flex-fuel vehicles could be even more positive for the

per day, making it an attractive segment for us to target.

Mexican agricultural industry.

VIEW FROM THE TOP

PIONEERS SUPERCHARGE THE ELECTROMOBILITY MARKET JORGE SUÁREZ Commercial Manager of Electromobility and Urban Transportation at Volvo Group México

Q: How committed is Volvo to the development of electric

In 2015, Volvo signed a Memorandum of Understanding

and hybrid technology?

(MOU) with Mexico City’s government to advance

A: Volvo has engaged in electromobility since the early

electromobility in the city. We expect that our hybrid

1970s, making us industry pioneers. During the 1990s,

technology will be the first to be implemented, once

even before environmental awareness topped the agenda,

operators and users become accustomed to the idea of

Volvo developed its first hybrid system, the Environmental

innovative technology providing a better service, takes

Concept Bus. As energy and environmental perceptions

care of the environment and minimizes noise pollution.

began shifting, especially after the Kyoto Protocol, the push

341

for these products led to innovations in transportation and

Q: What are the challenges related to charging station

energy consumption. Hybrids were the first generation

infrastructure and how have you overcome them?

of products in electromobility, recovering energy during

A: Our biggest challenge so far has been building the

braking and storing it in the vehicle’s battery. This

infrastructure as it depends heavily on the city, its

technology required vehicles to operate under stop-and-

design and its legislation. Supercapacitors, an emerging

go conditions, making buses and delivery trucks the two

technology, have the advantage of potentiating energy

major targets for electromobility. The biggest challenge

but they lack retention capacity and have very short

has been extending battery life, while achieving a balance

life spans. Therefore, multiple supercapacitors would be

between the vehicle’s weight and its power storage. Rising

needed at each high-powered station for every bus.

demand pushed Volvo Buses, with the help of the Swedish Energy Agency, to embark on hybrid vehicle development.

As a solution, Volvo installed high-powered batteries in its hybrid vehicles adapted to store 5kWh. Our electric

Q: To what extent have Mexican authorities supported

hybrids are adapted with 9kWh batteries, while our purely

Volvo in the implementation of this type of technology

electric vehicles have four batteries of the same capacity.

in Mexico City?

The average bus route in Mexico City is 15km long, short

A: Cities must have multidisciplinary teams that understand

enough for buses to reach the end terminal to charge for

our technology, bus operations, infrastructure and rolling

three to six minutes while passengers board at the terminal.

stock. We have to work closely with the city government,

We also decided that rather than selling the batteries, we

which has not been an easy task as these types of matters

would sell their usage. Volvo provides all the necessary

must be consulted with seven departments, whose

maintenance and replacements. The Volvo package

opinions are rarely the same across the board.

includes a high-performance hybrid bus, a battery and maintenance contract, as well as our telematics service.

We have a consortium with ABB and a planning consultancy, IDOM, to develop a bus line in downtown

Collaborating with Siemens and ABB led us to develop a

Mexico City. The city government has shown interest in

charging station encompassing a transformer connected

this, though we must still build a case and be open to

to the high power line. Since a pantograph is only needed

alternative procedures and technology. The Metrobús runs

for the charging process, we minimize costs and risks by

a highly competent operation, so we are flattered that

installing them at each station, rather than on each bus.

they have shown interest in our products. Mexico City is

This allows us to minimize infrastructure investment. The

one of the most important cities in Latin America for us

synchronization between bus and terminal presents the

and we want cities to implement these solutions because

biggest challenge, apart from deciding the location of

they want to improve quality of life and the environment.

the charging stations. Their weight and size have to be

Solutions need to balance out both sustainability and

considered in advance, in addition to any special permits

profitability.

and terminal design requirements.

DOING BUSINESS IN MEXICO

How easy it is to do business in a country is a crucial factor for foreign entities when deciding whether to invest in the market. It is the big picture that companies look at before taking any concrete steps. The panorama taken into consideration includes rule of law, investment and expansion opportunities, feasibility of export operations, infrastructure, trade agreements and domestic supply chains. Mexico offers quality business opportunities due to several conditions that include a qualified work force, the existence of a strong supply base and numerous trade deals. But there are several areas that need to be addressed, including corruption, inefficient government bureaucracy, tax regulations and access to financing.

This chapter focuses on the perspective of industry insiders and the domestic companies that help foreign businesses enter the market, presenting their views on the actions the federal and local governments must take to improve Mexico’s attractiveness as an investment destination.

343

CHAPTER 13: DOING BUSINESS IN MEXICO 346

VIEW FROM THE TOP: Mario Hernández, KPMG Mexico

348

VIEW FROM THE TOP: Manuel Nieblas, Deloitte Mexico

Alberto Torrijos, Deloitte Mexico

348

VIEW FROM THE TOP: Adrian de la Garza, Banco de México

351

VIEW FROM THE TOP: César Gutiérrez, INDEX National

352

VIEW FROM THE TOP: Akira Yamada, Ambassador of Japan in Mexico

353

VIEW FROM THE TOP: Luis Rojas, COFOCE

355

VIEW FROM THE TOP: Héctor de la Garza, eFactor Network

356

VIEW FROM THE TOP: Víctor Manuel de la Cruz, Bancomext

358

VEHICLE SPOTLIGHT: Volvo S90

360

INSIGHT: Josef Koberl, Comerica Bank

361

INSIGHT: Federico Delgado, HSBC Mexico

362

VIEW FROM THE TOP: Alex Mahoney, Biz Latin Hub

363

VIEW FROM THE TOP: Miguel Jáuregui, Jáuregui y Del Valle

364

INSIGHT: Angélica Raya, UPIIG at IPN Campus Guanajuato

365

VIEW FROM THE TOP: Lewis Adams, Heidrick & Struggles

366

PROJECT SPOTLIGHT: Autodrome Hermanos Rodríguez

345

VIEW FROM THE TOP

VAT TAXES MEXICO’S COMPETITIVENESS MARIO HERNÁNDEZ Leading Partner of the IMMEX Segment at KPMG Mexico

346

Q: As the Tax Reform directly impacts the IMMEX segment,

companies are required to pay VAT, despite the fact that it

what effect has this had on the automotive industry?

could dramatically increase costs for investors. To soften

A: The benefits the government granted in the past

the impact, Mexican authorities delayed the enforcement

have significantly improved the quality and quantity of

of these practices by one year, allowing companies to

foreign investment. Prior to 2014, the effective tax rate

brace themselves for the change. After long discussions,

applicable in Mexico for some of the entities in the supply

the Mexican government devised a new plan. Companies

chain was internationally competitive at 17.5 percent.

can now obtain a reliable taxpayer certification if they can

KPMG prepared a comparative study in 2012 to pinpoint

produce documentation that demonstrates their good

the differences between Mexico’s IMMEX tax regime and

practices, including the compliance of their suppliers as

comparable countries such as Costa Rica, China and

part of an indirect auditing process. This certification

South Korea, which showed that most countries granted

program gives companies the option to open a tax

several years of exemption to companies that allocated

credit that remains valid until eventual exportation of

resources to manufacturing processes. In some instances,

goods. If such stock is not exported, then companies

countries were spared tax payments over five-year spans,

will effectively have to pay the VAT. So far, around 3,500

followed by tax rate reductions to 50 percent for the

companies under IMMEX, including the most important

following years. The study taught us that, even during its

manufacturers, have chosen to adopt the certification

most successful years, Mexico’s IMMEX program was not

program and are responsible for around 94 percent of all

competitive enough. To further aggravate matters, the Tax

temporary imports.

Reform modified Mexico’s tax rate to 30 percent. Although an effective tax rate is not the sole deciding factor as to

Mexico still struggles with this approach, as goods bound

whether a company invests in a foreign country, it certainly

for manufacturing processes can get lost in the market.

affects the competitiveness of Mexican automotive

The way in which the IMMEX program is handled enables

producers.

companies within IMMEX to trade goods between each other, making it almost impossible to efficiently track

Q: What issues for foreign companies has KPMG seen as a

these transfers. If you include VAT evasion, the result is

result of the Tax Reform?

a flagrant negative competence for the Mexican market.

A: The tax environment is changing worldwide and Mexico is no exception, which will directly affect the automotive

Q: What can companies do to ensure they legally opt for

industry. The most notable outcome of the reform is

more favorable customs payments?

destined to be companies deciding not to settle in Mexico.

A: Before NAFTA came into effect, the government gave

In contrast, countries like Guatemala and Honduras

companies a 10-year warning to prepare themselves for

have established IMMEX programs similar to ours and

change. The idea was to either incentivize companies to

are creating mechanisms that will attract the foreign

transition to NAFTA-based suppliers or to develop the

investment that Mexico is forfeiting.

market in Mexico but the efforts were fruitless. Once NAFTA was fully implemented in 2004, and in response

An additional issue in Mexico relates to the value-added

to the realization that companies had failed to adapt

tax (VAT). Before 2014, companies were authorized

effectively, the government implemented the Sectorial

to import goods on a temporary basis. Raw materials,

Promotion Programs (PROSEC). This program grants

for example, could remain within the country for 18-

companies involved in manufacturing processes a fixed

36 months as long as they were eventually exported

0-5 percent import duty rate if purchasers can prove that

as part of a finished product. Now that the law has

the imported goods cannot be obtained in Mexico. In

changed, temporary importation is no longer exempt and

addition, “Rule Eight” of the General Law of Import and

Export Taxes allows a company to avoid paying duties

percent minimum requirement imposed in Mexico. Failing

by proving that the imported goods are destined to

to comply with this might lead to any entity’s allowance to

manufacturing processes. Through PROSEC and multiple

temporarily import goods being revoked. The willingness to

free trade agreements, companies rarely pay duties on

expand the industry is tangible, but the Mexican government

imported goods, demonstrating that the real concerns

must take action and set up a plan to understand the needs

derived from legal changes have nothing to do with

of the industry, to locate suppliers and to assist them in

customs, but with VAT payments. Mexico has lost some

providing the necessary local raw materials.

of its competitiveness with the VAT increment, especially when the temporary importation of goods continues to be

Q: How does KPMG add value and help automotive

exempt from payment in other countries.

companies that are involved with IMMEX overcome difficulties in tax legislation?

Q: Is Mexico’s long-term position as a manufacturing hub

A: KPMG has been evaluating the possible effects of the

likely to be altered given competition from countries with

decisions taken by countries involved with Base Erosion

more favorable taxation rates than Mexico?

and Profit Shifting (BEPS) recommendations. Difficulties

A: Recent global tendencies have divided the market

often arise because countries have different taxation

into

their

laws. Because of this, tax treaties must come into play to

manufacturing, distribution, logistics and design processes

blocks,

forcing

companies

reallocate

avoid double taxation. However, in recent years we have

to specific countries or risk being excluded from certain

been in a state of double-nontaxation, in which entities

markets. A few years back, companies migrated from

are not paying their fair share of taxes anywhere. As a

Mexico to countries like China. But the realization that

result, the Organization for Economic Co-operation and

low human capital costs do not necessarily guarantee

Development (OECD) in collaboration with the G-20 are

sustainable profit growth made many reconsider their

taking steps to prevent these BEPS practices. Continuous

location. Vehicle, component and auto parts distribution

information sharing allows them to efficiently modify tax

became problematic, forcing companies to maintain larger

treaties and tax legislations, which subsequently helps

stock volumes to cover the local market’s demand, which

countries impose the correct payment according to the

evidently led to larger costs.

company’s profit.

Manufacturing in Mexico makes distributing directly to

The aftermath of current taxation changes could lead

our northern neighbor more straightforward and cost-

companies to adjust their supply chain establishment.

effective. Companies seek to control their environment

KPMG advises them on how to efficiently complete this

by staying close to their target market, which allows

transition based on local and international changes that

them to have a clearer insight into the delivery timeframe.

affect their agenda. Our company’s global reach and

Similar time zones teamed with cultural similarities and a

communication between each of its branches is essential

dual understanding of both currencies also make Mexico

for foreign enterprises entering the country.

a more attractive market for these companies. In the meantime, the US is experiencing a near-shoring and

Q: What is the most urgent change the IMMEX segment

reshoring phenomenon, leading to a need to stimulate

and the Tax Reform should sustain to incentivize foreign

the creation of manufacturing jobs once again. In 2015,

investment?

certain manufacturing plants based in the north of

A: Firstly, although VAT certifications have helped the

Mexico were moved to the US. The US’ attention is fixed

government gather in-depth information about the

on this development and measures will be implemented

processes and aptitudes of the biggest players in Mexican

to redistribute the manufacturing processes of their

manufacturing, I would expect the certification program to

industries, the aftermath of which will be felt in Mexico.

provide companies more benefits, such as accelerated tax returns. Secondly, returning to a 17.5 percent tax rate would

Q: Will fiscal changes attract domestic and international

be beneficial for everyone involved in exported goods

companies devoted to sourcing raw materials?

manufacturing. The 30 percent quota is not attractive

A: The market and the opportunities are here but industries

enough to compete with countries such as Guatemala,

use enormous volumes of raw materials each year and

Honduras and Costa Rica, which can offer similar benefits

domestic availability is generally insufficient. Interestingly, the

and enough proximity to the NAFTA region. The IMMEX

automotive industry is the exception. Automotive products

segment is here to help Mexican companies and to identify

are manufactured with close to 30 percent of domestic

control mechanisms that should be implemented. Pushing

raw materials, while other industries fall short at 5 percent.

for a higher level of Mexican content in products is just the

The automotive industry has been historically protected in

beginning, but the provision of grants for companies that

commercial treaties around the world, reflected in the 30

ensure this would be a solid start.

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VIEW FROM THE TOP

TPP TO BOOST COMPETITION, FORCE EFFICIENCY

Manuel Nieblas Partner and Manufacturing Industry Leader at Deloitte Mexico

Alberto Torrijos Partner and Automotive Leader at Deloitte Mexico

Q: What impact will competition from Asia-Pacific

MN: If the TPP goes through, Mexican industry will benefit

companies have on local industry after the Trans-Pacific

from national content clauses that will reduce the impact

Partnership (TPP) deal?

of new competitors in the market. Asian companies offer

AT: Free trade agreements (FTAs) have a positive impact

quality products and competitive prices but Mexico has

on commercial operations. The implementation of TPP will

a uniquely privileged location near the US. This lowers

create a more competitive environment because the local

logistics costs and transport time.

content clause was altered from that in previous trade 348

agreements, boosting the number of foreign companies

Q: How prepared are local companies to tackle the

here and increasing competition among local suppliers.

challenges posed by the TPP?

Mexican entities will have to develop the local supply base

MN: The level of preparation for a change in conditions

by making Tier 2 and Tier 3 companies active participants in

depends on which aspect of the value chain is assessed.

the automotive value chain. From a commercial perspective,

We have many opportunities to improve in raw materials.

