Carlos Pardo García
Director General
View from the Top

Success Depends on Offering More Than Great Trucks

Tue, 09/15/2015 - 16:13

Q: What are the main factors influencing the development of the Mexican heavy vehicle sector?

A: 2014 was a complex and unusual year because, while the country was doing well from a macroeconomic standpoint, the overall heavy vehicle market decreased by almost 15%. Consumption indicators went down almost 4% in 2014, directly impacting the transportation of goods, and the lack of incentives within the reforms has not convinced companies to renew their fleets. These two factors were some of the main reasons for this decrease in the market. For a country the size of Mexico, 30,000 units is nothing; there should be a market of 80,000 or more. By the end of 2014, we had sold around 8,000 units, which was a huge success in terms of volume. The important result of the year was that Navistar was the only brand that gained market share. We grew three points in market share in that tough time, so we were very successful in this competitive and challenging environment. This year we are targeting around 8,500 units sold because the market has plateaued.

There are constant constraints on our customers’ profits, which cannot be raised since their costs and expenses are growing. The increasing price of diesel is hurting them in this respect, as well as the cost of drivers. In order to be more successful and profitable in the market, transportation companies will have to be more efficient, which means having better trucks, better maintenance, and better solutions to issues before they arise.

Q: How is Navistar planning to approach these challenges and deliver solutions to its customers?

A: Navistar has the widest set of services in the sector, and our slogan is “more than great trucks”, which we truly believe in. We understand that we have to develop the best truck in the market, but even that is not enough. Our portfolio therefore also includes financial services, insurance services, roadside assistance, and dedicated maintenance. The latter enables us to take control of our customers’ workshops and perform the maintenance for them, leaving them to focus on their core business. Now we are looking at the next step, which is our OnCommandTM brand services, one of which is called OnCommandTM Connect, which uses a full telematics tool that can tell us in real time what is happening with the truck, as well as determining the driving habits of the drivers. This is one of the key issues to help our customers to become more profitable in the future. We currently have over 1,000 units running with our OnCommandTM tool and our goal is to increase that figure to more than 5,000 this year. An additional feature of OnCommandTM Connect is the Repair Advocate, which can monitor our customers’ trucks 24/7, enabling us to react to any issues in the shortest time possible.

Q: In what ways does Navistar approach the design of its dealerships in order to accurately convey the goals of the brand and the benefits for the customer?

A: This is one of the paradigms that are changing in the industry. In the future, I do not see customers frequenting dealerships as often as they do now. Even so, our dealerships have been designed for simple and fast transactions. Showrooms are becoming less and less necessary as we are taking demo trucks to our customers. This gives them a better overall experience with the vehicle. Our dealerships are primarily used for service and for parts, so trying to create a unique experience is very difficult. We have developed a system called SAVI, which is a quick guide that takes our salespeople through the questions and answers that arise during a sale. This has been positive for the company and has produced extraordinary results. We also have a team that evaluates our dealerships around the country, certifying that they are all operating in the same way. Creating the best dealership experiences is very challenging, very demanding, and very costly, but the rewards we get from our customers make it worthwhile.

Customers expect the dealer to bring the vehicle to them, rather than visiting the dealership themselves. Customers are also becoming more knowledgeable, which is changing the game. At the same time, the concept of brand loyalty is changing, but it is not disappearing. In the past, heavy vehicle customers were loyal because of a working history with the brands, but also because of personal connections with the dealers. The new generations will only be loyal to the brands that help them to be profitable through value added services.

Q: How was CityStar welcomed in the Mexican market after its launch in 2013 and what new models are you launching in 2015?

A: Even though we have never been big players in this segment, the International power of the brand helped to enter the market with ease. Mainly in class 5, the buyers of these trucks are completely different, so we had to adapt our sales force and our dealers in order to help them. Class 5 was like a match made in heaven for Navistar. Our growth was very fast in the first year, reaching almost 8% of market share, even in such a competitive market with a lot of players. Our plan this year is to reach a double-digit market share. We will also be launching a Class 4 and a Class 6 this year, in order to have the most complete portfolio. Additionally, we are preparing to launch a new engine for Class 3 with more weight capacity.

Q: How is your relationship with NAFIN helping to develop Navistar’s new generation of trucks?

A: We had a great year with our finance company, financing almost 50% of the trucks that we sold. We launched a fair market value leasing program which was a complete success as we leased almost 1,000 units through that program. Now, we have developed a new program with NAFIN for owner-operators and smaller fleets, as well as a program with the Mexico City government for food trucks, also with NAFIN’s collaboration. Navistar is the only brand offering these programs right now. There are four programs that we run in total, one with CANACAR, one with CONATRAM, one with the Mexico City government, and now we are the only brand working on the scrapping program that was just launched with NAFIN.

Q: Why do you think the other brands are one step behind on the scrapping program?

A: They have not yet seen the value of it. We have been working with NAFIN for many years and we love to work with development banks because we truly think that this is the only way to grow the market. We have to get into markets that have been forgotten by the industry for years. The average age of the Mexican fleet is over 18 years, but this will be difficult to change without the help of development banks. Last year, we launched a program called Truck-A- Punto, which is our effort to become a big player in the used truck market. We are developing used truck dealerships that, depending on the territory, are sometimes behind our current new truck dealerships while in other cases these will be completely new and independent dealerships. The idea is to offer an experience that is similar to the experience we provide for new vehicles. Used truck customers will have access to credit, warranty, insurance, and all the other things that we offer. In order to be successful in this field, we need the development banks to support us. As a company, we believe that the used truck market has to professionalize in order to grow the new vehicle market.

Q: Which programs are you most proud of, and what goals do you intend to reach during your time at Navistar?

A: The two things that make me proud, and that will make a difference to the company in the future, are the Integral Solution Initiative and the launch of the light trucks segment. The Integral Solution Initiative is a strategy to build solutions for the whole portfolio, shifting the way that business is viewed in the future. This includes Vision 2020, which will represent large growth for us in the market and within our overall economic mainframe. I was personally there from day one for the launch of the light trucks segment, which was a game changer for Navistar. Mexico is the only country where this is happening so we currently have the attention of the entire corporation to see if they could apply this strategy to other countries.