Mexico Automotive Review 22/23

9th Edition | October, 2022

Introduction

As the automotive industry faces arguably its biggest transformation in history, players across the supply chain continue to adapt to ongoing changes and disruptions, including the war in Ukraine and its global impact, rising inflation and growing energy and transportation costs.

While production has yet to fully recover following the COVID-19 pandemic and subsequent component shortages and logistics constraints, Mexican suppliers continue to innovate and embrace disruption to renew product portfolios and meet OEMs’ changing demands, as the latter continue their transformation from automakers to mobility providers.

Despite the ongoing challenges, the automotive sector continues its push toward sustainability, which is driving further innovations within manufacturing processes, material technology, transport and electrified vehicles. This is in addition to the growing adoption of alternative fuels for heavy vehicles in Mexico.

By the end of 2021, Mexico became the fourth-largest exporter of auto parts in the world. The country is expected to keep growing in this regard, thanks to USMCA and the benefits it has brought to the national automotive industry. Mexico will have exported about US$80 billion in auto parts by the end of 2022 to the US and Canada, far beyond the US$34.8 billion in auto parts imports. Meanwhile, nearshoring continues to gain traction, representing a significant area of opportunity to continue developing the local supply chain.

The latest edition of Mexico Automotive Review gathers the insights and projections of key decision-makers in the sector, providing an insiders’ perspective regarding ongoing industry transformations alongside in-depth analyses. From logistics and technology partners to OEMs, Tier 1s and Tier 2s, those shaping the automotive sector share their expectations for a key component of the Mexican economic engine.

Table of Contents

Introduction

2

State of the Industry

4

Powering the Vehicles of Tomorrow

21

Manufacturing Trends

39

A Digital Era

56

OEM of Tomorrow

74

1

State of the Industry The automotive industry is experiencing a dramatic transformation. While this sector recovers from the upheaval of the COVID-19 pandemic, it must also adapt to numerous other issues, including trade conflicts and the war between Russia and Ukraine.

Although the hostile international context challenged the sector, it also gave it opportunities to improve. Digitalization, the acceleration in innovation and the nearshoring effect are being leveraged by the industry to shift the crisis into an opportunity.

Meanwhile, the efforts to achieve net-zero carbon emissions and an interconnected ecosystem have accelerated worldwide.

This chapter will explore how the automotive industry in Mexico is facing continuous challenges. It will also address the resilience built through new procurement strategies and how the sector is progressing to transform the vehicle into a more sustainable, connected and efficient solution to meet new mobility demands. Additionally, State of the Industry will cover how the industry is capitalizing on the commercial opportunities related to USMCA and Mexico’s role in supporting the North American region in the transition to electrification.

The world's 7th largest automotive technology company FORVIA provides solutions for safe, sustainable, advanced and personalized mobility.

1

State of the Industry

7

Analysis Industry Transformation Demands Future-Proof Procurement Plans

8

Expert Contributor José Zozaya | Executive President | AMIA

9

View From the Top Karen Lellouche | Managing Director and Partner | BCG

10

View From the Top Daniel Hernández | Director General | Queretaro Automotive Cluster

12

View From the Top Francisco González | Executive President | INA

13

Analysis Macro Challenges Lead to a Stronger Supply Chain

14

View From the Top Manuel Montoya | President | CLAUT

15

View From the Top Boris Franchomme | Managing Director | Sparx Logistics

16

Conference Highlights Building Resilient Supply Chains Through Communication, Alliances

17

View From the Top Ingo Babrikowski | CEO | Estafeta Mexicana

18

Conference Highlights USMCA Brings New Challenges to Mexico’s Automotive Industry

19

View From the Top Wilfredo Ramos | President | UPS Latin America

20

Content Links

State of the Industry | 7

Industry Transformation Demands Future-Proof Procurement Plans With growing pressure on automotive suppliers across the world due to raw material and semiconductor shortages, procurement strategies have become increasingly important for OEMs. While the global supply chain still faces disruptions, automakers are finding ways to secure component supply, from negotiations to vehicle design changes.

