Natural Place to Build Heavy VehiclesMon, 09/01/2014 - 08:54
Q: What are the characteristics of a typical fleet in Mexico?
A: The average fleet age of buses and trucks is 17 years, and for trucks alone, this rises to over 18 years. This is almost double the average fleet age in countries such as the US. The benefits of having newer fleets include more efficient diesel consumption, reduced emissions, and better road safety. Congress is proposing reforms designed to encourage the renewal of fleets. Right now, any bus used on a Mexican federal highway cannot be older than 15 years. However, there is no such limit for cargo and heavy duty trucks. Additionally, there are 140,000 registered carriers, and 80% of those are owner-operators, namely individuals who own between one and five vehicles. Many owneroperators have problems due to their lack of experience in business management. We are therefore working with the government to create a mandatory requirement that owner-operators receive some training.
Q: How rapidly are production levels of heavy duty vehicles growing in Mexico?
A: 2012 saw Mexico produce 138,000 vehicles, of which 104,000 were exported. It turned out to be the best year of heavy duty production in Mexican history. To mark ANPACT’s 20th anniversary, we conducted an in-depth analysis of the export market and concluded that heavy vehicle exports might rise up to 300,000 in the next 20 years. ten years ago, Mexico represented 16% of the North American production of heavy duty vehicles, but this has almost reached 35%. In the same period, US production went down from 75.6% to 60.3% and Canada’s dropped from 8.4% to 2.3%. Mexico is becoming the natural place to build heavy vehicles in North America, and the relocation of manufacturing lines is proving this. The projected growth of exports to 300,000 heavy duty vehicles does not only depend on Mexico claiming a larger market share for production, but also in exporting more to Asia, Australia, and Central America. Last year, Mexico was the seventh largest producer of heavy duty vehicles in the world, the third in America, and the fourth largest exporter worldwide. Ten years ago, Mexico was the ninth largest producer, which shows our rise in terms of production. Now, this sector employs 144,000 people, of which 22,000 are direct jobs, which translates to a current potential to produce 174,000 vehicles. However, 2013 was not the best year for the industry. Exports dropped by 13.4% due to the economic situation in the US and changes in the rules in Colombia. This caused a chain reaction for exports and when sales drop, so does production.
Q: What is the biggest impediment to internal sales, and what can be done to mitigate the current problems?
A: Our biggest concern is the growing importation of used vehicles. Last year, around 40,000 vehicles were sold in Mexico but an additional 12,000 were imported from the US, of which 85% were 10 to 20 years old, and the remaining 15% were over 20 years old. Some rules have been implemented to curb this, with SEMARNAT restricting the importation of vehicles complying with EPA 98 or older regulations. However, these restrictions have not been implemented effectively due to the uptake of an amparo legal procedure, which allows for these rules to be circumvented. If the Supreme Court decides that the new rules implemented by SEMARNAT should be enforced, then it must also resolve the amparo issue. I hope that we can soon decrease the influx of old vehicles in order to improve the national market. In 2007, Mexico sold around 52,000 heavy duty vehicles compared to 40,000 in 2013. This is selling ourselves short as ANPACT predicts Mexico could reach sales levels exceeding 62,000 by enacting legal reforms, providing training, financing, and enforcing scrapping projects.
Q: What measures must be taken to improve access to financing for owner-operators?
A: In Mexico, more than 80% of heavy duty carriers are owner-operators, and these traditionally do not do well in administrating their businesses. The majority of them do not keep accounting records, they sometimes do not even have bank accounts. To counteract this, we will implement administrative training for owner-operators through 2014. Our biggest challenge is that many of them cannot show documents to support the success of the business in order to secure financing to purchase vehicles. We are working with NAFINSA on schemes in which an owner-operator can use a federal permit as collateral for receiving credit. Getting financing from the Mexican government is not cheap. These programs have interest rates ranging from 13-15%, as compared to 4% in Brazil.