Heavyweight challenges and solutions in Mexico

Miguel Elizalde Lizarraga is the current Executive President of the National Association of Bus, Truck and Tractor Truck Producers, (ANPACT). Simon Duval Smith caught up with him recently and asked him about the challenges facing the heavy vehicle industry in Mexico and how ANPACT works for its members.

ANPACT is a non-profit institution that unites and represents companies that produce heavy vehicles of gross vehicle weight of 6.3 tons and more. It also encompasses companies producing diesel engines, and other institutions related to the sector. It was founded at the end of 1992 . Currently, its membership includes Cummins, Detroit Diesel Allison de México, S. de RL de CV, Dina, Freightliner-Daimler, Hino Motors, International Navistar de México, Isuzu, Kenworth, Mack Trucks, MAN, Mercedes-Benz Buses, Scania, Volkswagen of Mexico, and Volvo Buses.

At the beginning of our talk, Elizalde speaks proudly of the heavy vehicle industry in Mexico but tempers this with notes on some of the challenges facing the sector. “The Mexican commercial and heavy vehicle production industry is a worldwide reference,” he says, adding: “We are the number one exporter of tractor units, the fourth largest exporter of heavy vehicles and sixth largest producer of heavy goods vehicles in the world. Our products drive motor transport, mobility, logistics and international competitiveness.”

On the challenges that face his members, he says: “The main challenge for the heavy vehicle industry is in the domestic market. The motor transport sector is interested in renewing the fleet, but it is facing a series of challenges such as theft of motor transport, increase of insurance policies, the deregulation of fuel prices, exchange rate fluctuations and the lack of a tariff calculation policy that complicate it. The result is a vehicle fleet of more than 17 years old on average. This compromises road safety, the environment and competitiveness.”

Simon Duval Smith (SDS): Can you tell about the OEM-supplier relationship in powertrain procurement and supply in Mexico, both in new engines and transmissions and also in remanufactured units and why are there are no heavy vehicle powertrain makers in the country?

Miguel Elizalde Lizarraga (MEL): Mexico has no engine or transmission plants making new units so a company such as Cummins or another heavy engine maker has not set up here partly because we have many remanufacturers in Mexico and it is a historic situation, the remanufacturers can turn out a hundred as-new engines a day. It is the nature of the modern truck engine that it can be rebuilt to be as good as new several times over. No major engine maker wants to make the investment here. There have been engine plants in the past but when the original NAFTA agreement was made, engine makers carried out analyses and decided to shift the plants back to the US.

SDS: What are the biggest challenges your members face in Mexico - tariffs on imported/exported parts and finished vehicles, problems with just-in-time supply, security of loads?

MEL: Security is a major problem; it has been an issue for the last year in particular, since some highways in the central region of the country are dangerous, especially at night. But planning ahead, with new routes, and adopting different schedules is a way in which this has been dealt with.

SDS: The mix of vehicles produced for domestic and export sales must give your members some particular challenges - are there differences in their component purchasing strategy and export production systems for the various markets?

MEL: We don’t collect information on purchasing strategies of our associates but the main challenge for our members is localising procurement and production - the size and mass of many heavy truck components and systems means that transporting them any distance increases cost much more than with passenger vehicle parts and so this factor is influential in the choice of local suppliers and good and economical delivery routes for parts.

SDS: Have you seen the balance of global powertrain supplier companies and local, Mexican-owned suppliers to your members changing over the years, and how?

MEL: We don’t have specific information regarding how this has changed, but we see more availability of powertrains by OEMs in recent years. This is giving more choice for operators [buyers], which can only be a good thing for our members.

SDS: Can you foresee more localised truck and heavy vehicle production as the US/Mexico border may make it less attractive to import finished trucks?

MEL: With the forthcoming improvements in legislating the border, we don’t see the US/Mexico trade relationship becoming less attractive. If TMEC is ratified, it would be beneficial for the region. [The new T-MEC agreement, signed in June 2019, updates the twenty-five-year-old North American Free Trade Agreement, NAFTA, an agreement that has brought the Mexican and US economies closer. This is particularly significant as a few months ago Mexico surpassed Canada to become the main trading partner of the United States and the largest market for US products.]

SDS: How is the shift between diesel and other fuels moving?

MEL: ANPACT’s heavy duty vehicles use a mix of diesel, hybrid, electric or natural gas. While diesel is still at a reasonable cost, we do not see big shifts but this will change - we expect more electric and hybrid for last mile deliveries but diesel and natural gas will remain as the fuel of choice for longer distance transport.

SDS: How flexible and available is financing for your members' products - are the banks being helpful or will the truck makers need to offer more and more financing packages to sell their products?

MEL: Mexico has some financing promoted by the government, but usually large companies [OEMs] have their own financing companies to support them. These companies can often provide finance in cases where the customer cannot meet the requirements of the banks or the government schemes. 

Automotive Purchasing and Supply Chain Magazine - Issue 32

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