Disruption has become the new normal in the automotive industry following the COVID-19 pandemic, the US-China trade war, the Ukraine-Russia conflict and inflation, among several other factors. These events have put the sector in a difficult position and procurement is playing an increasingly important role within OEM operations. Automakers rely heavily on their supply chain to survive and they have normally favored a single partner supplier, making them “far more vulnerable to external shocks,” according to TD Economics. Among the challenges that Chief Procurement Officers are facing toward a more strategic approach, Deloitte highlights five: how to stay on top of technological developments, how to empower and equip teams with the new skills required in a rapidly changing technology and supplier landscape, how to create future-proof procurement organizations that incorporate new agile work models and automated operational processes, how to make the most of new cloud-based procurement systems and how to establish an effective and fast innovation sourcing process.

A key component for strategic sourcing is cost reduction.

Efficient logistics play an essential role for automotive manufacturing operations and technology has enabled logistics partners to offer better solutions to clients, says Milton Magos, Country Manager, UPS Supply Chain Solutions: “All technological innovations must be applied to automotive logistics. From route optimization, traceability and fuel savings to the overall reduction of the supply chain’s carbon footprint.”

The COVID-19 pandemic evidenced areas of opportunity in the supply chain. The biggest impact on the automotive industry has been the semiconductor shortage, David Pineda, Head of R&D Queretaro and ADAS Mexico, Continental, told MBN. “(Shortages) spur us to increase development activities. When a component is not available, we kick off a redesign process to look for alternatives with available components. This redesign needs a complete series of validations to ensure that the final product works perfectly.” Reacting faster to changes in the market is crucial for companies and OEMs, added Karen Lellouche Tordjman, Managing Director and Partner, BCG. “Securing supply is all about diversifying the supplier base and understanding where the risks come from,” she told MBN. “Manufacturers have calculated their risks in a very detailed way by vendor, supplier, network, location and material. This will allow them to monitor disruptions in real time, as much Read the complete article More about this topic

as possible. A best practice to achieve this fast reaction is to create risk indicators and track them to anticipate outcomes depending on what happens in the market.”

I

mplementing responsible action to reduce emissions for the sake of the planet has now become more essential than ever.

Remaining committed to the fight against climate change is one of the automotive industry’s main priorities. The electrification of the automotive sector would contribute extensively to the

fulfillment of the UN Sustainable Development Goals. According to UN estimates, this would lead to a substantial reduction in CO2, potentially 2.4 gigatons, which would represent fuel savings of close to US$85 billion in the 2016-2050 period.

The accelerated growth of cities entails not only a mobility challenge but, also, challenges related to climate change mitigation and healthcare for the population. Automotive companies and governments worldwide have set the electrification of the vehicle fleet and its operations as a priority in the coming decades. In the transition to electromobility, multiple interrelated factors converge, including climate change, energy efficiency, clean and renewable energies, industrial competitiveness, research, development and

State of the Industry | 8

innovation, especially in countries where the automotive industry

Sustainable Mobility Is Essential for Mexico, the Future Planet José Zozaya Executive President | AMIA

is part of the production and export matrix. For this reason, the promotion of the electrification of fleets and sustainable mobility is being accompanied by comprehensive public policy strategies developed with the industry to mitigate emissions and, at the same time, promote industrial competitiveness.

The automotive industry is undergoing an accelerated global transformation that will change the way we understand mobility and will require profound changes in the very way in which vehicles are produced. Electric power, its capacity guarantee, and the way it is produced will be among the most important elements defining the destiny of where the vehicles of the future will be produced.

Thus, the Mexican Association of the Automotive Industry (AMIA) is committed to providing the best technologies to help solve these problems and, together with governments, take on the challenge of promoting public policies that facilitate electrification of fleets and sustainable mobility.

