Trusted Partner to Mexican Coach Fleets

“Mexico’s transportation vehicle market is unique and has almost nothing in common with other markets in the world,” states Igor Fernández, Director General of Irizar. As a Spanish-based builder of luxury coach vehicle bodies, Irizar has acquired vast experience in coach manufacturing and quickly realized Mexico’s particular conditions after its arrival in 1999. This prompted a restructuring in the company’s vision, ranging from the adjustment of manufacturing practices to the creation of strategic partnerships and tailored supply chain development. “As a result of the efforts made to understand the local market, Irizar currently has 60% of the market share in the luxury vehicle segment,” states Fernández.

One of the most salient characteristics that Irizar has identified in Mexico’s luxury vehicle market is its immunity to the problem of imported vehicles from US, which poses considerable difficulties for other sectors. “This does not represent a problem for Irizar as the technical specifications of our products in the US are completely different from the ones in Mexico,” explains Fernández. In fact, he believes the efficiency that Mexican companies expect to have in their units is higher than what US coach manufacturers are able to provide. Fernández attributes the sophistication of the luxury vehicle segment to the fact that buses are still the preferred transportation mode in Mexico. “You cannot get everywhere in the country by plane and even when you can, air travel remains expensive while there are no other alternatives like trains,” Fernández explains. With a huge volume of people travelling by bus per year, companies like Irizar see that Mexican passengers know how to identify differences between each bus brand on the Mexican market. Customer demand for high added value bus services in terms of security, entertainment, and comfort has sparked fierce competition between bus companies. “In response, Irizar has attempted to differentiate itself from its competitors by adapting its products to the Mexican market and being flexible enough to provide customized solutions to its customers,” says Fernández. Irizar’s main customers include Grupo ADO, Primera Plus, Flecha Amarilla, Estrella Blanca, IAMSA, and Grupo Toluca, among others.

Irizar does not use a distribution network but carries out its sales personally in order to maintain close relationships with customers, with Fernández saying that “most of Irizar’s customers have been with us many years, so there is already a common understanding and trust.” Irizar also distinguishes its business model by its horizontal structure, allowing for quick decision-making. Fernández believes that this structure allows Irizar to implement changes faster than any competitor from the engineering and design to when the vehicle is produced. In Europe, Irizar is currently manufacturing an integral coach after acquiring the complete know-how to do just that. In Mexico, however, production follows the traditional model, building the coach with an operational chassis. Fernández says that there has been no identified need to develop the new manufacturing business process in Mexico. This is largely due to the strong, strategic partnerships that have been developed in this market. One of Irizar’s strongest partnerships is with Scania, and the two companies collaborate closely to develop and integrate their products. “Scania’s core business is the power train of the bus and Irizar’s core business and strength is the bodies, so we complement each other very well,” explains Fernández.

To maintain a flexible business model and rapidly adapt to market needs, a strong supplier network is essential. “60% of Irizar’s supply chain is located in Mexico,” comments Fernández, adding that “most of these suppliers have started with Irizar and we have developed together. These suppliers must share Irizar’s flexibility in order to keep up with the continuous growth and technological advances.” 40% of the supply chain is still located outside of Mexico for logistical reasons, with Fernández explaining that Irizar uses one single source for critical components to service all the plants worldwide due to the volume and investment involved. On a general level, Irizar’s supply chain in Mexico is strong, but Fernández believes there is still room for improvement, conceding that “the need for local suppliers should encourage existing suppliers to meet the needs of the market in terms of quality, price, cost stability, and other factors that help make the customer safe.”

While fleet companies grapple with rising fuel prices, vehicle manufacturers like Irizar are tailoring their vehicles to provide sustainable and fuel efficient solutions. Manufacturing luxury vehicles that uphold fuel efficiency qualities requires raw materials that are sometimes difficult to source. Despite these procurement challenges, Irizar has a strong program to reduce the weight of the units, since fuel efficiency is a proven way to increase market share. However, Fernández states that the trend for better fuel consumption is still in its early stages in Mexico. “In Mexico, Euro IV has been required for the last years but since January 2014, Europe has moved on to Euro VI. This shows there is still a lot of inconsistency. Companies are investing in units containing the lightest technologies to improve their fuel consumption and reduce emissions, but they are also forced to abide by conflicting rules. This is part of the Mexican reality,” he says.