FTAs offer important business opportunities. But they also

We import large amounts of resources, demonstrating a

generate more competition and companies with public

need to develop local suppliers. Assembly plants could

capital are always forced to become more efficient. They will

increase their added value if they use local suppliers, which

need to invest in high-value equipment and provide added

should make investment in this segment a priority. Even

value products to the supply chain. The TPP will undoubtedly

though some programs exist to support the industry, the

open new markets to Mexico. The agreement is unlikely to

government should play a more active role, encouraging

alter the 83 percent trade balance Mexico manages with the

the development of local supply chains with incentives

US but the industry will have more options for diversifying.

and training.

VIEW FROM THE TOP

DOLLAR-PESO EXCHANGE RATE IMPACT ON PRICES MODERATE ADRIAN DE LA GARZA Macrofinancing Analysis Manager of Banco de México* Q: As many auto components and vehicles are priced in

financial conditions abroad have deteriorated, leading to a

US dollars, what is being done to minimize the exchange-

further depreciation of emerging market currencies including

rate impact on consumers?

the Mexican peso, Banco de México has taken prompt action

A: Banco de México’s mandate is to preserve the purchasing

whenever necessary, such as the decision to increase the

power of the Mexican peso. Our actions target low and

Bank’s target rate by 50 basis points in June 2016.

stable levels of inflation. Although our currency experienced a sharp depreciation in 2015 and 2016, the corresponding

Nevertheless, car prices have increased only moderately

impact on prices in general has been moderate and Mexico’s

and not directly in line with the peso’s depreciation. In

inflation rate remains below 3 percent. While economic and

fact, domestic car sales have been growing significantly in

AT: We cannot generalize about the supply chain being

pesos, eliminating the risks of a volatile exchange rate.

ready or not. Ecosystems are being created by Tier 1

Local suppliers also offer more competitive costs. Deloitte

companies that are training and assisting suppliers. Many

can help by issuing recommendations for the industry’s

Mexican companies are not ready in terms of capital and

development. We have been persistent in informing

infrastructure to compete and meet the specifications this

companies about the risks of an unarticulated industry

openness will demand. Local suppliers need to update their

and that competitiveness can only be ensured through the

logistics processes to comply with volume requests. Just-

development of local suppliers.

in-Time (JIT) operations will be complemented by Justin-Sequence (JIS) processes and local suppliers’ delivery

Q: How does local supplier development add value to a

services will need to be improved. Certain sectors are

product?

ready to implement these changes but many are in need

AT: One of the biggest challenges we will face in the

of investment, talent and alliances with stronger partners.

next few years is becoming a country that not only manufactures but is also an active participant in added

Q: What are the challenges faced by local suppliers when

value activities such as R&D. The number of researchers

trying to work with an OEM?

and developers in Mexico is very low. For the country to

MN: Due to its competitiveness, the automotive industry

create an advanced innovative manufacturing system, we

it has very low profit margins. OEMs pressure suppliers to

need more investment in talent development.

lower their costs but small suppliers have very little room to maneuver, especially regarding financial operations.

MN: OEMs usually need to make significant investments

Obtaining financing from a third party or using financial

to train researchers and engineers. Recently graduated

factoring companies represent an extra cost. OEMs need

engineers start generating real value for their employers

to be more flexible regarding the conditions they impose

after their second year in the company. Unfortunately,

on local suppliers to create win-win situations. Convincing

in our country curriculums are more theoretical than

OEMs to use local suppliers is difficult. Usually when a new

practical. Many OEMs are investing in R&D departments,

OEM establishes in the country it already has contracts with

which benefits the entire supply chain. Those are individual

suppliers it uses in other countries. Ideally, OEMs would

efforts that need to be replicated throughout the country

research potential local suppliers. Mexico has many suppliers

in different industries. It is difficult to achieve technological

that could work with big OEMs but they need assistance and

integration and innovation in the lower levels of the supply

guidance to meet the industry’s requirements.

chain. Tier 2 and Tier 3 companies do not have the same level of automation as a Tier 1 or an OEM. Getting to that

AT: For foreign companies, one of the advantages of

point of automation requires an important investment that

using local suppliers is that the price is always in Mexican

would potentially threat the company’s financial stability.

Mexico for the last 18 months, as have auto loans granted

Unlike banks, SOFOMs were not allowed to operate as

by commercial banks and other financial intermediaries.

deposit-taking institutions. Different laws affecting their

These developments have taken place while interest rates

operations were subsequently passed and the SOFOM

remain historically low and delinquency rates have shown

sector has grown significantly in the past 10 years. Today,

a steady decrease. Mexico is an open market economy so

some of these institutions compete with banks in the auto

OEMs and market sellers set their prices as they see fit.

loan segment by offering specialized financial services catering to auto consumers. The financial reform passed

Q: How has the financing sector evolved to meet demand

in 2014 had the objective of increasing competition in the

for automotive loans?

financial industry by improving the legal and institutional

A: The financial industry has undergone gradual yet

framework,

profound regulatory changes in the past decade,

particularly

the

area

collateral

with

repossession. This should lead to lower financing costs

the objective of making lending more flexible, increasing

for consumers and businesses. Auto lending in general

competition and expanding credit provisions to the private

has grown steadily. Several financial intermediaries have

sector. One change was the creation of the Financial

partnered with individual auto makers, which should

Society with Multiple Aims (SOFOM) in 2006, which

help financial institutions better understand the needs of

was originally designed as a financial intermediary that

individuals, especially those loyal to a specific brand.

could issue loans and offer financial leasing and factoring services without the stricter regulations faced by banks.

*All the opinions are the responsibility of the author, and do not necessarily reflect the views of Banco de México.

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WATCHING OVER THE INTERESTS OF LOCAL SUPPLIERS CÉSAR GUTIÉRREZ President of INDEX Guanajuato and Vice President of INDEX National

Q: How does INDEX’s structure allow it to significantly

Q: What do you hope to achieve with INDEX in the short

contribute to Guanajuato’s industrial development?

term and what is your involvement with industries in

A: INDEX has offered its services since 1983, catering to

Guanajuato?

companies with foreign business that need consulting

A: We want to work closely with directors and key

services. This led to the creation of a national institution to

decision-makers who are already part of INDEX and

support companies in the areas of economy, sustainability

ensure they are aware of the services we offer. We must

and human resources. We have a close relationship with

define the needs of individual industry players to identify

the federal government and from that we were able to

a series of problems that could be mutually solved or that

participate in several forums where we realized that

could affect other companies in the same way.

Mexican industry was under-represented. INDEX grew as a support entity of the Foreign Trade Promotion Coordinator

The automotive cluster has consolidated in Guanajuato

(COFOCE), addressing the needs of companies that

and there will be more opportunities when Toyota starts

already had a vocation for exports.

operations in 2019. But we must not lose sight of the textile industry, while also promoting the growth of the chemical

Q: What influence has INDEX had on policy decisions that

and personal care sectors. We are also considering the

most reflect the entity’s vision for industry?

development of aeronautical activities in the state. We

When

the

federal

government

announced

are eager to use the state’s privileged position to develop

series of adjustments to the regulations surrounding

other industries, without jeopardizing the ones that

temporary imports, the Tax Administration Service

are already essential. Influential Japanese and German

(SAT) discovered that many companies were taking

companies have invested in Guanajuato, creating an

advantage of the IMMEX program to evade taxes, as

imposing presence that benefits the local industry, but

certain materials were crossing the border without ever

there are plenty of Mexican companies that could also

becoming exported products. The government decided

strengthen the local supply chain.

that all companies that imported raw materials for later export as manufactured products would have to pay a

Q: In what ways can Mexico hone its competitive

VAT, which would be refunded once those components

advantages to compete internationally?

were exported. INDEX created a consensus among its

A: Many sectors will benefit from the TPP agreement.

associates on the effect that paying VAT would have on

Although we know many Asian countries are competitive in

companies across the country. We concluded that the

electronics, we are confident about the level of expertise and

total taxes paid would be astronomical and SAT was

international production standards that exist in Chihuahua

unlikely to be able to digitally manage this temporary

and its neighbouring states. Mexico can remain competitive

tax payment.

by innovating and investing in new technology. We have excellent human capital for generating ideas. Unfortunately,

By enlightening the authorities on the risk involved

we find ourselves developing the innovations of other

for the manufacturing industry, we were able to reach

countries. Mexico must move from being a manufacturing

an agreement. We created a certification that allowed

hub to a technology creator with the support of internal

companies to retain control of their finances while Mexico

investors. Our most important objective should be

developed its local supply chain. In 2014, 3,200 companies

investing in human capital and offering opportunities to

out of the 6,200 companies that were part of the IMMEX

young people with innovative ideas would be a good start.

program certified their processes, while the rest had to

Increasing our design and engineering capabilities would

follow the new tax regulation starting from 2015 until they

allow the country to truly profit from the commercialization

could comply with the certification.

of products.

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VIEW FROM THE TOP

JAPANESE EXPANSION HAS NOT FALLEN SHY IN MEXICAN PARTNERSHIP AKIRA YAMADA Ambassador of Japan in Mexico

352

Q: How prosperous is the economic relationship

Mexico will not see many changes since our EPA has

between Mexico and Japan, and how is it transforming

allowed us to create strong ties for several years. The

the automotive industry?

TPP agreement will bring new advantages, as entry

A: The commercial relationship that Japanese OEMs have

barriers to the US market will loosen up and other export

with Mexico is fundamental to their global operations. In

opportunities will arise for countries on the other side

five years, the number of Japanese companies in Mexico

of the Pacific. This will also facilitate human capital

has more than doubled, hitting 814 by 2014 from 399 in

movement between TPP countries, strengthening the

2009. At the same time, the total number of Japanese

global value chain.

citizens in Mexico has grown at a steady 10 percent per year. There is no other country in the world where

These added benefits have created an upsurge in interest

Japanese investment has increased to this level, mostly

from many countries in the Asian and Latin American

in the Bajio region, and Japanese ventures are expected

region. The TPP will most likely trace new standards

to diversify into other industries.

for international trade, investment and business among countries. We expect investments to increase amid

Mexico’s economic stability, coupled with an increasing

reduced risk, given that signatory countries must adapt

understanding of Mexican culture, has made the country

to common standards and rules. Beyond establishing

extremely attractive to Japanese companies. Mexico’s

commercial tariffs, one of the TPP’s main goals is to

light vehicle production and exports have reached historic

define rules in terms of transparency.

proportions, as has domestic consumption. Furthermore, the country’s goods routes allow easy logistics due to

Q: What specific plans exist to broaden the influence

its competent infrastructure and geographical position,

that

adding to its reputations as an investment powerhouse.

automotive industry?

Japanese

advancements

have

Mexico’s

A: From an academic standpoint, Japan has governmental Mexico and Japan’s Economic Partnership Agreement

scholarship programs to promote foreign inclusion,

(EPA) came into force in 2005, and after its 10-year

regardless of industry and specialization. However, we

anniversary the outlook of the commercial relationship

are trying to strengthen the parts and material industry

between both countries seems favorable. Honda and

in the Mexican market to stimulate the local economy,

Mazda’s car production here is a taste of what is yet to

as Mexico has fallen short in the amount of local content

come. There are multiple suppliers following major OEMs

it provides to manufacturing processes. To address this

into the Mexican market, not only in the Bajio region

issue, the Japan International Cooperation Agency (JICA)

but also in neighboring states. Toyota is the largest

and the Japan External Trade Organization (JETRO) have

car company in the world and has not been shy in its

created a Mexican supplier database to identify which

expansion efforts in Mexico. In addition to its Tijuana

players match Japanese suppliers and OEMs, creating an

truck factory, Toyota’s new project in Guanajuato will see

additional stream of commercial relations.

at least 50 additional suppliers come into the Mexican market.

Following our commercial and academic exchange, a KOSEN technical school program was established in

Q: How will the Trans-Pacific Partnership (TPP) deal

Guanajuato, which serves as a mixture of high school

impact Japanese companies that are establishing

and university courses with a five-year specialization

operations in Mexico?

program. This approach is mostly used in Japan but its

A: Beyond the benefits that a TPP agreement may

expansion into Mexico is the clearest example of the

generate for its members, Japan’s relationship with

cultural integration that both countries are undergoing.

VIEW FROM THE TOP

WORKING LOCALLY TO SUCCEED GLOBALLY LUIS ROJAS Director General of Foreign Trade Promotion Coordinator (COFOCE)

Q: How has COFOCE helped companies of all sizes to

We work with several agencies including JETRO and

internationalize?

JICA in Japan, the German Embassy and the German

A: Created in 1992, the objective of COFOCE is to promote

Expat Program, as well as several chambers of commerce

internationalization among all companies. Initially we

and

focused on vocational segments but we have expanded

coordinate all these efforts to offer companies the best

our reach in response to industry growth in Guanajuato.

experience in the market. Guanajuato now has both a

We can now visualize complete integration of all vocational

Japanese and German honorary consul. Several new

segments in the state. Part of our job is to find companies

German investments are expected in the state, adding

with the best opportunities in the market. We have

to the current US$1.65 billion and more than 11,000 jobs

several development programs and are working with the

this community has generated. Dutch, Italian, Polish and

Secretary of Economic Development and the Guanajuato

Spanish companies, to name a few, have also played

Automotive Cluster (CLAUGTO).

a significant role. Mexican companies forming joint

marketing

organizations

ProMéxico.

ventures with different multinational companies is an Q: With many new OEMs establishing plants in Guanajuato,

emerging trend.

which subsectors have the best growth opportunities? A: The leather cluster was among the first to benefit from

Q: Following the TPP Agreement, how do you see direct

this growth, along with the metallurgy sector. We are now

and indirect exports being affected in the state?

seeing considerable development in other industries such

A: There will definitely be drastic change post-TPP and it

as fabrics and plastics. These industries are based on

is clear we will have to strengthen our skills especially in

strong molding, plastic injection and chemical processes

labor, industrial property and environmental strategies. At

that can also apply to the automotive sector. Other

a macroeconomic level, the TPP will generate many more

sectors including transportation and food and beverages

investment opportunities but will also mean we will have

have shown signs of development thanks to an indirect

to improve our trade and logistics infrastructure. Many

relationship with the automotive industry.

Asian companies are expected to start expanding into the NAFTA market so we must be prepared for the moment

Q: Where do you see opportunity for companies to begin

borders open. Local firms will have to either consider

exporting their products and how do you help them with

partnerships with these companies or strengthen their

the process?

operations to stay competitive in the market.

A: Depending on the firm’s position in the market, suppliers may need to certify processes and build up installed

Q: How important is human capital development for

capacity. We help these companies obtain ISO 9000 and

Guanajuato’s industrial growth?

TS 16949 certifications, we feature them in our brochure

A: Human capital development is crucial in this industry.

and promote them at events in which we participate. We

Most companies considering entering the automotive

put them in contact with the purchasing departments of the

market are financially stable, which means increased

most important OEMs in Mexico and abroad. Companies

employment. To satisfy existing and potential talent

interested in moving their operations to the automotive

demand, we have several collaborative programs with

market may need guiding in this process, for which we

international organizations such as JICA to focus on

have formed strategic alliances with the Mexican Industrial

developing knowledge and expertise in the automotive

Supplier Association (APIMEX) and CLAUGTO. This is a

industry. Mexico has truly competitive labor costs but one

much longer and perhaps a more expensive process than

day other regions might emerge with lower costs. If our

the first scenario, which means that companies must stick to

entire industry is based solely on this advantage we will

their current line of business until the transition is complete.

lose our competitive edge.