To achieve sustainable and comprehensive mobility, electric vehicles must break into the passenger transport system, freight transportation and logistics vehicles as well as compact vehicles for public and private services, without forgetting the support infrastructure required. This will require bold and coordinated actions from the public and private sectors to optimize technology transfer, seek manufacturing incentives, and adopt public policies that allow users to access electrified vehicles.

Currently, hybrid-electric, plug-in hybrid, extended-range electric and battery-electric vehicles are already a real alternative to internal combustion vehicles in Mexico. The strategy toward the transition of electromobility in our country must establish specific objectives and goals for the reduction of greenhouse gas emissions in the short, medium, and long term. The transition to electromobility in Mexico still requires: + Implementation of a comprehensive public policy that includes the appropriate legal framework to promote and regulate the use of new technologies.

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+ Support for potential consumers of hybrid and electric vehicles with tax and non-tax incentives. + Promoting the growth of the network of charging stations. + Supply of energy from renewable sources at competitive prices, which is essential to attract new investment projects in electromobility.

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from the

Q: With ongoing supply chain disruptions, logistics challenges and semiconductor shortages, what is the near-term outlook for the automotive industry?

A: Demand will continue to outpace supply in 2022 and probably 2023. This will depend on how long the war in Ukraine extends and what happens during and after. OEMs at the moment are raising prices to improve margins.

One of our surveys has also shown that due to shortages, consumers are more willing to purchase a used car instead of waiting for a new vehicle. This is having a significant impact on the used car market, which we see through the growth of players such as Kavak. When production stabilizes, this will create a gap in the industry. The entire value chain is changing and this is an opportunity for current and new players to launch new initiatives.

Q: Based on BCG’s experience, what strategies should manufacturers implement to secure supplies?

A: Being able to react faster to changes happening in the market is crucial. Securing supply is all about diversifying the supplier base and understanding where the risks come from.

Manufacturers have calculated their risks in a very detailed way by vendor, supplier, network, location and material. This

Karen Lellouche

will allow them to monitor disruptions in real time, as much as possible. A best practice to achieve this fast reaction is to create risk indicators and track them to anticipate outcomes depending on what happens in the market.

Managing Director and Partner | BCG

Q: How is the concept of vehicle ownership changing and what should OEMs do to adapt to the new reality?

A: Brand loyalty is decreasing and this has been a drastic

Disruptive Trends Force Companies to Continuously Adapt: BCG

generational shift. OEMs need to think about loyalty differently and be more proactive in the way they reach out to consumers. Some OEMs, through the use of AI, are personalizing their offering to consumers who have previously purchased a vehicle with them, which reduces risks.

In many parts of the world, younger generations are less interested in purchasing cars. A way to boost car purchases is to also offer more financing options, while building new ownership concepts and even introducing subscription models.

Mobility is offering options that respond to the interests of younger generations, which means the automotive industry is expected to do the same. The current model of this industry is B2B when it should be B2C. Q: How can BCG offer integral solutions to its automotive clients in Mexico?

A: We work with very different types of clients and based on our insights and collected data, we help them adapt their

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production based on their issues, like supply chain shortages.

In sales and marketing, we have been helping clients with their transformation to e-commerce to create the best experience for customers, while considering a balanced impact on the company’s finances.

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from the

Q: What benefits has the promotion of the circular economic system brought to Queretaro’s automotive industry?

A: This is an initiative linked to Queretaro’s economic development, created from the State Development Plan and promoted by the Ministry of Sustainable Development. The cluster is taking point on the issue because the automotive sector is the most important industry in the state. It generates the most jobs, moves a large part of the economy and develops the state’s supply chains. We are also incorporating other industrial sectors, such as food and energy. Next year, we might incorporate the aerospace and agribusiness industries, among others.

