Supply Chain Forces Efficiencies Elsewhere

A weak supply chain continues to be an area of opportunity for the Mexican automotive industry, while also forcing companies to find efficiencies in other areas of the manufacturing process, says Alejandro Veraza, Managing Country Director of TI Automotive, which develops and produces automotive fluid systems. “Much of our product content comes from the US, Canada and Europe. Since suppliers based in Mexico do not make up as strong a supply chain as it could be, we have to import more raw materials than we would like,” says Veraza. “Knowing what raw materials cost has led us to make our logistics and distribution operations as inexpensive as possible, negotiating with suppliers and looking for efficiencies in-house when possible.”

While improving the industry’s supply chain has long been on the agenda of both the government and private companies, Veraza says that in most cases the investment needed to start producing new components largely exceeds the benefits. “The acquisition of new equipment for Mexican companies keen to branch into new products makes manufacturing these components comparatively more expensive for new entrants.” TI Automotive, which has more than 120 manufacturing locations in 29 countries, has chosen to source the needed pieces from outside Mexico. “We have been able to source these pieces from less convenient locations from suppliers that require less financial cushioning as they already supply several other companies,” says Veraza.

Although the supply chain remains an opportunity area, Veraza believes the country and the industry should focus on its most important selling point: human capital. While automation can be beneficial for safety reasons, companies that choose to bring production to Mexico tend to be looking for competitive personnel. “Although automation can offer competitive advantages in other countries, to date the absence of automation is one of Mexico’s selling points. If a company were to automate a process, it could do so in Germany, France or Canada,” he says.

TI Automotive is a strong participant in the industry. At least 40 percent of the Mexican automotive industry uses one of TI Automotive’s products and Veraza says that there is still room for growth with new companies like Daimler and Audi, as well as Ford’s increasing operations, despite the San Luis Potosi plant suspension.

The company has remained a steady player in the industry, consistently gaining market share, partly because of its focus on safety. “All clients want safety to be taken care of,” says Veraza. “Not only do buyers want products that adhere to high-safety standards, companies look to contract suppliers with safe distribution channels and in-house processes.”

TI Automotive ensures everything within logistics, manufacturing and personnel respects health and safety standards. “Safety has become the most important topic in the automotive industry,” he says. In an attempt to make the products they offer for traditional fuel-engines even safer, the company continue to develop technology that reduces the complexity of vehicles by using fewer components. “The lower the number of seals or joints in a system, the lower the probability of leaks,” says Veraza.

Although TI Automotive excels in high-risk components such as fuel distribution and braking systems, Veraza says the company does not foresee a market share reduction due to the shift from combustion engines to electric vehicles. The company has already taken measures to participate in electric vehicle development and Veraza says this will ensure TI Automotive maintains a healthy market share.

“We do not expect our gasoline products to become obsolete as soon as 2025, when many believe that electric cars will overtake fossil-fueled cars in market penetration.” Particularly for Mexico and Latin America, Veraza believes the adoption process for this new technology will take longer, so he predicts an extended need for their current components in the local market. “Until electric recharging technology develops, we see gasoline and diesel cars dominating the automotive sector in most geographical areas.”