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VIEW FROM THE TOP

ONLINE FINANCING BOOST FOR SMALL PLAYERS HÉCTOR DE LA GARZA Director General of eFactor Network

Q: What advantages can eFactor Network offer to

financing. There are still huge opportunities to increase

companies looking for financing alternatives?

our market penetration in Mexico.

A: Our online platform for supply chain financing offers a complete solution for companies and suppliers by reducing

Almost 35 percent of our portfolio is made up of 12

risks involved in the payment process and optimizing cash

automotive industry suppliers operating in 12 countries

flows throughout the supply chain. To ensure payment for

including Ireland, England, the US, Canada and Hong Kong.

supplied goods, financing institutions have access to all

Nemak, Volvo and Navistar are among our biggest clients.

due accounts. Through eFactor Network companies can

Our platform comprises approximately 10,000 suppliers

finance suppliers in Mexico and other regions, using funds

from various sectors, mostly from the automotive industry.

from national and overseas banks. This is the only platform in Latin America that is integrated as a multibank solution.

Q: What strategies has eFactor Network implemented to

Our product helps companies free up their lines of credit

target SMEs in Mexico, considering the lack of financial

to use them for activities besides financing receivables.

education in the country?

It simplifies the payment process, which is particularly

A: When we approach a new OEM or Tier 1 supplier we ask

difficult for corporations with numerous suppliers, and

them for a list of their suppliers to contact them directly

eliminates the need for financing players to perform an

and explain the advantages of our solutions. Our offices

analysis on every supplier in the client’s network.

in Monterrey, the Bajio region, and Mexico City allow us to target all three major automotive regions in the country.

Electronic financing solutions were implemented with the

We operate in 14 countries and all 32 federal entities in

Confirme program established by Spanish bank Santander.

Mexico through more than 30 financing brokers that

In 2001 they started to develop the program globally.

connect us to global banking institutions. We also have

We gradually identified business opportunities we could

a strategic alliance with Bancomext targeting supply

tackle, creating international factoring, along with export

chain financing for exports. Both eFactor and Bancomext

and import solutions in collaboration with several banks.

approach suppliers with the goal of connecting them with

We started supporting local companies that wanted to

different financing institutions.

acquire business with foreign players, eventually building a global network.

Q: How will eFactor Network expand its presence in the Mexican market?

Q: How does eFactor Network’s business model differ

A: There are no supply chain financing solutions for

from other factoring solutions?

Tier 1 suppliers. Therefore, our goal is to build specific

A: After buyers publish their invoices on eFactor Network’s

solutions for these companies over the next five years.

platform, suppliers select the invoices they want to

We created a specific program for Volvo Buses alongside

anticipate so our financing partners can delegate those

Bancomext. We also want to create new products

resources. Once the account is actually due, the buyer

to address the needs of our clients, including client

directly pays the financing entity that took care of that

factoring and portfolio protection. Unlike supply chain

invoice. This program has enjoyed an excellent reception

factoring, client factoring has low overdue rates and high

internationally, especially considering the long time frames

operations volume. Companies usually want to anticipate

that rule most industries. According to Banco de México,

these payments at a corporate rate, which we can only do

the time frame for payment in most sectors is 90 days on

through client factoring. In terms of portfolio protection,

average. This is even longer in automotive because it is

we can support Tier 1 and Tier 2 companies that face bad

primarily a manufacturing industry. That being said, only

debt risk as they start building relationships with smaller

1.7 percent of the national GDP relates to supply chain

players.

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VIEW FROM THE TOP

A FINANCIAL HAND FOR SMALLER COMPANIES VÍCTOR MANUEL DE LA CRUZ Automotive Director of Bancomext

Q: What are the implications of the financial environment

million (US$32.9 million) to a large number of SMEs. We

on Bancomext’s operations?

foresee another boom in 2016 with 100 percent growth,

A: The number of projects in our portfolio affected by

so we expect to allocate up to MX$1,300 million (US$71.2

currency exchange is limited. We target companies

million) to new SMEs.

involved in foreign commerce and around 85 percent of our

356

investment portfolio is in dollars. Most of these companies

Reaching such a large number of enterprises is a challenge

receive credits and generate revenue in dollars, which

for Bancomext due to limited office space and staff. We

means a strengthening US currency is beneficial for many

are using Santander’s extensive network as a platform to

of them. Variable costs such as rent, services and wages

attract SMEs from all over the country. The Bancomext

are calculated in Mexican pesos so a weaker national

support plan follows a pyramidal structure. We focus on

currency represents reduced overhead costs. Mexico is

resource optimization to allocate capital to the projects and

undergoing an adjustment period across industrial sectors.

enterprises with the highest potential to make a positive

Even though Bancomext is not particularly affected by

impact on the sector, especially Mexican companies

the current financial environment, we have redefined our

producing auto parts. Bancomext promotes the use of

strategy and redirected financial resources to industries

national components in cars manufactured domestically.

facing the biggest challenges, specifically SMEs, Tier 1 and

Considering 3 million cars were manufactured in 2015,

Tier 2 enterprises in the automotive sector.

encouraging a higher percentage of Mexican components would have a positive impact on the country’s economy.

Q: What factors are behind the decrease in production volumes at the beginning of the year?

Q: Which sectors of the industry benefit most from

A: The automotive industry works cyclically. We cannot

Bancomext?

base our annual forecasts solely on results from the

A: Bancomext offers direct services to the top 400

first months of the year. January is always a bad month

exporting groups and serves the second level through

for Mexican car sales. Generally, the automotive sector

guarantees, intermediaries, funding and factoring plans.

peaks in December and May when Mexican employees

Bancomext’s support reaches almost 4,000 enterprises or

receive extra payroll benefits. I do not believe there is a

around 96 percent of the exporting companies in Mexico.

slowdown in the sector. Foreign investment in Mexico over

Since most OEMs are foreign companies, mainly from the

the past three years totaled approximately US$30 billion

US, Germany and Japan, manufacturers are not targets

in the automotive sector alone. One automotive company

for our financing. The same is true for Tier 1 companies,

investing in the launch of a new model needs a million

which generally come from the same country as the

dollars to have the processes and equipment in place

manufacturer. The market niche for Bancomext starts at

for the new product. An investment of this scale shows

the Tier 2 level. Some of the most important targets are

commitment to local industry.

companies that manufacture car molds and providers of services and raw materials. The reality is we do not

Q: What has been the most notable impact of the Proauto

prioritize one sector above another. Our goal is to support

program on Mexican SMEs?

the sector on all levels.

A: Proauto was coordinated by the Ministry of Economy with the objective of providing accessible financing to

Q: What characterizes Bancomext’s factoring services for

SMEs in the automotive industry. We collaborated with the

industry SMEs?

Ministry of Economy and the Ministry of Finance, AMIA,

A: Factoring has been in Mexico for over 15 years but

INA, NAFIN, the automotive clusters and commercial

programs like ours are newer to the domestic market.

banks. By the end of 2015, Proauto had allocated MX$600

To offer this innovative model, we joined forces with

357

eFactor. We provide access to financing without additional

equipment in Mexico. The Trans-Pacific Partnership

interest to large-scale companies using the company’s

(TPP) agreement and the Financial Reform are means

balance as a reference. This service is beneficial for SMEs,

the Mexican government is using to increase the share

particularly those without a credit history or with debt,

of Mexican suppliers in the industry at Tier 2 and Tier 3

and for profitable SMEs because the requirement for

levels. The ultimate goal is to have the maximum amount

receiving financing is usually high. With factoring, money

of national components in every car manufactured in

is allocated to a large company that does not pay extra

Mexico. To achieve this the government is setting barriers

costs or interest. That company passes the funds directly

for imported products through the TPP, particularly from

to the SME at a preferential rate. The use of these services

Asia as it offers far cheaper products than Mexico.

is growing. So far we have achieved satisfactory results and approximately 100 enterprises have benefited from

Q: What are Bancomext’s goals and what role is the

our factoring strategy.

automotive industry playing in its 2016 strategy? A: In 2016 we expect growth of 15 or 20 percent, well

Our goal is not to compete with commercial banks but to

above the 10 percent we have seen over the past three to

be a complementary partner. Bancomext is different from

four years. Bancomext wants to reaffirm its commitment

commercial banks because it takes on riskier projects,

to Mexican and international companies by generating

often with longer financing periods. In the automotive

jobs

industry we are developing programs for factoring and

particularly to the automotive industry, the Ministry of

financing for initial investments. Bancomext’s goal is to

Economy, AMIA and INA have set a goal of surpassing 5

promote foreign investment and to support projects in

million vehicles manufactured in Mexico by 2020, which

Mexico until they start generating revenue, which is when

we are certain will be achieved. In 2015, nearly 15 million

we redirect them to commercial banks.

tires were produced in Mexico and we expect these

through

our

operations

Mexico.

Referring

figures to double by 2019. In this sector investments from Q: What do automotive clusters expect from financial

key players include Continental, Goodyear and Pirelli.

institutions?

Goodyear is planning to open a manufacturing facility in

A: Since more than 90 percent of manufacturers and

Mexico while both Goodyear and Pirelli will expand their

Tier 1 enterprises belong to companies from developed

production lines. The tire industry has great potential

economies, they have access to funds at preferential

to grow as it works with new cars and the aftermarket.

conditions.

pushing

Investment plans from Audi, KIA and Volkswagen have

commercial banks to fund the projects of Tier 2 and Tier

also been released such that we are confident the sector

3 companies. These subsectors rely on domestic capital,

will continue growing despite the ups and downs of the

work with domestic staff and acquire raw materials and

macroeconomic landscape.

Therefore,

clusters

have

been

VEHICLE SPOTLIGHT

358

VOLVO S90 Innovation and renovation. Those words best describe Volvo’s new S90 vehicle. First unveiled at the Detroit Auto Show in January 2016, the S90 is an ambassador for Volvo’s global rebirth. The executive sedan offers the latest features in terms of technology, power, connectivity, design and elegance. A

replacement

for

Volvo’s

S80

model,

the

S90

introduces Pilot Assist technology, a semi-autonomous driving cont rol system as standard in every version. Pilot Assist allows drivers to maintain constant speed and distance from other cars, while also enabling the car to come to a complete standstill and keeping the vehicle from crossing lanes. The car is also equipped with City Safety and Large Animal Detection technology that detects pedestrians, bicycles or large animals and prepares the car to react and brake. The Momentum AWD version features a semi-autonomous parking system to better facilitate the driving experience. Connectivity is the S90’s backbone, powered by the Sensus Connect system that accompanies drivers every step of the way. The information, connectivity, control and entertainment system is featured on the 9-inch vertical tactile screen that is compatible with Apple Car Play and Android Auto. The S90’s screen is elegantly merged with the car’s dash, almost eliminating the need for buttons. Volvo’s S90 excels both in design and performance. The 4-cylinder, 2.0 liter Drive-E engine pledges fuel efficiency and low emissions. The automatic transmission with eight speeds ensures full use of the S90’s 320hp but without hindering its mission to be environmentally friendly. This includes CleanZone technology that constantly monitors pollutant levels and filters dust, pollen or particles inside the car. The S90’s design is pure Scandinavian inspiration. The car’s LED headlights emulate the shape of Thor’s hammer. The inside is ergonomically designed to offer exceptional comfort on every ride, be it a 10-minute trip or multi-hour journey. The vehicle offers a fourzone, electric climate control, as well as heated back seats. The front seats offer electric leg-rest extensions and have a ventilation system that ensures maximum comfort while driving.

359

INSIGHT

MOTOR CITY ORIGINAL BANKS ON FOREIGN INVESTMENT executives are actively approaching new market participants

JOSEF KOBERL

to increase the bank’s customer base in the region.

Senior Vice President and Country Manager Mexico of

The bank boosted its technology outlay to enhance its

Comerica Bank

platforms, infrastructure and capabilities in 2015 and upgraded its transaction processing systems, ensuring its clients have access to leading payment processing

Comerica Bank started its operations in Detroit, the

capabilities. Comerica Web Banking was completely

hometown of the US automotive industry. It is now banking

redesigned with added features and functionality. These

on the relationships developed there to help it thrive in the

make it more user-friendly while also increasing security

Mexican auto sector. The arrival of massive investments

measures to better protect customers and their financial

from automotive OEMs to the country presents several

information. The bank’s commercial card program is

attractive opportunities.

gaining traction and is an important component of its integrated payables offering, as clients seek efficient,

360

Many of the bank’s clients in the US established

paperless solutions to meet their cash management

subsidiaries and manufacturing facilities in Mexico. This

needs. “The cornerstone of our success is our relationship

enabled Comerica to widen its reach and develop close

banking strategy. We want to be trusted advisors to our

relationships with other key industry figures here. “We

clients. It is how we raise expectations of what a bank can

have initiated relationships with new customers, as well

be,” says Koberl. In collaboration with colleagues from its

as expanded our relationship with existing clients,” says

International Department serving European, Asian and US

Josef Koberl, Senior Vice President and Country Manager

clients, Comerica Bank identified customers who planned

Mexico of Comerica Bank. “We are confident Comerica’s

to invest in Mexico. Its proactive approach enabled the

industry experience has generated value as they go

company to address their financial requirements. “Our

through the process of establishing themselves here.”

expertise in the industry and knowledge of automotive lending gives us a competitive edge,” explains Koberl.

With 167 years of experience in its vaults, Comerica is among the top 25 financial holding companies in the US,

Automotive lending encompasses loans to OEMs and

according to its website. It is an active supporter of the

loans to smaller borrowers involved in auto production.

manufacturing sector in the US Midwest, so establishing

Comerica Bank backs Tier 1 and Tier 2 suppliers whose

a presence in Mexico was a natural progression. The

primary revenue source is automotive-related. Its customer

bank established a representative office in Monterrey to

base in Mexico is primarily large corporations but it has

support its Mexican-based customers, including several

been actively promoting business relationships with

automotive clients, with corporate banking and trade

middle-market companies. “We are positioned to provide

finance services. “Over the years, we have developed

a wide variety of financial products and services, including

long-term relationships and cooperated closely with

US-dollar financing, foreign-exchange services, treasury

manufacturing companies in the automotive space by

management services, which include modern payments

providing a wide array of credit and noncredit financial

capabilities such as same-day automated clearing house,

products and services,” says Koberl. “We have grown

trade financing, such as supply chain financing, letters

together with our customers and have helped them take

of credit and standbys, as well as improved commercial

advantage of the favorable conditions Mexico offers to

cash management systems focused on automation and

expand their businesses.”

effectiveness,” says Koberl.