We are trying to change the linear economic model in which we extract natural resources from the environment, process, use and dispose of them. The circular economy proposes extending the life of a product as much as possible through recycling, reusing and an industrial symbiosis where waste can be used for new products or services. We seek to reduce the consumption of energy and water, while identifying new business models based on tools related to the circular economy.

Last year, we implemented the first stage with the participation of over 40 companies. This year, over 120 companies have

Daniel Hernández

participated and are already formulating circular economy projects. The automotive sector is completely changing to develop sustainable chains that reduce CO2 emissions, which is why it is shifting toward electromobility and changing

Director General | Queretaro Automotive Cluster

manufacturing processes. Sustainability systems are the new business model of the automotive industry and companies that want to work in this sector must have sustainable policies. We will be working hand in hand with companies in the sector and supporting the state government’s strategy for the next five

Innovation, Sustainability at the Core of the Automotive Industry

years to reach a critical mass of more than 1,000 companies implementing circular economy projects.

Q: What are the cluster’s expectations for the B2B encounter at EXPO Encuentro Industrial y Comercial Querétaro that will be held in the first week of September?

A: We supported the government of Queretaro in the organization of this event. For over 20 years, the EXPO has become a space where local companies can make their capacities known and business opportunities are created between large companies in the state. The EXPO generates a space for B2B encounters to create a meeting point for supply and demand. The event receives companies from the entire region and has no entry cost.

Q: It has been reported that Queretaro has an industrial talent deficit of 8 percent. How is the cluster dealing with the shortage of talent?

A: This problem is not exclusive to Queretaro. Mexico’s entire automotive sector has a greater demand for personnel, especially for the production of auto parts. Mexico concentrates over 60 percent of North America’s workforce for the production of auto parts. This problem affects the entire country because Mexico aims to be the leading producer of auto parts for the North American region.

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from the

Demand is high for production workers, especially those without a high specialization. The sector recruits mainly those with basic or upper-midlevel education with manufacturing training. This is a large area for Queretaro because its production activities have gradually been outsourced and people regularly prefer to work in the service or retail sectors rather than in a manufacturing plant.

The automotive sector must improve its branding and positioning because it offers an opportunity for growth that can hardly be found in other sectors. The automotive industry offers the opportunity for personal growth and salary improvement in much faster cycles than the commercial sector offers.

Q: The cluster is one of only two in Mexico recognized by the European Secretariat for Cluster Analysis (ESCA) with a silver award. What factors led to this distinction?

A: Nine years after the founding of the cluster, we have over 110 members because many have placed their trust in us and participated in these collaboration spaces. The cluster is a space for collaboration and intelligent dialogue between its members. The silver award recognizes the quality of our services. The standard speaks to the maturity of our governance and the strength of our finances and of the services we provide to customers and associates.

This distinction also marks the improvement path to obtain the gold distinction in two years. It has been quite a challenge but we are pleased to be able to accompany our members and this acknowledgement shows us that we are doing the right thing to provide the best services.

Q: Queretaro has one of the highest EV adoption rates in Mexico. What has made the state more open to these vehicles?

A: Queretaro’s population is at the forefront of the sustainability movement. We have the Ministry for Sustainable Development, which covers two strategic areas: promoting economic development by strengthening local companies and promoting environmental care. For over 25 years, Queretaro has implemented a strategy of sustainability in economic development that has permeated society and companies. They are aware of the importance of electric and hybrid vehicles.

For example, companies participating in the circular economy project are planning to buy these types of cars. This is part of Queretaro’s natural ecosystem that promotes sustainability with companies and society playing an essential role.

New industrial, commercial and residential developments plan to incorporate the necessary infrastructure for charging stations, helping increase the penetration of these vehicles.

The lack of charging stations is limiting the growth of hybrid and electric fleets in the country. We need more charging points to make these technologies more popular, as is Read the complete article More about this person More about this company

happening in other countries. Public incentives play a key role because the use of electric vehicles requires greater promotion. There is a large area of opportunity for leasing companies to give greater weight to this type of product and promote its penetration.

