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News Article

The New Auto Sector Needs Technology

By Antonio Gozain | Thu, 09/23/2021 - 11:11

You can watch the video of this presentation here.

Technology and digitalization had steadily been changing the automotive industry for the past few years. However, the pandemic accelerated these processes, pushing the sector to its biggest transformation in the century, according to Edgar Estrada, General Director of Volkswagen Brand Mexico.

“We had been working with innovative projects in Mexico years before COVID-19, but when the pandemic hit everything was pushed forward. For instance, in 2019 we started working with a mobile application so our customers could watch their car service on real time and receive online quotations and budgets. The goal was to deliver the app by 2024 but the pandemic changed everything and the pilot version was launched two weeks ago,” said Estrada.

Volkswagen takes innovation seriously and recently announced the implementation of AI and robotics in its North America plants, including the two located in Mexico. This will increase their productivity by 30 percent. The German automaker will also invest US$1 billion during the coming years in its three plants: Silao in Guanajuato, Chattanooga in Tennessee and Puebla. Volkswagen’s goal is to implement technology such as cloud software, intelligent robots and AI, which require exhaustive training and capacitation. With the unified software launch, the automaker will be able to optimize collaboration between its plants, upgrade the work environment for its employees and suppliers and improve the overall manufacturing process.

Despite the pandemic, Mexico is still considered an attractive market for foreign investment. The Mexican economy is in the Top 20 worldwide, according to the World Bank. Mexico holds great potential for the automotive industry thanks to its young, 28-year-old average population, and the possibilities to access to bigger percentages of the population. The big opportunities will come once the inequality that prevails in the country is addressed. Only 5 percent of the 129-million population is able buy a new car, according to Estrada, but there are between 1 million and 1.5 million units available for sale in the Mexican market.

During 2020, the Mexican industry went through its worst period in modern history. In April, less than 35,000 light vehicles were sold. One year later, sales bounced back to over 83,500 units, a 139 percent increase, according to INEGI.

In addition to the impact COVID-19 caused in sales and exports, the pandemic boosted shortages in supplies, mainly semiconductor chips, which have become essential as automakers move toward electric vehicles (EVs). The semiconductor shortage disrupted supply chain across the world and by the end of 2021, they impacted the production of over 10.5 million units globally and 2 million units in North America, according to IHS Markit.

“Semiconductors shortages have forced us to adjust our sales levels across the world, including Mexico. These are challenging times, no one knows when the supply chain will return to normal. It has become a bottleneck. However, we took advantage of those times when production stopped to strengthen our processes,” said Estrada.

Electrification is arriving everywhere, according to Estrada, who explained that Volkswagen has already an important presence with EVs in countries where infrastructure is ready for this technology, such as the EU, the US and Canada. Mobility is eventually going to become electric in Mexico, but combustion engines and HEVs will continue to dominate the Mexican market, according to industry experts.

“Volkswagen has the ID family of EVs across the world. Our future vision includes bringing them to Mexico, which is why we continuously work with other brands and the public and private sectors to generate synergies and make electrification a reality for Mexico in the near future,” said Estrada. Interconnectivity and dynamism are key to the light vehicle market, especially as SUVs take the spotlight in North America.

Technology continues to drive drastic changes in the automotive industry. Volkswagen is embracing digitalization and opened the first City Store of North America in Mexico City and one of its first five in the world, according to Estrada. “This is the new way to interact with customers. During the past 100 years, clients visited traditional dealers. City Store is a completely different concept, with a new customer journey where clients will see the vehicles through augmented reality, interact and receive online quotations and assistance.”

While the industry continues moving toward electrification, technology also continues changing the way production, sales and exports work. It will also continue improving the entire customer experience, from driving to car service and second-hand market.

Antonio Gozain Antonio Gozain Journalist and Industry Analyst