Comerica Bank has clients in the most important economic

Foreign customers generally expect conditions similar to

regions of Mexico: Monterrey and Saltillo in the north;

their experience at home but the legal system in Mexico

centrally in Mexico City, Toluca and Puebla; and in the Bajio

limits the availability of financial offerings and certain loan

region, which covers Queretaro, Aguascalientes, San Luis

structures. Comerica Bank believes it has addressed those

Potosi and Leon. The accelerated investment and growth of

challenges by maintaining its commitment to provide

the Bajio area has made it even more attractive for financial

high-quality financial services and delivering the level of

institutions and particularly for Comerica Bank, whose

service that consumers demand.

INSIGHT

INVEST IN SKILLED, LOCAL SUPPLIERS The automotive industry is a key global driver of investment and development. As in many countries, the sector accounts for a good portion of Mexico’s GDP. The

FEDERICO DELGADO

growth of the industry here can be attributed in great

Senior Director of Global

part to free trade agreements (FTAs). HSBC believes

Banking of HSBC Mexico

in the benefits of international commerce and FTAs. NAFTA created opportunities for Mexico to convert its domestic-based economy and make it export oriented.

R&D facilities here but are facing several hurdles,

The Trans-Pacific Partnership (TPP) deal also offers

especially in hiring qualified engineers, who are in

clear benefits to Mexico. It will bring in more foreign

great demand in several industries besides automotive.

investment and will unlock Asian markets, allowing us to

Although some regions such as the northeast have very

diversify our exports.

good educational facilities, we should be developing skilled labor specifically for R&D centers. Internal training

Despite high growth rates in recent years, the automotive

programs at companies are great options but skilled

sector still has room to boost regional economies. While

engineers move on quickly, making companies wary

foreign companies dominate the segment, Mexican

to implement these programs. The optimal approach

companies play a vital role in the supply chain, even if

for encouraging R&D is to create global programs, as

it is tough for local companies to compete with global

markets around the world are driven by technology and

OEMs and Tier 1 and Tier 2 corporations on technology

efficiency.

and prices. The investments made by major OEMs is clear proof of the competitiveness of the Mexican industry. This reflects trust in our country, paves the way for further growth and cements our global position as a car manufacturer and exporter. Mexico is the seventh largest automotive producer in the world, manufacturing approximately 3.4 million units in 2015, of which 2.7 million were destined for export.

3.4 million units were manufactured in 2015, of which 2.7 million were destined for exports

Production costs give us an additional advantage. A weaker peso translates into more competitive exports,

Attracting

wages and salaries. At the current exchange rate, in

businesses to Mexico is part of the country’s strategy

significant

number

international

real dollar terms Mexican wages are lower than Chinese

to become a global competitor. We need Foreign Direct

wages, which is helping our competitiveness in the

Investment (FDI) in R&D and the resulting knowledge

global market. The government’s structural reforms

and opportunities that arise from FDI. Developing

also are allowing access to cheaper raw materials and

domestic suppliers is a second logical step but this

the economic stability we enjoy is attracting important

can take a significant amount of time. Unfortunately,

foreign investment. To reap further benefits, Mexico must

local companies are usually limited in what they can

quickly increase the skill level of its workforce, create more

offer because they do not have access to advanced

talent and apply their expertise to the manufacturing

technology. HSBC is assisting local companies to evolve

industry in general. We need to leave behind the cheap

in the automotive sector and to increase their market

labor approach of IMMEX and convert our manufacturing

competitiveness. The company is focused on supporting

industry into a producer of finished goods with added

our customers by bringing our international connectivity

value. That is our main challenge.

to Mexico and the NAFTA region. Our objective is to become the world’s leading international bank by

Mexico

world

renowned

for

its

efficiency

serving our customers with a forward-looking vision and

manufacturing processes but it has an important

ensuring local investments are consistent with those in

opportunity in R&D. Some companies are establishing

the US and Canada.

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VIEW FROM THE TOP

OUTSOURCING EASIEST FOR FOREIGN ENTRANTS ALEX MAHONEY Country Manager of Biz Latin Hub

362

Q: What are Biz Latin Hub’s priorities for the Mexican

Q: What are Biz Latin Hub’s strategies to penetrate the

market?

Mexican automotive market?

A: Biz Latin Hub has a strong presence in Colombia,

A: Our experience in other regions gives us an advantage

Peru, Chile and Argentina, and we opened offices in

in the automotive market. We cannot ignore the industry’s

Panama

services

booming growth in Mexico. Once we consolidate our

including accounting, payroll, legal and recruitment. We

accounting and legal services we will start offering due

began operating in Mexico five months ago and we have

diligence, background checks and business advisory

already formed strong relationships with clients in the

solutions in Mexico. We are focusing on English and

automotive and oil and gas industries. We are not limited

French speaking companies although we are open to

to the industrial sector. We also have clients in the services

any business opportunity. Most of our existing customers

industry and a strong background in mining thanks to our

contacted us through a previous client, our webpage or

operations in Colombia and Peru. Biz Latin Hub is defining

directly at an event. We are also in contact with embassies

its focus in Mexico and we have already landed a contract

and chambers of commerce but we have found working

with a Chinese company that manages vehicle imports and

with these entities to be a slower process.

recently.

Our

focus

back-office

exports. For these activities in particular we have a lawyer Q: How have outsourcing services changed the labor

specialized in foreign trade.

environment in Mexico? Q: What services are most in demand among new clients

A: Depending on the line of business of each company,

of Biz Latin Hub?

it can be cheaper and more efficient to handle these

A: Foreign clients normally look for someone who speaks

operations in-house. But there are times where the

English and understands what they really need to succeed

company does not want to be liable for these activities.

in the Mexican market. Even though we offer the same

Labor laws are particularly strict in Mexico, which can be

services as larger competitors, our competitive advantage

daunting for a foreign company considering introducing

is that we handle all operations directly with the client.

operations in the country. Certain companies simply do

Customers

not want to handle all the paperwork related to contracts,

appreciate

this

personal

attention

and

flexibility, and we offer competitive prices.

social security or payroll, so they outsource these processes to us. It is a short-term solution for some but

We have had to work hard to secure new clients since

other companies with long histories in Mexico still manage

we are still building our brand’s presence. We give initial

their staff and back-office operations this way.

advice to the customer to demonstrate how, despite not having 200 people on our premises, everyone we

Q: What do you see as the biggest challenge for foreign

employ is an expert in their field. All our staff members

companies that want to understand how the Mexican

are bilingual. As well as understanding the intricacies of

market works?

the Mexican market, our specialists know how to address

A: One of the biggest surprises for foreign companies

the needs of the client according to their place of origin.

is the flexibility of Mexican law. It can be difficult for foreigners to understand how business is done locally.

We manage our recruitment services from Colombia but

German or British people are very direct, while Mexican

the intention is to offer these services from our Mexico

people tend to think about what they want and want to

office within the next 12 months. Having representation

build a relationship with the client before stating their

across most of Latin America has helped us connect clients

intentions. There are legal discrepancies in the incentive

that wanted a stronger presence in the region. It also serves

programs put in place by the government. Thus, most

to build on the long-term relationship with the client.

companies need a specialist to guide and support them.

VIEW FROM THE TOP

IMPLEMENT CLEAR POLICIES, AND ENFORCE THEM MIGUEL JÁUREGUI Founding Partner at Jáuregui y Del Valle

Q: How do you expect Mexico to accommodate electric

consolidating. Mexico’s macroeconomic figures are stable,

and hybrid vehicles?

competitive and attractive compared to other regions. The

A: The government needs to establish clear policies to

goal is to have a domestic market with disposable income

spur innovation and protect the environment. Mexico

arising from better salaries.

needs to be consistent in applying regulations, especially for car usage and environmentally unfriendly vehicles.

Q: Which measures could be taken to grow domestic

Vehicular compliance should be enforced, whether they

demand in the medium and long term?

are government or commercial units, private or part

A: The expansion of the middle class and higher salaries

of the public transportation system. A focus on public

will be crucial for boosting purchases of consumer

transportation is also needed. Two million vehicles will enter

durables such as vehicles. The main challenge for Mexico

the market every year by 2020. The goal should be to create

is to address the segment of people who do not have

an integral mobility plan, an improved public transportation

acceptable economic levels and living conditions. A

network and to develop adequate infrastructure.

solution would be to enhance education opportunities and create jobs to foster upward mobility.

Q: How will international trade deals affect industry? A: New commercial agreements such as TPP will boost

Q: What factors could hinder Mexico’s attractiveness for

Mexico’s presence in the global marketplace, diversifying

foreign investors?

operations outside the NAFTA region. The TPP will also

A: As soon as Mexico does away with impunity, among

strengthen our position as a key manufacturing location

other ills, it will be better perceived and will attract more

for Just-in-Time (JIT) operations, resulting in reduced

foreign investment. Eliminating impunity will improve

logistics times and sourcing costs. The structural reforms

Mexico’s international image while shifting the focus to

implemented by President Enrique Peña Nieto are

education, rule of law, growth and respect for property.

CHALLENGES WHEN DOING BUSINESS IN MEXICO Corruption

20.2

Inefficient government bureaucracy

13.6

Crime and theft

13.3

Tax rates

10.1

Complexity of tax regulations

8.4

Access to financing

8.3

Inadequate supply of infrastructure

7.6

Restrictive labor regulations

4.5

Insufficient capacity to innovate

Inadequately educated workforce

3.6

Policy instability

2.9

Poor work ethic in labor force

1.5

Inflation

1.1

Foreign currency regulations

0.6

Government instability/coups

0.3

Poor public health

0.2

Source: World Economic Forum

363

INSIGHT

PREPARING STUDENTS TO GET AND KEEP HIGH VALUE JOBS ANGÉLICA RAYA Director of the Professional Interdisciplinary Unit (UPIIG) at Instituto Politécnico Nacional (IPN) Campus Guanajuato

Once a graduate gets a job, the next step is keeping it. To

The unit was established quickly, releasing an admission

do so, they must adapt to their new company’s philosophy.

summons after confirming the Institute’s participation

At IPN, students are trained to have the professional

in Guanajuato Inland Port. “To our surprise, neighboring

flexibility and technical knowledge that industry demands,

communities were not as committed to our project, as

says Angélica Raya, Director of UPIIG at IPN Campus

the initial turnout did not exceed 200 people,” says Raya.

Guanajuato. Although industry seeks advanced technical

364

skills, soft skills are equally important to a student’s

IPN decided to better communicate its intentions

professional development, Raya says. As defined by the

to spread its regional influence and earn the local

Research Center for Civil Associations Development

community’s trust. It redoubled its efforts, which

(CIDAC) in its National Survey of Professional Skills, these

ultimately paid off. “Our success is contingent on the

include leadership, conflict management, teamwork,

growth of the Guanajuato industrial corridor, which has

empathy and communication skills.

led to demand for our program increasing significantly in 2015, as we received applications from students located

“Our success is contingent on

in 30 different states,” Raya says.

the growth of the Guanajuato

Talent is essential to a state’s development but if there

industrial corridor”

elsewhere. This was a concern for the government in

Angélica Raya, Director of UPIIG at IPN Campus Guanajuato

are few employment opportunities people will go Guanajuato so its Ministry of Economic Development established a Labor Subcommittee to analyze wages and track job openings. By assessing the positions with the highest offerings the committee pinpointed the

The government of Guanajuato realized early that

professional skills required to fill them. As a result, the

establishing an institution to develop the region’s human

state government established the Borderless Training

capital was crucial and it decided to allocate resources and

program in 2014, granting paid internships to students

land to the Inland Port project, which also housed a number

looking for professional experience. Students with

of automobile companies, to IPN. In return, the school

specific skillsets are invited by local executives for

would adapt courses to help spur business development.

further evaluation and those selected can either work in

Among the incentives for IPN, the government donated

a Mexican plant or relocate to the company’s country of

a 20-acre land parcel worth close to MX$190 million

origin for a semester. IPN is also beginning an academic

(US$10.4 million) at the time and 95 percent of the facility’s

mobility program, which allows students to travel the

construction

(US$7.1

world and witness the latest technological procedures

million). The state secured IPN’s commitment to run

first-hand. As a result, the alignment between the labor

multidisciplinary programs for 25 years with the goal of

requirements of the automotive industry and skills

solving specific issues that impact the region.

availability in Guanajuato is structurally improved.

When IPN came to Silao, Guanajuato, four specific

Challenges remain. The Institute’s educational model

programs were chosen based on the state’s strategic

encourages independent learning, but it has been a

development plan. “Taking into consideration their rapid

difficult goal since 2003. “We created a 21st century

growth rates, we settled on the automotive and aerospace

academic model but its dispersion has not been as

industries for our focus, while offering biotechnology and

successful in IPN’s Zacatenco engineering unit as we

pharmaceutical programs as well,” says Raya.

hoped,” Raya says.

costs,

totaling

MX$130

million

VIEW FROM THE TOP

SEARCHING FOR LEADERSHIP LEWIS ADAMS Principal at Heidrick & Struggles

Q: How has Heidrick & Struggles’ approach to its executive

by some Mexican companies can be rigid and slow to

search and consultancy services benefited Mexico’s auto

adapt to changing markets. Any company aspiring to

industry?

a position in the global market must ensure it has the

A: As a leadership advisory firm, Heidrick & Struggles

right leadership and culture to adapt to more complex

focuses on executive search, leadership consulting and

customer demands.

culture shaping. We work with CEOs and many of the most influential multinational companies around the world,

Q: What distinctions characterize Mexican human talent

regardless of the business sector. These include Global

compared to international candidates and how is Heidrick

OEMs and Tier 1 suppliers that have gone through cultural

& Struggles working to improve this?

restructuring processes. This makes us uniquely qualified

A: In terms of talent, the automotive industry is probably

to share global perspectives with leaders in a variety of

one of the most developed in Mexico. Most companies

sectors, although automotive is a major focus for our

here have solid organization development programs, which

firm. Ever-changing technology within the automotive

ensure Mexican operations remain globally competitive.

industry forces companies to continuously adapt their

Nevertheless, there is a deficit in leadership talent with no

operation models, making secure leadership and cultural

sign of change in the foreseeable future. The education

development crucial for success.

system is the main obstacle to developing talent in Mexico

365

and the automotive sector is competing with other Q: How has global leadership training been received by

industries for strong graduates. Changing cultures and

Mexican automotive companies?

leadership approaches takes time and can face resistance

A: The majority of OEMs and Tier 1 suppliers traditionally

but it can be achieved through constant communication

have international expats as top executives but this has

by aligning the approach to tangible business outcomes.

gradually shifted over the past few years toward strong

We meet people all over the country who share the same

local development. KIA is leading this trend by placing

philosophy and are ready to drive that kind of change,

Horacio Chávez as its leader in Mexico, while other

which takes courage and tenacity.

companies such as Ford and Nissan are also moving toward local recruitment for managerial positions. Another

Q: What are Heidrick & Struggles’ priorities regarding the

example is Bosch, which has a significant proportion of

future of the industrial and the automotive segment in

expatriates in leadership roles in its Mexican division.

Mexico?