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from the

Q: What have been your main strategies in your first year as INA’s executive president?

A: We are lobbying for new regulations and laws that could benefit the industry and its workflow. This year, we have developed committees to discuss the state of the sector, detect problems and solve them. We have committees focused on foreign trade, labor matters, original equipment and aftermarket. INA is also focusing on Industry 4.0 and new technologies. We work hard to make sure Mexico remains a competitive auto parts manufacturer.

Sustainability has become a cornerstone of our work and we are quick to incorporate new technologies so our associates can remain up-to-date regarding the use of new materials and fuels, such as aluminum, lithium and hydrogen. We also closely follow electrification trends, alongside leading countries such as the US, Canada, Japan and Germany.

Q: How does INA work to attract investment into Mexico?

A: One of INA’s main objectives is to consolidate the Mexican map of auto parts manufacturing. To attract investment, the association works in two ways. First, by advising companies arriving in Mexico of the advantages and disadvantages of certain situations. Second, we work closely with the

Francisco González

authorities and the private sector during the negotiations of free trade agreements, such as those with Ecuador, South Korea and the UK, to promote and foster investment in Mexico.

Executive President | INA

Q: What factors make Mexico an interesting country for nearshoring?

A: Mexico’s privileged geographic position, in addition to the

Sustainability, Supply Chain, Investment Are INA’s Priorities

USMCA, make it an ideal destination for companies looking to relocate their operations to enter the region. In addition, the country has amazing talent. In Mexico, the wages offered for manufacturing jobs are increasingly improving and young professionals are receiving more specialized training. The proximity to the US and Mexico’s quality education system enable Mexican professionals to enter jobs with a broad set of technological skills.

Q: What are the main trends shaping the auto parts market and how are Mexican suppliers preparing to meet those needs?

A: Auto parts production is becoming increasingly sensitive to the availability of raw materials. State-of-the-art technology is becoming crucial in their production as data analytics is being leveraged to avoid material waste and maximize recycling capabilities.

The auto parts market is no longer just mechanical, plastic, rubber and textile components. New vehicles are equipped with screens, systems and advanced technologies, including

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dashboards and security systems, which require different types of parts and components. Auto tech is changing the supply chain and it is crucial to develop more talent specialized in the field and to upskill the workers who are already on the production lines.

To the full extent

The effects of the COVID-19 pandemic, the Russia-Ukraine conflict, and the trade war between the US and China have led

BALANCE OF POWER

automotive companies to face disruptions due to the rising

OEMs dominate the automotive world Highest decline in market volume

costs and the availability of raw materials. A transformation of

Highest growth in market volume

the supply chain is imperative to face these challenges, experts say. “All companies are suffering from high prices, especially in the automotive sector. Compared to these crazy high prices, it almost feels like COVID-19 was easier to solve,” Udo Storck,

Scenario 1.

Data and Mobility Manager

Managing Director of Masterfoam Group, told MBN.

Transmission

35%

HV battery / fuel cell

1,359%

ICE

34%

Electric drivetrain

1,116%

Exhaust system

29%

ADAS and sensors

995%

The hostile trade environment is forcing automotive players to find new strategies to strengthen their supply chain and make it more resilient. “Automotive customers are becoming increasingly open to planning because they belong to one of the industries that has probably suffered the most during these last two years of pandemic-related disruption,” says Boris Franchomme, Managing Director of Sparx Logistics.

Scenario 2.

CAPABILITIES OF CARS

State of the Industry | 13

Macro Challenges Lead to a Stronger Supply Chain

Stagnant Car Maker

Transmission

16%

HV battery / fuel cell

892%

ICE

13%

Electric drivetrain

670%

Exhaust system

6%

ADAS and sensors

6%

Nearshoring has become an attractive option. The recent crises have shown that having a closer supply chain helps companies to ensure the continuity of operations. Mexico has benefited from this development as it offers companies a space to scale up their businesses within the North American market. This has been underpinned by the USMCA treaty, which pushed North American companies to substitute Asian imports through stricter regional value content (RVC) norms, which rose from 62.5 percent previously to 75 percent under the new rules.

