Preparing for Advanced Standards in Urban Transportation

Q: How has your strategy to gain a greater market share within the coach segment evolved over the past year?

A: Daimler Buses remains a market leader in the urban transportation segment, currently holding a 50% market share. The coach sector is a bit more challenging due to the difficult exchange rate situation and the tax increases that have directly affected our operating costs. The strategy of changing our invoices from dollars to pesos was an important move to stabilize our business, eliminating the risk that our clients might perceive. The problem remains, but we can help our customers during this challenging time.

Q: How does your Nuevo Leon plant collaborate with Daimler’s Mexican operations?

A: This facility shows our engagement with the Mexican market and it gives us an opportunity to show our top- quality production to our clients. Customers can get involved in the manufacturing process from day one, so they can be sure of the quality standards in Daimler’s production. For us, quality does not start with inspections or when we deliver the vehicle to the customer, it goes all the way back to the materials and the most basic production processes.

Our coach line was added to the Nuevo Leon production in 2012, introducing Euro V technology to our units. We plan to complete our portfolio with this standard by the end of 2015, strengthening the leadership position we have established over the last few years. Together with our joint- venture partner Marcopolo, we provide a total of 5,000 direct and indirect jobs in Nuevo Leon. Furthermore, if we add all segments within Daimler Group, we employ more than 7,000 directly.

Q: What barriers need to be overcome in order to advance units from Euro V to Euro VI standards?

A: There are certain conditions that need to be met in order to allow this evolution. Firstly, all operators need ultra-low- sulfur diesel (ULSD) availability throughout the country. If companies are going to invest millions on this new technology, they need to make sure the infrastructure is ready to support it. The second factor is how ready the market is to receive these new products. A Euro VI unit represents a 10% to 20% cost increase in the chassis, depending on whether you go from Euro IV or Euro V to Euro VI. Therefore, we need to determine if we can absorb 20% extra costs, and if the client will be capable of tackling a 20% price increase. This links to the third factor, regarding the incentives the government could offer to support this technology.

Q: What opportunities is Daimler Buses pursuing in the fields of natural gas and hybrid technology?

A: Natural gas is still a growing market and we are currently participating with the Torino CNG and the Gran Viale LE CNG. Given the exploitation and production operations in the country, as well as the huge availability of natural gas reserves, this technology is perfect for Mexico, especially in BRT systems. Nevertheless, the country still needs the proper network infrastructure to function properly. These units are an important part of our business, but there will always be remote areas in the country, which means that diesel will remain the main fuel to transport cargo and passengers. In Europe, we have seen that hybrid unit sales are overtaking natural gas buses. Nevertheless, the infrastructure for these products is not yet complete. Furthermore, we need to train our dealer and our service network to understand these systems, given that they deal with high-voltage and other applications that require a truly specific level of expertise. The biggest benefit these vehicles offer is fuel efficiency, and part of Daimler’s strategy is to improve the total cost of ownership of all its units. Manufacturing the vehicle is the easy part, but we want to be involved in the whole lifecycle of the unit.

Q: How have your online and mobile platforms developed, and how are they changing your value proposition?

A: Our new Bus Builder app can interact with the different parts of the vehicle, allowing the clients to configure their bus according to specific requirements. The software offers diverse choices regarding the complete driveline, as well as details like curtains and seating colors. Furthermore, the platform takes into account all the financial alternatives the client can use, to create the most adequate plan for the unit. Online platforms are a global trend in the company, and every branch of the group is introducing a mobile solution in its operations.