This company is taking note of the advantages of having

A: Our focus is across all automotive tiers in Mexico.

Mexican leaders, leading to three to four-year leadership

Alongside OEMs and Tier 1 suppliers already based

rotation programs in Germany, where executives are

here, we see an opportunity with the rest of the supply

prepared for senior managerial positions with a view to

chain, particularly new investors who are entering the

returning to Mexico and creating a local leadership team.

market. There is tremendous interest from US suppliers to

The market is receiving this preference for local executive

establish facilities in Mexico and we expect this trend to

talent very positively.

continue over the next few years. The automotive world is undergoing unprecedented change driven by technology

Mexican players such as Metalsa are also facing leadership

developments,

challenges

after

integrating

acquisitions

during

regulatory

environments,

heightened

customer expectations and fierce competition. Companies

strong growth period. The company is transitioning

operating in such an environment need visionary leaders,

from a national entity to a key international player in

high-performing teams and thriving corporate cultures.

the automotive sector without losing its culture and

Our firm is well-positioned to help automotive clients

personality. The traditional organizational model adopted

achieve this.

PROJECT SPOTLIGHT

366

AUTODROME HERMANOS RODRÍGUEZ Formula 1 racing has returned to Mexico and the refurbished Autodrome Hermanos Rodríguez. Inaugurated in 1959, the racetrack has hosted local racing legends like Pedro and Ricardo Rodríguez and international stars such as Jim Clark, John Surtees, Graham Hill, Emerson Fittipaldi, Nelson Piquet, Alain Prost, Ayrton Senna, Nigel Mansell and Michael Schumacher. The track hosted the Mexican Grand Prix from 1986 to 1992 and last year Formula 1 made a triumphant comeback on a fully renovated site. For the 2015 Grand Prix, the racetrack and drainage system at the autodrome were remodeled. The track was completely redesigned and underwent an asphalting process to comply with safety measurements and assure extremely flat surfaces. The foundation posed an engineering challenge. It required the use of geotextile materials as filler and a concrete structure to prevent subsidence. The magnitude of the project required an asphalt plant to be built inside the compound or the remodeling of the track, the run-off areas and paddocks would not have been finished on time. The introduction of an S-shaped chicane kept cars in sight of the main stage for longer. The racetrack has a total length of 4.305km with a main straight of 1.302km and a width that ranges between 1217m. There are 17 corners: seven left turns and 10 right turns. Curves four, five and six allow crowds to keep drivers in sight for a long period of time. The venue can hold 28,000 spectators. Two straights of over 500m each give drivers the room to accelerate up to 328km per hour. To withstand the friction of the constant passing of cars at high speeds, the racetrack was coated with three layers of asphalt. The base coat has a thichness of five centimeters, the binder is a coat of two centimeters and the wearing layer consists of three-centimeters. It has 30 pits for teams and an additional three pits for the International Automobile Federation (FIA). The Autodrome was designed to provide a superb spectacle for both drivers and audiences. The racetrack has 300 surrounding speakers that, combined with 24 LED screens of 675m2, give fans all the details they need. At 3,000m2, the Media Center can hold up to 470 journalists and the VIP section can accommodate 5,000 guests.

367

MEXICO’S AUTOMOTIVE FUTURE

The automotive industry is not oblivious to the changes that are permeating societies. OEMs are shaking up their product portfolio to cater to the changing needs of consumers, introducing green technologies, for example. Electric technology increasingly is being adapted for cars, while manufacturing processes have also become more ecological. Mobility issues are dictating the need for future city designs that are not driven by planning oriented on private vehicles. There may be a future not too far ahead where automated cars prevent vehicle and pedestrian accidents and people choose car-sharing as their number one mobility option.

This chapter offers a glance into the future of the automotive industry, not only in Mexico but globally. Though exciting, there are a series of challenges that will need to be addressed in the next few years, such as the creation of new laws that regulate the transit of self-driving cars.

369

CHAPTER 14: MEXICO’S AUTOMOTIVE FUTURE 372

VIEW FROM THE TOP: Javier Romero, The Boston Consulting Group (BCG)

374

INSIGHT: Tesla Accelerates the Electric Vehicle Transition, Tesla México

375

VIEW FROM THE TOP: Gabriel López, Ford de México

376

VEHICLE SPOTLIGHT: Tesla Model S

379

VIEW FROM THE TOP: Adriana Macouzet, Society of Automotive Engineers Mexico (SAE)

380

VIEW FROM THE TOP: Jorge Suárez, Volvo Group México

381

VIEW FROM THE TOP: Abel López Dodero, World Bank Group

382

PROJECT SPOTLIGHT: Joint Efforts Toward Self-Driving Technology

383

VIEW FROM THE TOP: Laura Ballesteros, SEMOVI

371

VIEW FROM THE TOP

TECHNOLOGY TO TAKE THE AUTOMOTIVE MARKET BY STORM JAVIER ROMERO Partner and Managing Director for The Boston Consulting Group (BCG)

Q: Based on BCG’s broad market knowledge, what have

OEMs have opened their systems to ease interface

you identified as the main trends in the automotive

transition with their own infotainment systems, forcing

industry?

them to make strategic decisions regarding ownership

A: There are two main trends that relate to each other.

and how much of it they wish to relinquish. By outsourcing

The first is the way in which drivers use their vehicles

solutions, the link with customers can be lost. Therefore,

and, in that sense, we believe car sharing will be a rising

the company’s involvement in customer experience

trend over the next five years. Other trends will include

must be carefully planned before, during and after the

any alternative that removes the burden of purchasing a

sales process. By pinpointing the traits of customer

vehicle, disassociating car usage from ownership.

experience they are willing to relinquish, their inclusion

372

can exponentially improve the quality of a product. The second trend shows that personalization of privately

Infotainment is just one these opportunities, as the realm

owned vehicles will increase considerably, as customers

of possibilities for in-vehicle software is quite broad.

will be able to add or remove specific components from cars, enhancing their driving experience. These include

Q: How can companies work together to expedite the

not only the vehicle’s features, but also size, shape and

inclusion of autonomous technology into the market?

functionality. Moreover, the number of technological

A: Autonomous technology is going through an interesting

components will be customizable, which will enable

period in which there are now two completely different

drivers to monitor on-the-road behaviors, such as music

approaches to R&D that are competing to reach the

preferences or frequent routes and destinations. In terms

market first. On the one hand, traditional OEMs believe

of commercial vehicles, their personalization will refer

the technological transition toward autonomy will happen

to freight shipping and volumes, while also taking into

gradually, taking away one driving control responsibility

consideration their size and shape.

from users at a time. The first natural step would be the automation of a vehicle’s braking system, followed by

In terms of vehicle production, manufacturing processes

enhanced highway cruise controls and other features that

will also change. Over the next 10 years, we expect

improve the human-vehicle control interface, but all within

production lines to develop significantly, while flexibility

our current driving environment.

between both machine and human labor will allow OEMs to use their assets more efficiently, allocating their resources

Technology companies like Google have developed

to multiple processes within the production line. As a result,

solutions that, for the time being, only work under

we will see flexible production models that will give way to

specific driving conditions with little-to-no uncertainty.

a wider diversity of vehicles, thus greater personalization.

Nevertheless, these systems are adaptable and they are programmed to continuously learn and improve their

Q: Do you expect OEMs to expand their business model

software, so they could gradually be transferred to more

to include technological developments or to rely on

hectic and complex scenarios. We will have to wait and see

creating partnerships with specialized companies?

how this trend plays out in the coming years but it will be

A: Enclosed or wholly owned systems are now a thing of

fascinating to watch.

the past, giving way to standardized systems provided by IT companies. For the time being, Apple is leading the way

To achieve vehicle autonomy, on top of building a car, it

with Google closely behind, as they have now integrated

is necessary to develop proper software that supports

their operating systems into the vehicles. However, the

the vehicle’s functionality. A similar situation can be

door is not closed to other companies that want to tackle

found in the mobile phone and software field. Google

these opportunities.

has done a solid job in software development through

Android and, by offering this technology to hardware manufacturers, companies have been able to focus solely on phone functionality to ensure higher quality products. BCG believes this is precisely the approach that Google is employing in its autonomous driving developments. By creating competent software, the company can later commercialize it without engaging

By creating vehicle autonomy software, companies like Google can commercialize it without engaging in actual vehicle manufacturing.

in actual vehicle manufacturing. This scenario might suit OEMs, as they could outsource software developments

Q: How can BCG’s interdisciplinary team offer an integral

and focus on their core business of manufacturing.

solution to its Mexican auto clients?

Although the market is aimed at passenger applications,

A: BCG is a strategy consulting firm that helps companies

we foresee that commercial vehicles will see this type of

to make better decisions and improve their operations. Our

technology integrated first, since its implementation can

work with OEMs has been mostly focused on developing the

be more easily achieved and its economic benefits are

management of their production facilities through better

more traceable.

asset utilization and improved efficiency. BCG also helps its clients with aftermarket and commercial operations

Q: Low oil prices have allowed clean energies to emerge,

according to local conditions. In terms of Tier 1 suppliers

directly impacting Mexico’s environmental agenda. How

and aftermarket players, we help them define their strategy

committed is Mexico’s auto industry to developing the

regarding local and international market share growth, as

electric vehicle (EV) market?

well as evaluating the feasibility of product expansions and

A: BCG has no clear evidence that shows the government’s

developing their distribution channels. 373

commitment to developing the market and we are not completely sure it will. Nevertheless, we do not believe this

We have had a presence in the Mexican market for close

will hinder the availability of EVs. Vehicle manufacturing in

to 40 years, at first running our local operations directly

Mexico is mainly driven by exports to the North American

from our US offices. In 1993, we finally opened our first

markets, so as long as these markets demand EVs there will

Mexican office in Monterrey, expanding to Mexico City

be a knock-on effect on Mexico. There is no question that

three years after that. Nowadays, our local offices employ

we will see EV production here but whether they remain

close to 100 consultants, with five Mexican BCG partners

in the Mexican market is another story. Affordability is an

supporting us. Our partners are divided into different

additional element that will impact their market inclusion,

areas of specialization, including financial services,

a barrier that has already been broken in the US using

consumer goods and industrial goods, while our team

subsidies. If we do not mirror that solution, the Mexican

of consultants has different types of functional expertise

market will be limited to a smaller number of applications

that range from investment decisions to manufacturing

that fit our economic constraints.

operations.

ELECTRIC VEHICLE SALES PROJECTIONS Million vehicles SOLD sold per year M VEHICLES PER

% of new car sales

140

100% 90%

120

80%

100

70%

60% 50%

40% 30%

20%

20 0

10% 2015

2020

2025

2030

Internal Combustion Engine (ICE) + Hybrid Electric Vehicle (HEV) Plug-In Hybrid Electric Vehicles (PHEVs) Source: Bloomberg

2035

2040

Battery Electric Vehicles (BEVs) EV% of new sales

INSIGHT

TESLA ACCELERATES THE ELECTRIC VEHICLE TRANSITION By 2020 this factory will produce more lithium ion cells by itself than the rest of the world did in 2013

the needs of its customers. Accelerating the world’s

Ricardo Blanco, Head of Communications at Tesla México

on torque or power but could still be tagged as zero

transition to sustainable energy, Tesla’s belief that electric cars could surpass petrol-powered cars, seemed beyond reach when Musk announced his vision. Formed in 2003 by a group of engineers in Silicon Valley, the team dreamed of creating cars that did not compromise emissions. The company has even developed HEPA technology that removes 99.97 percent of the harmful

Since Tesla had its iPhone moment on March 31, 2016

contaminants in the air with a ‘Bioweapon Defense Mode’

reaching a total of 232,000 reservations in just 2 days for

that eats up the smoke, pollution, allergens and bacteria

its Model 3, Bloomberg has compared it to the Citroen

even inside the vehicle.

DS that, back at its launch in 1955, signed 80,000 unit

374

sales. The Citroen DS was also marketed as a cutting-

In collaboration with Panasonic, Tesla is building a factory

edge engineering marvel, that was incomparable with its

in Nevada to produce lithium ion cells and battery packs

competitors. However, the Tesla Model 3 broke barriers

for stationary storage use. By 2020, this factory will

as one of the fastest accelerators in its category and with

produce more lithium ion cells by itself than the rest of

the cheapest battery range available.

the world did in 2013, the company says. This will facilitate the production of the Model 3, a mass-market vehicle.

In December 2015, Tesla brought its electric cars to

The battery packs will reduce costs for businesses and

Mexico and is committed to expanding its presence here.

homes and act as a backup power supply.

The innovative company found creative ways to succeed by getting close to people interested in its transport

Tesla gets its name from the inventor Nikola Tesla,

and energy solutions, says Ricardo Blanco, Head of

whose 1888 AC induction motor was the inspiration for

Communications at Tesla México. “It was great to see that

the company’s first sports car. Launched in 2008, the

Mexico already had infrastructure for owners of electric

Roadster set a new bar for electric cars. Its lithium ion

vehicles, such as special electricity tariffs and policies that

battery lasts for 245 miles per charge and the Roadster

could be further strengthened like deductibility, beyond

reaches 60mph in 3.7 seconds from a standstill. Over

the existing International Standard Audiovisual Number

2,400 Roadsters have been sold in over 30 countries.

(ISAN) and no road tax in most states,” says Blanco. The Model S, released in 2012, was designed to be electric Tesla opened the first Mexican supercharger just six

from the get-go and was the first premium electric sedan,

months after starting operations. Its goal is to continue

with four doors, room for seven passengers and over

growing

destination-charging

64ft3 of storage. It is a family car but it accelerates almost

locations as the company boosts its brand in the country.

as quickly as the Roadster. It also has a low center of

its

supercharger

and

gravity thanks to a flat battery pack in the chassis below Tesla’s system of selling only at own-stores or online means

the cabin. Named Motor Trend’s 2013 Car of the Year,

that prices are predictable and not negotiated at dealerships.

the Model S achieved a 5-star safety rating from the US

Elon Musk, Co-founder and CEO of Tesla Motors, wants to

National Highway Traffic Safety Administration.

make electric cars not just desired objects but accessible as well. To that end, the vehicles save on maintenance costs as

The company’s innovation also extends to connectivity.

oil changes, filter changes and emission controls become

A dashboard screen in the Model S displays maps with

obsolete with cars powered entirely by batteries. Tesla also

charging stations and navigation as well as having 4G

wants every updated generation to be more affordable

Internet music and radio. Although not yet a driverless

than the last as the company gains economies of scale and

car, Tesla has an autopilot feature similar to that used in

becomes more efficient.

airplanes. The goal of Driving Assist is to improve safety and make highway driving more enjoyable, not to take

The goal, Blanco says, is to innovate in energy. It

full control of the car, though the company is a step

introduced 60 and 75 kWh batteries in 2016 to support

closer to true autonomous driving.

VIEW FROM THE TOP

DESIGNING THE FUTURE TODAY GABRIEL LÓPEZ President and Director General of Ford de México

Q: How do you expect living habits to influence

mileage. We consider self-driving cars to be a product that

transportation and automobiles?

can greatly improve the efficiency of fuel consumption.

