Manuel Nieblas
Partner and Manufacturing Industry Leader
Deloitte Mexico
Alberto Torrijos
Alberto Torrijos
Partner and Consultant
Deloitte Consulting Group
View from the Top

A Technological Future Awaits

Fri, 09/01/2017 - 14:45

Q: How aligned is Mexico with the technological trends adopted by other industrialized hubs?

MN: Mexico has always been regarded as a low-cost manufacturing destination. In contrast, Industry 4.0 implementations require large investments. The moment technology becomes more affordable than human labor, the industry will transform. According to the OECD, Mexico is the least prepared country in sensorization and digitalization. We can already see some robotic and automation strategies but human labor remains the most cost-effective alternative in the country. The problem Mexico faces is that technology prices keep falling and it will not be long before they match the country’s labor advantages. The automotive industry’s innovation-oriented vision will only accelerate this transformation.

Q: How ready are Mexican companies to face technological challenges posed by leading international players?

MN: There are massive technology gaps in the automotive supply chain. SMEs are practically unaware of the advantages these advances can offer and they do not have the necessary resources to invest in advanced manufacturing equipment. The situation worsens when we consider there are no real incentives from the government to incorporate advanced technology in national suppliers, while the industry is not that committed to developing the local supply chain. For years, the driving force in the Mexican industry was to produce more with less. This is no longer enough according to international standards.

AT: Mexican companies are not ready to face the technological challenges presented by the industry; they are more focused on surviving. If these companies do not offer an added value, their products will be commoditized, which will be a huge problem in the next five years due to the extreme competition in the market. The country will keep manufacturing internal combustion vehicles but we will gradually see how companies make way for electrification. Small suppliers must find a way to enter the production chain or they will meet their end.

Q: How will connectivity and advanced technology permeate the development of automotive technology?

AT: Technology integration is propelling the industry toward a global strategy of connectivity between processes in manufacturing and between vehicles and infrastructure regarding the end product. Cars operate with over 1 million lines of code and the industry’s goal is to capitalize on the information gathered from both products and processes.

Connectivity and advanced technology will play a defining role in the industry’s future, not only in manufacturing but also for the end user. The world is changing its focus toward mobility and we expect the industry to transform in four stages. We are already looking at a first shift in mindset related to ownership and assisted driving. Once users ditch the idea of ownership, the market will move into a new phase of shared economy. The third stage in the industry’s transformation will be full autonomy, which will eventually lead to a sharing autonomy future where data collection and analysis will be crucial to ensure safety and overall functionality.

Q: How attracted is the Mexican consumer to autonomous and connected features in their cars?

MN: According to our Global Research on automotive consumers, Mexican clients are more focused on safety- oriented technology and security features, such as how to track vehicles remotely. Although this is not new to the industry, it is the basis for connected innovations and an autonomous future.

AT: Although the first priority for the user is safety, we found that clients are willing to pay more for advanced technology features in their vehicle. Mexican consumers are among those willing to invest more in new technology compared to other users in the international market. Our research shows that members of the Y and Z generations are open to spending MX$35,000 (US$1,900) for advanced technology, particularly in greener powertrain alternatives.