Strenghtheing the Argument for Natural GasTue, 09/15/2015 - 16:19
Q: How has Cummins evolved since 2014, and what new trends have you detected in the industry?
A: Cummins did not have significant presence in the bus segment, but by the end of 2015 we will reach a market share of 25%, and we expect to exceed 50% by 2016. The popularity of natural gas engines has also skyrocketed, and now they represent close to 30% of our business in the bus segment. There are real economic advantages of natural gas, given that it represents fuel cost reductions of around 40%. Natural gas is a growing trend in the industry, and we have now commercialized more than 1,000 of these engines in the market.
Q: What are the highlights of the recent business growth of Cummins in Mexico?
A: In terms of new business, we have gained an important presence in the light truck segment. We are collaborating with International for their JAC and City Star production, and have therefore grown to a 23% market share. We are selling 3.8l and 2.8l engines, which is a completely new area for Cummins, and we are starting production of our new 5l engine that will be used in the new Nissan Titan 2016. Current invoicing of our Mexican plants is close to US$1.2 billion annually, and our internal sales represent US$900 million. Considering that 80% of the local production is destined for export operations, Mexico represents approximately US$2 billion for Cummins. We just added a really modern DPF line in Ciudad Juarez and our filter plant is expected to produce 40 million units by the end of 2015.
Q: Which technology trends define the future development of the heavy-duty vehicle industry?
A: The preferred technology in the passenger segment will be natural gas, but diesel will remain strong in the truck market. Nevertheless, we are already carrying out tests with natural gas engines for trucks, and our clients are extremely pleased; the problem is how to recharge the units quickly in any location, given that we do not have the proper infrastructure. By 2018, the government will introduce a new emission norm that will make ULSD mandatory for every unit. However, the cost of a diesel engine, with all its necessary components, is exactly the same as a natural gas engine; the only difference is that you get 40% fuel savings with the latter. Furthermore, natural gas engines have the advantage that fuel cannot be stolen. The only problem we have with natural gas engines is the resale process. Most clients do not know how to sell their units, and even with these new regulations it might be a difficult process. Nevertheless, people are accepting this technology and we expect to see significant engine replacements by 2018. Furthermore, with these new regulations we are looking to evolve to Euro VI and EPA 2017, bringing our market in line with international standards. We will have this technology ready to be implemented in Mexico by 2018.
Q: Which role does Mexico play in Cummins’ global R&D strategy?
A: American companies are now creating technology hubs and Cummins is following suit. At the moment, we have four R&D centers, one in the US and the others are in England, China, and India. China and India were chosen because they had really specific requirements in terms of repairs and maintenance. Furthermore, specialized engineers are much cheaper in India, and there are several simulators in this country that eliminate the need for excessive testing. Following that strategy, we develop every component in China, England or the US, and afterwards we send them to India to be tested with testing models. This limits the R&D possibilities we could have for Mexico, but does not mean we have no plans for the country.
Nowadays, San Luis Potosi maintains the global manufacturing process for Cummins, and is where we repurchase our engines before replacing them with remanufactured units. That way, we can reuse most components, implementing them into customer units with the same warranty as any other new product. The advantage is that these engines are 60% to 70% cheaper than completely new units. With this process, we are currently producing close to 240 engines daily, significantly extending the productive lifecycle of our equipment. We are working closely with CONACYT to support remanufacturing technologies, and all these developments are coming from Mexican engineers. Additionally, we are developing a technical center that will be opened by the end of 2015, and is dedicated to these remanufacturing processes