A: Growing population rates around the world will lead to significant changes in urbanized areas. Experts speculate

We have also seen that owning a car is an expensive

that by 2025, there will be 50 megacities in the world

investment. A car remains parked most of its useful life.

having more than 10 million inhabitants. Mexico City and

Our goal is to support the transport evolution through

the metropolitan area already have a population greater

smart mobility such as uberPOOL, which finds up to four

than 25 million. Megacities demand distinct interactions,

people to carpool. However, as long as customers enjoy car

behavioral and consumption models. Of our employees, 10

ownership, Ford will continue to produce vehicles. Private

percent work from home to avoid wasting time commuting

cars could be optimized if other drivers were allowed

in traffic. This saves them time that can be used more

to use them to earn back the initial investment. The car

productively.

could take its owner to work and afterward, the owner can choose to allow it to work with Uber or other similar apps.

An aging population resulting from couples deciding to

This would reduce stationary time and technology has

have fewer children has meant that younger generations

proven it can achieve these mobility solutions.

are not growing quickly enough to fill labor demand. Medical advances have also prolonged life expectancy

The automotive industry requires challenging long-term

and the population unable to walk or cycle will grow in

strategies as development takes time. Ford’s current

size, leading to greater dependence on cars. The market

designs will not be launched until 2021, forcing our

is responsible for developing technology to ensure that

engineers and experts to imagine how we will live in the

people can satisfy their mobility needs. Visual disabilities

future. All industries are facing obstacles and we are

will also boost demand for autonomous cars to drive

creating strategies in response. Companies need to adjust

patients to their appointments and medical treatments.

the way they sell and deliver their products. 3-D printing will cause messenger services to disappear as files can be

These new tendencies will create new opportunities

fed to a printer that can deliver the purchased product.

for businesses, along with technology that promotes

Many doubt how soon this type of technology will become

efficiency and quality. Autonomous or self-driving cars

widespread but history suggests that technology changes

are mistakenly considered gadgets but they will become

quickly.

a necessity to create cities without traffic and to allow an aging population to be more independent.

Q: How do you expect the automotive industry to behave in the future?

Q: In what ways will the industry need to adapt to

A: Mexico will continue being an attractive investment

changing mobility and automotive trends?

destination for the automotive industry and manufacturing

A: Stricter regulations will increase the cost of vehicles.

in general. Its size, commercial openness and growth in

Electrical applications are seen as a possible solution for

production make Mexico an interesting investment hub.

pollution. This does not consider that 50 percent of this

The government can boost expansion, building on its 40

energy is generated from carbon and is more expensive.

commercial agreements to ensure a bright future. NAFTA

The price also relates to the number of units manufactured

needs to be reconsidered as a live agreement with fixed

and if the required investment to develop these products

conditions to be corrected, such as the transnational truck

is divided between few vehicles, costs spike. Technology

crossing approvals that detract from our industry. The

that meets regulations will be more expensive and the

automotive industry can also create contracts with more

only way to balance cost is by creating products with more

suppliers to attract more business to Mexico.

375

VEHICLE SPOTLIGHT

376

TESLA MODEL S Long gone are the days when electric vehicles were futuristic

spaceships

straight

out

visionaries’

imaginations. Tesla has taken the electric vehicle idea beyond what anyone could have imagined, creating not only a powerful car but a luxury model that rivals any other in the market. The Model S is a true statement of what innovation can do for emerging technology. On the outside, the Tesla’s lines merge perfectly to create something aesthetically unique. The LED headlights are slim and fit seamlessly with the vehicle’s front, framing Tesla’s logo. The headlights' shape are also a feature in themselves, made by 14 three-position LED dynamic turning lights that can adapt to better illuminate winding roads. The windshield merges with a panoramic glass roof that can open completely or to the driver’s desired percentage. Even the door handles are high-tech as they sink into the door while the car is locked or driving. Although everything about the Tesla is new and innovative, what stands out particularly is the Autopilot system. With a simple tap to the cruise control level, the Model S pilots itself within its own lane, manages speed, changes lanes just by tapping the turn signal, scans for parking spaces and handles parallel parking on its own. Through its digitally controlled brakes and steering wheel, collisions and accidents are avoided. The system piloting the Tesla combines a series of active sensors, GPS and digital maps. The rear-view camera is also groundbreaking, featuring an HD system that can remain visible while driving forward. The Model S features an all-wheel drive dual motor that provides the car with the power it needs to accelerate from 0-100km/h in just 2.5 seconds. Tesla has named this the Ludicrous Mode, powered by a 100kWh battery that can take the car to approximately 500km with just one charge. The car includes a mobile connector with 110V, 240V and J1772 adapters, so it never runs out of power. As if being the most innovative car on the road was not enough, the Models S’ system receives real time feedback from the Tesla fleet and its software is constantly updated, making it the safest car on the road. All in all, Tesla has brought the future to us in a stylish, one-of-a-kind car.

377

VIEW FROM THE TOP

RECRUITING ACADEMIA TO PROMOTE INNOVATION EXCELLENCE ADRIANA MACOUZET President of the Society of Automotive Engineers Mexico (SAE)

Q: What can Mexico do to solidify its R&D and engineering

to delve into these subjects, there is a definite risk

image and not be known just for manufacturing?

that automotive companies move back to an all-

A: Our final vision in SAE is for Mexican automotive

manufacturing vision for Mexico. There are universities

engineering to be recognized as the best at an international

that already offer these programs but very few students

level and for our engineers to be acknowledged as top of

choose them. Our job at SAE is to make young people

their respective fields. That way, instead of solely being

fall in love with engineering, especially in Mexico’s

a manufacturing country, we will be able to participate

specific areas of opportunity.

and innovate in the industry. A crucial element to achieve this is to develop our human capital so we are recruiting

Q: How are you promoting SAE’s vision among companies

academic institutions to reinforce our efforts. We already

and institutions that have not yet joined your initiative?

have the support of AMIA and INA, and I have been a

A: Some people think SAE only establishes standards

counselor for INA since April 2016.

for the American market and, although this was its initial goal, the association has turned to integrating different

We are a nonprofit organization and our council is formed

players who can benefit the entire industry. We are

of representatives from universities, OEMs established in

inviting all companies and associations to participate in

Mexico and suppliers from all levels of the supply chain.

SAE’s development through our different conferences

Our strategy is to form a triple helix through which we can

and events. The objective is to incentivize students to

count on the right incentives from the government and

join engineering programs. All companies can contribute

private companies to impact all university courses related

through

to the sector. We are promoting engineering through our

competitions. SAE is not a student organization, however.

World in Motion program targeting elementary and junior

This initiative is only the first effort toward achieving

high schools to attract more children to engineering,

integration among all members in the industry.

sponsorships

guidance

events

and

mathematics and science programs. We are organizing several events and competitions to motivate students

to later enter formal competitions like Baja SAE. We

international standards into Mexican laws?

How

SAE

promoting

the

normalization

hope to make professional experience a prerequisite for

A: We are not addressing this issue yet because, contrary

graduates, especially promoting design and engineering

to popular belief, Mexico is not far from achieving top

projects through specialized conferences. We expect at

international manufacturing standards. The country is

least 20 suppliers to follow each new OEM establishing

heavily influenced by the US so most Mexican regulations

here. Developing adequate talent will become essential

are similar to those in the American market. Certain

to address the predicted demand.

areas of opportunity could be addressed to perfect the manufacturing model in Mexico. Enforcement of

Q: What are the most pressing needs when renovating

these regulations has not been the strongest but the

academic programs related to the automotive industry?

industry is evolving steadily with SAE’s support. Safety

A: The areas in which universities can best contribute.

is an area that needs improvement in Mexico as some

Academic institutions need to integrate lean processes

markets continue to neglect basic safety standards. A

and other manufacturing trends into their plans to

lack of information and willingness to invest in safety

shorten training periods for new hires as much as

systems throughout the Mexican population has become

possible. Ideally we could get graduates certified as

an impediment. The technology exists and is slowly

Six Sigma Green Belts or even Black Belts. SAE is also

infiltrating the market but we still need to demonstrate

promoting the creation of degrees such as automotive

the true benefits of these systems so that Mexico can

design and materials technology. If we do not start

become a safety-oriented market.

379

VIEW FROM THE TOP

SUSTAINABILITY A MAJOR MOTOR FOR INNOVATION JORGE SUÁREZ Commercial Manager of Electromobility and Urban Transportation at Volvo Group México

Q: Which cities have you identified as optimum locations

The International Association of Public Transport (UITP)

for electromobility technology?

surveyed 70 public transport authorities regarding their

A: London was Volvo’s first major market and due to the

future environmental agenda and most stressed the

success achieved there, we were awarded a contract to

importance of increasing electric vehicles in their cities.

supply 400 hybrid buses toward the authorities’ goal of

380

having 1,600 hybrid units on London’s streets by 2016.

There is a common misconception that sustainable

Other cities with similar mobility and environmental

transport is only equal to reducing emissions, whereas

concerns will undoubtedly follow suit and Latin American

energy efficiency and noise minimization are equally

cities have the biggest need for our solutions, as they have

important in the equation. There is still a lot of work to do

higher population rates. Cities such as Bogota have hydro-

to properly educate the public about sustainable mobility.

powered energy matrixes, which become a major driver in energy shifts, allowing cities to adapt and transition to

Q: To what extent is natural gas a realistic solution to the

electric-based vehicles much faster. In contrast, Mexico’s

environmental and efficiency issues facing Mexico City?

energy base is 75 percent powered by fossil fuels,

A: Many cities have shifted to Compressed Natural Gas (CNG)

pinpointing a need for a major energy transition. There are

buses but this is unusual. CNG technology is characterized

over 2,000 Volvo hybrid buses operating globally, 400 of

by its volatility, as small price fluctuations between gas and

which are located in London and another 500 in Bogota.

diesel as little as 10 percent can remove the advantages of using this technology. Mexico has established a federal policy

Mexico’s environmental agenda pushed state governments

favoring natural gas over any other energy source, a direct

to implement BRT systems in Leon, followed by the capital

result of its high natural gas production volumes, as well

city’s Metrobús project in 2005. But rather than advancing

as its access to the US market. CNG technology becomes

new technology, the government’s initial premise was to

less beneficial the further a city is from the main pipeline,

minimize the presence of privately owned buses, namely

as the infrastructure requires heavier investments. However,

Mexico City’s microbuses. Five Mexican cities now run

Mexican cities bordering the US and in the north of the

operational BRT systems, namely Mexico City, Leon,

country will most likely implement CNG based technology.

Guadalajara, Puebla and the State of Mexico. Bus with High Levels of Service (BHLS) systems were implemented

Mexico City is committed to reducing CO2 emissions,

in cities including Tijuana, Cancun and Tampico.

heralding the implementation of a climate change action plan. The target is to reduce CO2 with the help

Q: How do you suggest cities overcome barriers to

of the Metrobús system and by renewing the microbus

technology introduction and mobility solutions?

fleet. Although at the moment electric mobility is no

A: Problems arise when governments that have invested

more cost efficient than CNG buses, it does tackle other

in these solutions do not know how to move forward with

concerns, as well as the CO2 reduction issue. Carbon

innovative processes. In Mexican cities, sustainability has

emission reductions are dependent on efficient energy

become a major motor for innovation. So much so that

sources and although CNG has a reputation for positively

state governments have begun an unspoken competition

impacting the environment by reducing local pollutants,

to be the most advanced in sustainable mobility. Globally,

it is not a good option for CO2 minimization. Hybrid and

cities participating in the C40 City Awards are involved

CNG technologies are complementary and not mutually

in the sustainability race, pushing the market toward new

exclusive. Thus, a balance could be found between areas

technology like ours. The Clean Bus Declaration commits

that are closer to a city center and have a greater need

40 city mayors to integrate low-emission buses in their

for cleaner energy, and CNG and diesel-based technology

fleets by 2020, provided financial support is granted.

being used for longer distances.

VIEW FROM THE TOP

WORLD CLASS AMBITIONS FOR TRANSPORT ABEL LÓPEZ DODERO Urban Transport Specialist of World Bank Group

Q: From an economic and financial standpoint, what is the

Q: How is the World Bank participating in the introduction

Mexican transport system missing to become world-class?

of NOM-044-related restrictions for trucks and buses?

A: The federal government must work with states and

A: The element holding back the sector is fuel availability

municipalities to develop legal and institutional adjustments

in the country. Ultra-low sulfer diesel (ULSD) is easily

that

financial

attainable near the US border or in Mexico City, but not in

institutions more comfortable investing, whether it is in

the rest of the country. Natural gas could be an excellent

new transport units or to lower the cost of financing. The

alternative but transport companies are reluctant to invest

authorities are responsible for creating an environment in

in equipped units until the supply network is in place. This

which new entrants feel protected enough to take the risk.

structural problem makes it difficult for us to financially

would

make

private

companies

and

incentivize the use of the latest technology and our hands Exclusivity is still a sensitive area, since private investors

are tied until regulations are altered. In terms of delays or

want to know that their investment will be protected

changes to project completion schedules, our intervention

from competition for a certain amount of time. Ideally,

can go no further than discussions with the government,

exclusivity and legislative protection must go hand-in-

unfortunately. However, the Bank and BANOBRAS have

hand with a tariff policy. Companies demand a guarantee

never turned down a well-structured project, especially if

that their costs will be covered in the case of fluctuations

it includes the latest green technology available.

in fuel or maintenance costs, as well as certainty that the infrastructure will be ready when their units arrive

Q: How is World Bank helping the government reach

on location. These elements, while intangible, must be

environmental

included in a well-structured plan, alongside sanctions to

initiatives?

ensure all users respect the new transportation system.

A: Besides the UTTP initiative, we have a Sustainable

targets

through

emission

reducing

Transport and Air Quality grant of US$5.38 million Q: How does the World Bank work with the government to

offered

minimize project risks and incentivize private investment?

resources support select municipalities such as Ciudad

A: Guarantees depend on the level of risk but private

Juarez, Leon, Monterrey and Puebla to limit greenhouse

entities will always invest in risky projects if they provide

emissions, contributing to the institutional coordination

higher returns. The management of projects that are

between federal and regional governments. Through the

both privately and publically funded can be complicated

UTTP and its concessional loans, we want to incentivize

as it is unclear who should provide protectionist

the construction of cycle lanes, reduced speed zones,

policies. These investments must be backed up, or the

accessibility solutions and other projects that contribute

government should compensate the investor should the

to a sustainable goal.

the

Global

Environment

Fund.

These

authorities fail to comply with their own stipulations. For BRT systems requiring private participation, the National

We have also initiated work with the Ministry of

Bank of Construction and Public Services (BANOBRAS)

Environment and Natural Resources on clean freight

advocates for project finance plans to lower financing

transportation. The Ministry launched a program called

costs by better aligning incentives and by reallocating

Clean Transport, which includes a measure known as

risks among stakeholders through the Urban Transport

the green zone that shows how a vehicle can be driven

Transformation Program (UTTP). While these projects

most economically. When drivers remain within the green

require substantial changes in regulations, they are

zone, 15-20 percent of fuel costs can be reduced. By

essential to ensure that fares remain in line with average

creating a culture of looking after transport units, we can

income, encouraging private entities to provide better

extend the life-span of any vehicle, while also helping the

credit conditions to investors.

environment.

