Cummins Keeps Bet on Buses for LATAM

Q: How will Cummins’ boost its market share in the bus segment?

A: Cummins is still betting on urban buses as it is one of the main segments that will support the company’s development strategy in Latin America. We had availability issues for some important projects with OEMs already in Mexico and newcomers establishing their operations. Even though this prevented us from reaching our 25 percent target in 2015, Cummins reported year on year sales growth of 3 percent. Thanks to our relationship with DINA, we both reached a 20 percent market share by the end of 2015. We are again forecasting 25 percent participation in the urban sector for 2016 and we expect to surpass that initial target by 2017. During 2017 we will consolidate many projects started in 2014 and 2015, allowing us to reach an overall 36 percent market share that will strengthen our position in the Mexican market.

Following strict EPA and Euro environmental standards, our extensive diesel and natural gas product portfolio will support this goal. Between 2013-2015, we sold more than 1,500 natural gas engines in Mexico for the urban segment. This made Cummins the leading company in eco-friendly solutions compliant with EPA 17 and Euro VI standards. The ISX12G engine has become a popular alternative and we are confident that Mexico’s infrastructure will gradually evolve to accommodate natural gas units.

Q: How did Cummins regain investor confidence leading to a 59 percent recovery in its stock price?

A: Cummins is profitable despite the economic downturn with year on year growth of 3-5 percent in Mexico. NAFTA’s decline in the heavy duty truck market is reducing our exports to the US but our main strategy is to focus on our clients' needs and develop solutions that offer product support and training. Cummins invested approximately US$700 million in innovation and development globally in 2015, creating 76 new and improved products. We expect to reap the benefits in the coming years.

As leaders in the truck engine market our growth is focused on four directives. Cummins built a new logistics

and distribution center in San Luis Potosi. The X-BU began operations in June 2016 and incorporated the latest technology in logistics operations. This increases our storage capacity and optimizes deliveries to our distributors across the country. Our supply chain is a top reason we will become a global and fast-paced company. We are committed to keeping all vehicles equipped with a Cummins engine on the road for as long as possible.

Q: How is Cummins helping its clients achieve their environmental goals?

A: For more than 15 years, Cummins has followed the strictest environmental standards and used technology to aid the reduction of NOx and emissions on diesel engines. We will start construction of a new Technical Center in San Luis Potosi city in 2017. This will boost our remanufacturing operations as we eventually expand the center’s focus to other market segments. Clients can be certain Cummins’ products are clean, sustainable and reliable. The company’s utmost priorities are the values and environmental concerns of any region where it has a presence. Mexico is no exception. Pollution levels in certain regions of the country worry us.

Q: What expectations does Cummins have for the new family of X15 engines presented at the XVI National Merchandise Transportation Forum?

A: We have designed these engines to offer the market a more complete and precise portfolio. The new X15 engines comply with Euro IV standards and with Euro V given a simple recalibration. These engines were developed on the same platform to be used for Euro VI and EPA 17 standards. Although we are waiting for the government to ensure ultra- low sulfur diesel availability and enforce the emission laws to meet these standards. The engines feature an exhaust post- treatment system including a diesel-exhaust fluid solution, eliminating the need for variable geometry turbochargers and exhaust gas recirculation applications. This creates a simpler design with a common rail fuel-injection system and a single camshaft. Our X15 engines will have a significant impact on Mexico’s vehicle park renovation as long as there are strict import regulations for used trucks from the US.