A CLEAR ROADMAP FOR REACHING MARKET POTENTIAL
Q: What are your projections regarding the contraction of the domestic market?
A: The projection we made at the end of 2017 regarding domestic sales in 2018 expected a wholesale market of 41,000 units and retail of 40,000 vehicles. We closed 2017 with 40,756 units sold through wholesale and 41,765 through retail, which means sales would remain stable in wholesale and we could see a contraction of 4.3 percent in retail operations. However, we also performed a market analysis in collaboration with UNAM and its Economics School that showed the maximum potential demand of the retail heavy-vehicle market would be 66,900 units if we operated under optimal conditions.
So far, we are 28 percent below the industry’s best-case scenario. Between January and June 2018, we have seen a fall in wholesale of 9 percent and a 1 percent decline in retail. We come from an already lower result in 2017 of 6.8 percent in wholesale compared to 2016 and 5.2 percent in retail. We do anticipate, however, a pick-up in purchases ahead of the two regulatory changes that are expected to come to the industry. NOM-012-SCT related to road safety will be enforced on Jan. 1, 2019, while NOM-044-SEMARNAT will move the industry to Euro VI and EPA 13 from Euro IV and EPA 04 in a process starting on Jan. 1, 2019 and finishing two years later on Jan. 1, 2021.
Q: How have the NAFTA renegotiations impacted the heavy-vehicle sector?
A: We do not make forecasts regarding production and exports but we have noticed gradual recovery in the market, particularly in export operations. Between January and May 2018, exports increased 26.0 percent while production volumes rose 8.9 percent, although we must consider that we are still operating under the trade conditions established by NAFTA. At the moment we have not seen any impact related to the renegotiation of the treaty, but the US administration has already implemented tariffs of 25 percent and 10 percent on steel and aluminum, respectively.
Q: What should be the industry’s priorities to help the domestic market realize its true potential?
A: There are five key areas where the industry should focus. The first is what we call green incentives, which are related to new environmental regulations. Considering the added investment necessary to purchase new, high-tech units, the government will have to provide incentives for companies to renew their fleets. These will also be crucial for fleets to purchase new vehicles in line with the new standards stipulated by NOM-044-SEMARNAT. Second, we must improve the financing conditions offered by development banks. So far, OEMs’ financing arms offer more attractive loan options so development banks must step up their game to support the industry, particularly at the owner- operator level.
Professionalization is the third issue we must tackle, not referring in this case to operators but to micro, small and medium road-carrier companies. Most of these players are family companies that have never received training on how to best administer their business. We have developed several training plans over the years but we think these should be compulsory and tied to the financing offering and the availability of green incentives.
Our fourth focus refers to the modernization of regulations. All revised regulations should consider the latest technology, particularly regarding safety. This area has gradually improved and as an example, ABS braking systems will be mandatory starting on Jan. 1, 2019 for all vehicles registered at the federal level.
However, what is still lacking is vehicle inspection, which is our fifth priority. Vehicle inspection should be the promoter of fleet renewal but we have to promote more transparency. Vehicles that do not comply with emission standards and service criteria should be removed from highways.