381

PROJECT SPOTLIGHT

JOINT EFFORTS TOWARD SELF-DRIVING TECHNOLOGY Faster commutes, better quality of life and fewer road

The vehicle will incorporate Volvo’s Scalable Product

accidents are the advantages most often cited for self-

Architecture (SPA), a modular chassis system that is part

driving cars. Volvo and Uber are among those who see the

of a US$11 billion development program. SPA gives all Volvo

concept as the future, and they are putting their money

vehicles a fixed base to which the purchaser can add a

behind their belief.

series of extra features. The platform is already used in the Volvo XC90, the S90 sedan and V90. All necessary safety

The two market leaders are joining forces to develop the

and redundancy features for self-driving operations will be

next generation of autonomous vehicles, undertaking a

incorporated according to Volvo and Uber’s specifications.

US$300 million joint venture to develop vehicles boasting the latest autonomous driving technology. Uber, a leading

While this vehicle is expected to be ready in 2021, Uber is

ride-sharing app, says it expects autonomous cars to

already offering self-driving rides in Pittsburg, supervised

eventually replace those driven by people.

by a human driver. The chosen vehicle is an adapted Volvo XC90, a luxury SUV that received the highest safety rating

382

Unlike its competitors, Uber is not developing its own cars

awarded by the Insurance Institute for Highway Safety, as

but leaning toward agreements with well-established car

well as numerous prizes including Motor Trend’s 2016 SUV

manufacturers. In this case, Volvo Cars will manufacture the

of the Year. Although it is monitored by a driver, the XC90

base vehicle to which Uber will add its autonomous driving

is fitted with many features such as sensors, cameras and

system. Volvo is a world leader in safety systems, famous

GPS to ensure safety. This autonomous vehicle will place

for inventing the three-point seatbelt. The company was

both companies in what Samuelsson calls the “current

also one of the pioneers in autonomous drive technology,

technological revolution in the automotive industry.”

having noticed the time commuters waste in traffic. “We are very proud to be Uber’s partner of choice, one of

This is not a one-time project. Both companies expect

the world’s leading technology companies,” says Håkan

the collaboration to be a long-term partnership that

Samuelsson, President and CEO of Volvo Car Group.

revolutionizes mobility solutions.

VIEW FROM THE TOP

PUBLIC TRANSPORT THE BACKBONE TO INTELLIGENT MOBILITY LAURA BALLESTEROS Undersecretary of Planning at SEMOVI

Q: What are SEMOVI’s goals to transform the new mobility

Q: What is your forecast for the train being constructed to

plan for Mexico City?

link Santa Fe and the State of Mexico?

A: The new sustainability model aims to help all existing

A: The train is a federal project and the investment required

mobility models coexist. We want to make streets a more

was equal to that of the Metropolitan Metrobús network.

efficient element. The number of people traveling and not

The biggest difference between these two projects is that

the number of vehicles on the streets will be the measure

the train will only link Toluca and Mexico City, while the

of our model’s efficacy. The paradigm change we are

Metrobús network would have interconnected the entire

facing since Mexico City’s Mobility Law was published in

metropolitan area. However, all investments in transport

2014 placed the individual as a priority in public policy

routes in the city are beneficial. This train will spark new

decisions. Planning, infrastructure and mobility services

activity in the western zone of Mexico City and increase

are defined according to citizens’ needs and safety.

the need for infrastructure. We must invest in the subway system to fulfill the demand that this train will trigger

We aim to generate intelligent mobility services with public

or consider creating several stops along its route. This

transportation systems as the backbone. The metropolitan

mobility solution is positive but is missing the link with city

area needs a new city model wherein we live closer to

transportation that SEMOVI is targeting.

our places of work, which requires a shift in mentality. The Metrobús facilitates the integration of quality public

Q: How did you expect car users to be affected by the

transportation with pedestrian infrastructure. The master

vehicle regulations aimed at improving air quality?

plan for the confined-lane bus service consists of 11

A: Any pollution measure implemented must be applied

different lines. We have built six, and will have built at least

across the geographical region. It is not enough to restrict

two more by 2018. We hope federal resources will support

car use

us to build another five to reach the final target. We already

of the State of Mexico. Neither Puebla, nor Morelos, nor

have the necessary budget for building Lines 7 and 8, but

Hidalgo complied with the emergency emissions measures

for the rest we need support from the federal government.

We are lacking funding to cover a system that registers 23

of having one governing figure to enforce the public

million trips per day in the metropolitan area.

policies across multiple areas. These regulations must be

in Mexico City and only certain municipalities

reduce

pollution,

demonstrating

the

importance

accompanied by sufficient budget allocations to build the Q: How many buses do you project will be renovated or

transport system. Otherwise, these regulations can only

added to the public transport fleet?

be a temporary measure to improve air quality without

A: SEMOVI is supporting the RTP network. These government-

solving the problem long term.

operated buses service various parts of the city that had been left out of the budget in the past. We have managed to

As part of the contingency program, the No Drive Day

gather MX$5 billion (US$294 million) for newer technology

policy led us to toughen up the process of verifying

to improve emissions and payment methods. RTP units will

vehicle emissions. The next issue to face is the traffic

integrate the Mexico City Card payment method, expanding

problem, which was not solved with the contingency

universal payment to more public systems in the city. We also

program. Nevertheless, Mexico City is better prepared for

want to help 8,000 taxi operators to acquire electric units.

this change than any other town in the region. In 2014,

The complete plan must include the Metropolitan Metrobús

we began to generate all the legislative, administrative,

network consisting of 30 different routes between Mexico

budget and planning changes that need to take place for

City and the State of Mexico. This network would need an

an effective program implementation. We hope to share

investment of MX$35 billion (US$2 billion) to meet current

our experience with other cities to help them implement

demand for transportation.

the best measures.

383

INDEX A-E 3M

206

167, 180, 193, 194, 199, 205, 214, 217, 219, 226, 227, 242, 269

ABA Seguros 268

Boeing

ABB 167, 205, 222, 341,

Bosch Rexroth

ABC Leasing 269

Bose

Actinver 265

Bridgestone

Acura

Brose

57, 242

Advance Real Estate 189 Aguascalientes

206

251

BYD 220

311, 336, 360

Cabify 186

71, 91

Akebono

ALMU 313 7, 11, 36-37, 242, 245, 254

AMDA

, 101, 108

9, 47, 66-67

BRP

112, 116, 163, 171, 173, 180, 189, 211, 212, 219, 229, 306, 308, AIG Global Real Estate

285, 286, 287

71, 81

Brovedani

7, 9, 14-15, 16, 41, 51, 58, 73, 80, 85, 105,

245, 322, 333

Calsonic-Kansei

212

CANACINTRA

229

Carl Zeiss

223

Carmudi

261

American Industries 188

CeDIAM 180

American Lighting

CEDVA

111

1, 7, 8, 11, 24-25, 27, 48, 180, 229, 356, 357, 379

AMIA

103, 198-199

Amistad

AMPIP 187

138

Celay

116

CFE

17, 24, 25, 53, 202, 220, 226, 227

CH2M 201

7, 39, 127, 128-129, 131, 136

ANPACT

168

CHUBB

268

Antolin

CIATEC 230-231, 235

ANTP

7, 38

CIATEQ

APIMEX Apple

CIDESI 228, 229, 232

105, 353

179, 284, 359, 372

CIMAV 232

71, 72, 75, 102

CISA 328

ARIZA 247

Audi

7, 21, 41, 105, 353

CLAUGTO 159

Atlas Copco Atotech

71, 89, 234-235

CIDETEQ

Aqua Machinery 169 Arbomex

147, 223, 229, 235

7, 40, 41

CLAUT

101, 121

103, 351, 353

COFOCE

9, 12, 25, 33, 48, 54, 78, 81, 85, 88, 90, 93, 111, 123,

College of Civil Engineers

157, 193, 194, 205, 206, 214, 217, 219, 242, 269, 357

Columbus McKinnon 204

Autonomous University of Nuevo Leon

Comerica Bank 360

84, 138

Autopartes Calderón 278 Autotransportes de Carga Tresguerras

142, 312, 313

327

CONACYT

10, 13, 180, 212, 228, 230, 231, 232, 235

CONALEP

10, 21, 75, 194

Auto Safe International 271

CONDUSEF

, 268

AXA Seguros 262

Continental

173, 285, 286, 287, 357

Bader

110

COPARMEX

19, 229

BAIC

264

Covestro 221

Banco de México

7, 8, 9, 34-35, 348-349, 355

9, 127, 137, 151, 309

256

Cummins

Bancomext

7, 13, 32, 355, 356-357

Daimler

BANOBRAS

323, 381

163, 194, 219

15, 16, 58, 75, 79, 80, 85, 92, 127, 136, 145, 146,

Banorte 264

DANA

BASF

DC Gaskets

119, 279

BCG 372-373 Beccar

116 10, 101, 107

16, 323, 348-349

Deloitte

127, 141, 148

306, 324-325

CTS EMBARQ

Bancomer

Delphi

10, 229

Bernardo Quintana Institute 327

DENSO

195

BF Goodrich

Desmex 226, 227

287

BINZEL 169 Biofuel

97, 338

Biz Latin Hub 362 Blackhawk BMW

71, 84

9, 10, 12, 17, 47, 55, 75, 78, 85, 88, 92, 93, 111, 157,

DHL

281

DINA

9, 127, 137, 147, 150-151

Donaldson

212

Double Coin

287

Eagle Ottawa

110

INDEX E-K Eagle Plastic and Manufacturing Easy Taxi Eaton

71, 95

333

Grupo Desmex

286

227

Grupo Elías Motors 289

79, 116

Ecobici

Grupo Capricornio

326, 331

Grupo Industrial Monclova

Econduce 331

Grupo Marabis

10, 194

Ecoplating

Grupo Picacho

264

Grupo Pullman

286

Edscha

123

122

eFactor Network 355, 357

Grupo QUIMMCO

El Poder del Consumidor 330

GST

Embassy of Japan in Mexico 352

Guanajuato

Epicor 161

75, 78, 83, 91, 92, 95, 102, 103, 104, 105, 107, 109, 119, 131, 7, 9, 33

Ernst & Young Estafeta

281

Euroglas

71, 94

145, 173, 185, 188, 189, 194, 195, 199, 205, 214, 227, 231, 234, Guanajuato Automotive Cluster

101, 112, 116

Expeditors 305 FCA

7, 8, 9, 10, 18-19, 21, 40, 41, 43, 52, 57, 62, 65,

235, 311, 312, 339, 345, 351, 352, 353, 364

EXEDY DYNAX

8, 9, 10, 75, 92, 95, 96, 105, 123, 171, 180, 186, 199,

285, 286

10, 218-219

Harman

Heidrick & Struggles 365

205, 219

Hella

FedEx Express 306

Hellmann 296-297

FEMSA Logística 301

Henkel

Ferrari

Hino Motors

219

Ferreplus

101, 122

7, 21, 353

Guanajuato Puerto Interior 195, 214, 227, 313 Hankook Tire

92, 116, 217

Faurecia

110

103 234 105, 127, 142

Hoffmann Group

113

FESTO 157, 205

Honda

FIA

104, 105, 111, 116, 171, 194, 206, 229, 242, 269, 297, 313, 352

330, 367

FINSA 186-187 Fire Service Plus Firestone Ford

8, 9, 18, 26, 47, 57, 75, 79, 80, 81, 85, 92, 93, 103,

Hope Global 101, 206

287

HSBC 361 Hutchinson

8, 9, 10, 18, 26, 43, 47, 52, 81, 85, 92, 93, 95, 110, 111,

101, 109 229

Hydrocon 192 9, 63, 96, 122, 142, 219, 246, 252, 256, 285

116, 123, 142, 171, 180, 199, 205, 214, 217, 219, 235, 242, 270,

Hyundai

277, 285, 297, 313, 365, 375

Hyundai Motor Group

63, 122, 256

Hyundai Truck & Bus

49, 57, 59, 193, 366-367

Formula 1 Freightliner

9, 96, 136, 186, 199, 214

Fronius 178

ICA

327

IHS

7, 26-27, 28

FSP

101, 106, 206-207

IMI Precision Engineering 172

187, 192, 227, 331

IMPI

231 7, 28, 29, 72, 107, 180, 306, 356, 357, 379

GE Capital

187

INA

GE Power

192

Inaumex

German Embassy Getrag

353

71, 85

Gestamp 8

Giant Motors

300

10, 71, 93

INDEX 351 INEGI

15, 18, 72, 194, 204, 262

Infiniti

9, 12, 15, 16, 47, 58-59, 80, 163, 214, 242, 244

IOS OFFICES 191

GKN

9, 71, 78, 104

IPN

9, 10, 17, 26, 47, 50, 51, 53, 81, 89, 91, 92, 95, 103, 105,

Irizar

94, 141, 206

157, 171, 180, 186, 199, 205, 214, 219, 229, 235, 246, 249,

ISUZU

127, 143

250-251, 254, 263, 269, 271, 285, 297, 323

ITDP 326

GM Financial

53, 249

Gonzalez Trucking 308 Goodyear Google

9, 71, 88-89, 285, 286, 287, 357

179, 218, 261, 372, 373

84, 147, 195, 207, 364

ITESM

10, 19, 77, 119, 180, 194

Jatco

79, 112, 116, 171

JATO 254-255, 269 Jáuregui y Del Valle 363

Grupo Alden 246

J.D. Power 257

Grupo Báltico 340

John Deere

Grupo Bimbo 300

Johnson Controls

205 92

INDEX K-S Navistar

40, 96, 127, 133, 355

149, 157, 186, 193, 219, 236-237, 246, 256, 257, 285, 357,

Nemak

72, 355

365

Nexu 261

Klüber Lubrication 118

Nicro Bolta

KPMG 346-347

Nissan

KIA

8, 9, 12, 25, 26, 40, 47, 48, 60-61, 63, 78, 88, 111, 142,

Kuehne + Nagel KUKA

101, 123

7, 8, 9, 10, 11, 15, 16-17, 47, 48, 50-51, 55, 58, 75,

80, 81, 91, 92, 93, 105, 110, 112, 117, 142, 163, 171, 180, 194,

311

199, 205, 206, 212, 229, 243, 244, 245, 246, 269, 300, 306,

205

LatAm Autos 260

336, 365

Lear

Northgate Capital

92 11, 267

LeasePlan Lexus

269

NR Finance 244-245, 255 Numalliance 170

Liebherr

165, 171

Omnitracs

Linamar

116, 171

OnStar

53, 251, 263

Lincoln

53, 89, 122

OSRAM

101, 111, 288

PACCAR

96, 127, 132, 277

Lincoln Electric

122

LOVIS 160 Magna

Parque Industrial Querétaro 203

103

Magnetek Mahle

PEMEX

116, 229

Pirelli 127, 130-131, 214

MAN Truck & Bus

Marabis Desarrolladora 194 127, 149

MASA Autobuses

195, 286, 287, 357

Pochteca

101, 119, 279

Polomex

127, 141, 146, 197

Porsche

Posco

219, 233

PPG

7, 8, 9, 18, 28, 42-43, 47, 62, 75, 80, 90, 92, 93,

Mazda

128, 129, 172, 206, 275, 313, 340

Pioneer 284

204

ManpowerGroup 181

Maserati

71, 96-97

Parker 71, 72, 76-77, 171

MACIMEX

308

313 47, 67, 215, 234

PROFECO

103, 104, 105, 123, 171, 176-177, 194, 199, 206, 266, 269, 313,

ProMéxico

13, 28, 84, 281, 353

352

Promotora Energética E3 339

Mazda Financial

MD Manufacturing Medina Torres

Prudential

101, 105

101, 110

Mercedes-Benz

195

PSA Peugeot Citroen

Queretaro Automotive Cluster

9, 11, 15, 16, 47, 49, 78, 80, 90, 123, 145,

Queretaro Tooling Institute

7, 41, 95

146, 196-197, 214, 219, 224-225, 242, 269, 307, 316-317

Rassini

206

Metalsa

Renault

10, 58, 59, 242, 244, 245

72, 365

Metrobús

141, 145, 220, 322, 323, 324, 326, 327, 328, 341,

Michelin

Renault-Nissan Alliance

9, 285, 286, 287

REPUVE

Mikel’s 281

36, 37

R.H. Shipping 311

Ministry of Communications and Transportation

28, 129,

Robert Bosch

9, 69, 71, 73, 108, 116, 157, 168, 213, 365

Roca Desarrollos 202

265, 297, 328 Ministry of Economic Development

212, 364

Rockwell

157

Ministry of Economy 12, 13, 28, 36, 40, 53, 87, 129, 356,

RTP

357

SA Automotive

Ministry of Education

21, 29, 81

SAE

141, 383 71, 92

89, 379

Ministry of Finance

15, 36, 38, 39, 129, 230, 323, 356

Santander

Ministry of Health

206

SAP

83, 157, 180, 315

Ministry of Sustainable Economic Development for the

SAT

24, 36, 37, 351

state of Guanajuato

Scania

Mirka

58, 244

Renishaw 179

380, 383

105

101, 117

269, 355, 356

9, 127, 138-139, 214, 277, 282-283, 334-335

Schneider

10, 227, 331

Mitsubishi Electric 164-165

Schneider Electric

MPE Mexico 104

SCHUNK 175, 216

NAFIN

13, 132, 269, 356

Scotiabank

NASA

217

SEAT

248

10, 331

62, 266, 269

INDEX S-Z Seeräuber Automotive SEMARNAT

53, 129, 206, 303

10, 322, 383

SEMOVI

Setex Automotive Shell

71, 82-83, 173

279

TRUMPF 169 TRW

110, 151, 277

UAM

147

Uber

27, 37, 149, 245, 322, 323, 333, 336-337, 375, 382

UNAM

147

Siemens 156, 157, 233, 341

Unilever

SIMSA 165, 171

UPS

Sitrack 303, 315

Valeo

102, 103, 111, 229

SMW Autoblok 174

Vesta

16, 195

142

281, 298-299, 312

Specialized Vehicle Terminal (TEA) 297

Vistamex

Stanley Automotive Group

Volkswagen

Steer Davis Subaru

111

327

248, 271, 277, 285, 290-291, 311, 357

43, 286

Sustrend 279 Tachi-S

8, 9, 33, 47, 54, 81, 85, 92, 96, 105, 110, 123,

131, 157, 171, 180, 195, 205, 206, 214, 217, 219, 229, 235, 246,

219, 253

Sumitomo

101, 102-103

Volkswagen Financial Services 248 Volkswagen Group

71, 80, 212

Volvo

54, 110, 123, 206, 214, 248

9, 10, 79, 101, 115, 127, 141, 149, 214, 277, 341, 355,

TBC 286

358-359, 380, 382

TecAlliance 276

Volvo Buses 115, 141, 341, 355, 380

Tenigal

Volvo Trucks

Ternium

, 40, 63, 69, 71, 72, 87, 313

Vynmsa

Tesla

10, 17, 89, 92, 374, 376-377

ThyssenKrupp System Engineering 205 Tohken Thermo Total

101, 112, 116

14, 27, 121, 192, 267

Toyota

8, 9, 10, 18, 43, 47, 48, 62, 64-65, 75, 80, 91, 92,

214

195

Walmart 302-303 Wheels 332 Williams Scotsman 193 World Bank 323, 381 Yaxi

333

93, 95, 142, 171, 194, 199, 242, 246, 255, 297, 313, 351, 352

Yokohama Tire

Traffilog 314

ZF Services

Transportes LIPU 329

ZKW 214

TREMEC

71, 72, 79

71, 90, 96-97, 287

104, 173, 197, 277

Zurich 270

GLOSSARY AMDA

Mexican Association of Automotive

INDEX

Distributors AMIA

Mexican Association of the Automotive

Maquila, and Export Service Industry INEGI

Industry ANPACT

National Institute of Statistics and Geography

National Association of Bus, Trucks, and

IPN

National Polytechnic Institute

Tractors Manufacturers

ITESM

Monterrey Institute of Technology and

ANTP

National Association of Private Transport

BRT

Bus Rapid Transit

CONACYT

National Council for Science and

CONALEP

National Council of the Manufacturing,

Higher Education ISO

International Organization for Standardization

Technology

KPI

Key Performance Indicator

National College of Technical Vocational

NAFTA

North American Free Trade Agreement

Education

NOM

National Mexican Norm

ERP

Enterprise Resource Planning

OEM

Original Equipment Manufacturer

FCA

Fiat Chrysler Automobiles

R&D

Research & Development

GDP

Gross Domestic Product

ROI

Return on Investment

General Motors

SME

Small and Medium-Sized Enterprise

IMMEX

Maquiladora Manufacturing Industry and

SUV

Sport Utility Vehicle

Export Services

UNAM

National Autonomous University of Mexico

INA

National Auto Parts Industry

ADVERTISING INDEX Ariza

170

Simsa

Goodyear

184

Advance Real Estate

Government of the state of Guanajuato

190

Fire Service Plus

30-31

ZF Group

192

Williams Scotsman

Mercedes-Benz México

200

IOS Offices

Macimex

210

Carl Zeiss de México

Yokohama Tire

216

Seeräuber Automotive

Ternium

226

Grupo Desmex

Arbomex

228

Renishaw

Macimex

234

CIDETEQ

Ryobi Die Casting

240

Mazda de México

100

SCHUNK Intec

255

JATO Dynamics

102

Vistamex

262

Sitrack México

106

DC Gaskets

274

Pochteca

120

Atotech

280

Mikel’s

122

Nicro Bolta

288

Grupo Elias Motors

126

Arbomex

294

Hellmann Worldwide Logistics

131

MAN Truck & Bus México

304

Expeditors

134-135

Cummins

310

R.H. Shipping

139

Scania Mexico

320

Robert Bosch México

140

Volvo Group México

325

CTS EMBARQ México

144

PPG México

344

COFOCE

154

Siemens Industry Software

350

Vertice

158

American Industries

354

Mexico Business Publishing

162

Mitsubishi Electric

370

Hyundai Motor de México

ABB

378

Mexico Business Events

166

VEHICLE SPOTLIGHTS 60-61

KIA Forte 2017 Hatchback

250-251

Chevrolet Cruze

114-115

Volvo 9800

290-291

Volkswagen Beetle Dune

150-151

DINA Brighter

316-317

Mercedes-Benz V-Class

176-177

Mazda CX-9

334-335

Scania Long Distance R480 LA6x4

196-197

Mercedes-Benz Paradiso 1350

358-359

Volvo S90

224-225

Mercedes-Benz E-Class

376-377

Tesla Model S

PROJECT SPOTLIGHTS 42-43

Mazda de México Vehicle Operation (MMVO)

297

Lazaro Cardenas’ Specialized Vehicle Terminal

82-83

Seeräuber Automotive de México

309

X-BU Center

236-237

KIA Pesqueria, Nuevo Leon

366-367

Autodrome Hermanos Rodríguez

282-283

Scania Queretaro

382

Joint Efforts Toward Self-Driving Technology

TECHNOLOGY SPOTLIGHTS 67

PPG’s Envire-Primer EPIC

165

SIMSA Refurbishment

CIDETEQ Weathering Tests

216

SCHUNK Synergy

Yokohama

226

Desmex Rooftop System

303

Sitrack’s Predictive Telematics Solution

96-97

BluEarth-A

EDITION

CHELSEA FC 106

Fire Service Plus (FSP) Enforcer 10

AE50

PHOTO CREDITS 4

Volkswagen

MBP

KIA

MBP

Government of Aguascalientes

MBP

Nissan

MBP

Nissan

MBP

Nissan

Yokohama

Government of Guanajuato

BMW

Guanajuato Puerto Interior

102

MBP

GKN

103

Vistamex

MBP

104

MBP

Volkswagen

105

MBP

106

FSP

MBP

107

MBP

108

MBP

Bancomext

109

MBP

E&Y, E&Y

110

Medina Torres

Banco de México

111

MBP

112

MBP

Aston Martin

113

Hoffmann Group

MBP

114-115

Volvo

MBP

116

Tohken Thermo

MBP

117

MBP

118

MBP

42-43

Mazda de México

119

Pochteca

FCA

121

MBP

122

MBP

Nissan Mexicana

123

MBP

124

Daimler

General Motors

128

MBP

Volkswagen

128-129

Navistar

BMW

130

MAN

Honda

132

PACCAR

MBP

133

MBP

60-61

KIA

136

Daimler

MBP

137

Cummins

KIA

138

Scania

Toyota

141

MBP

Toyota

142

MBP

BRP

143

ISUZU

Daimler

145

Daimler

Robert Bosch

146

MBP

147

DINA

Macimex

148

Beccar

GKN

149

MASA

MBP

150-151

DINA

Tachi-S

152

Daimler

MBP

156

Siemens

82-83

Seeräuber

157

MBP

159

Atlas Copco

Gestamp

160

Lovis

MBP

161

Epicor

MBP

163

Nissan Mexicana

Yokohama Tire Mexico

164

MBP, MBP

PHOTO CREDITS 167

MBP

243

Nissan Mexicana, Nissan

169

MBP

244

MBP

169

MBP

246

MBP

169

MBP

247

MBP, Ariza

170

MBP

248

Volkswagen Financial Services

171

MBP

249

GM Financial Services

172

MBP

250-251 GM

173

252

Hyundai

175

SCHUNK

253

Subaru

176-177

Mazda

254

MBP

178

MBP

256

MBP

179

MBP

257

MBP

180

CeDIAM

260

Latam Autos

181

Manpower Group

261

MBP, Nexu

182

KIA

263

OnStar, OnStar

186

FINSA

264

MBP

188

American Industries

265

MBP

189

Advance Real Estate

266

Scotiabank

191

IOS Offices

267

LeasePlan, LeasePlan

193

MBP

268

MBP

194

Marabis Desarrolladora

269

ABC Leasing

195

Guanajuato Puerto Interior

270

Zurich

196-197

Daimler

271

MBP

198

Amistad

272

Jaguar Land Rover

201

CH2M

276

MBP

202

MBP

277

ZF Services

203

PIQ

278

MBP

204

MBP

279

MBP, Pochteca

205

ThyssenKrupp

281

Mikel’s

206

MBP

282-283 Scania

207

FSP

284

MBP

208

Daimler

285

MBP

212

Government of Aguascalientes

286

TBC

213

Robert Bosch

287

MBP

215

MBP

288

MBP

217

MBP

289

MBP

218

Harman

290-291 Volkswagen

219

Volvo

292

Jaguar Land Rover

220

MBP

296

MBP, MBP

221

Covestro

298

UPS

222

MBP

299

UPS

223

Carl Zeiss

300

MBP

224-225 Daimler

301

MBP

226

Desmex

302

Walmart

227

MBP

305

MBP

228

MBP

306

FedEx Express, FedEx Express

229

CIATEQ

307

Daimler

230

CIATEC

308

Gonzalez Trucking

232

MBP

309

Cummins

233

Siemens

311

MBP

235

CIDETEQ

312

MBP, Autotransportes de Carga Tresguerras

236-237 KIA

313

MBP

238

FCA

314

MBP

242

MBP

315

Sitrack

316-317

Daimler

353

MBP

318

BMW

355

MBP

322

SEMOVI

356

MBP

324

CTS EMBARQ

357

Hellmann Worldwide Logistics

326

MBP

358-359 Volvo

327

MBP

360

MBP

328

CISA

361

HSBC

329

MBP

362

Biz Latin Hub

330

MBP, MBP

363

Jáuregui y del Valle

331

MBP, MBP

364

IPN

332

MBP

365

Heidrick & Struggles

333

Cabify

366-367 CIE

334-335 Scania

368

Daimler

336

Uber

372

MBP

337

MBP

375

MBP

338

MBP

376-377 Tesla

339

Promotora Energética E3

379

MBP

340

Grupo Báltico

380

MBP

341

MBP

381

MBP

342

Daimler

382

Volvo

346

KPMG

383

SEMOVI

348

Deloitte, Deloitte, Banco de México

351

Vistamex

Inner front cover - Tesla

352

MBP

Inner back cover - VUHL

CREDITS SENIOR JOURNALIST & INDUSTRY ANALYST: Alejandro Salas JUNIOR JOURNALIST & INDUSTRY ANALYST: Luis Vargas JUNIOR JOURNALIST & INDUSTRY ANALYST: Gabriela Mastache SENIOR PUBLICATION COORDINATOR: Luis Aguila JUNIOR PUBLICATION COORDINATOR: Alexandra Brandt Corstius JUNIOR PUBLICATION COORDINATOR: Franco Romero EDITORIAL MANAGER: Nadine Heir ASSOCIATE EDITOR: Mario Di Simine EDITORIAL DIRECTOR: Vanessa Buendía COMMERCIAL MANAGER: Laurens Schöningh COMMERCIAL DIRECTOR: Jack Miller DESIGN DIRECTOR: Marcos González GRAPHIC DESIGNER: Ailette Córdova WEB DEVELOPMENT: Arturo Madrazo COLLABORATOR: Sophie Murten COLLABORATOR: Alicia Arizpe COLLABORATOR: Brenda Salas COLLABORATOR: Alberto Estrada COLLABORATOR: Paulina Fernández COLLABORATOR: Polet Piñones DIRECTOR GENERAL: Jeroen Posma PUBLICATION ADMINISTRATOR: Alena Lipková ADMINISTRATIVE ASSISTANT: Rebeca Garduño CIRCULATION MANAGER: Ana Cristina Garantón

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