BALANCE OF POWER

Although there are controversies around the interpretation of

Suppliers and outsiders set the rules

the rules of origin, the US, Canada and Mexico are collaborating to reach an agreement by the end of December 2022.

Scenario 3.

The Fallen Giant

Infotainment and communications

-59%

HV battery / fuel cell

925%

Transmission

-28%

Electric drivetrain

666%

ICE

-26%

ADAS and sensors

457%

Scenario 4.

USMCA has also put labor rights under the spotlight thanks to the implementation of a Rapid Response Mechanism for complaints made by member companies against others they believe are in breach of the treaty’s stipulations. This is leading to a shift in worker representation, which would result in fairer conditions for Mexican workers to freely elect their union and actively participate in decision-making processes.

Hardware Platform Provider

Industry experts agree that this mechanism was essential for

Transmission

-36%

HV battery / fuel cell

1,380%

ICE

-35%

Electric drivetrain

1,231%

Exhaust system

-30%

ADAS and sensors

989%

the evolution of the automotive industry. “It was necessary to include a chapter regarding labor in USMCA. This mechanism has been effective and provides confidence,” José Zozaya, Executive President of AMIA, told MBN. Although Mexico has benefited from USMCA from an automotive perspective, there are other issues regarding the treaty that might put the sector at risk. Recently, the US initiated consultations against Mexico as it claims that Mexican

Below technological possibilities

policy is affecting US companies in the energy sector. Canada

Source: Deloitte Supplier Industry Outlook 2025

backed this decision but it is representing its own perspective and interests. Consultations started on Aug. 24, 2022, and if no agreement is reached, a dispute resolution panel will have to be

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established. AMIA warned that if the panel rules against Mexico, the economic repercussions could affect the automotive supply chain and Mexico’s transition toward electromobility.

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Q: What is the role of CLAUT in the acceleration of the adoption of industry 4.0?

A: Industry 4.0 involves the adoption of new technologies in manufacturing processes, in which we have been working for six years. The state government of Nuevo Leon and local businesses are directing the Nuevo Leon 4.0 initiative to help manufacturing companies to incorporate new technologies such as AI and IoT. Within the cluster, we have an Industry 4.0 committee to collaborate with plant representatives, sharing practices and information to get acquainted with local suppliers that are offering 4.0 solutions. Even large companies, like tractor manufacturers, have developed local suppliers because sometimes the solutions offered by suppliers from Germany, the US or Asia do not align with the needs of plants in Mexico. Here is where SMEs become essential. We also have the Development of Suppliers of Industry 4.0 committee alongside the Software Cluster, in which automation and software companies offer solutions to our members.

We are expanding the ecosystem to shift to new technologies. If we do not do it, organizations in other regions will surpass us.

Q: Can Mexico rely on “friend-shoring”

Manuel Montoya

for a long period of time?

A: Regionalization is displacing globalization. The COVID-19 pandemic highlighted the need to have closer supply chains.

President | CLAUT

The EU is relying more on Eastern Europe and Asia, while the USMCA is making the North American region depend on itself more. This regionalization is a reality. The EU, for example, will rely less on Russia and its allies. With friend-shoring, countries are closer to their supply chains, which will not be affected by

Tier 2 Suppliers a Priority for CLAUT

political problems.

Q: How is CLAUT promoting the industry’s decabonization efforts?

A: The industry is adopting new EV technologies and we have to adapt to this new reality. ICE vehicles will remain for a long time in Mexico, Latin America and some countries in Africa and Asia. But our main client, the US, is on its way to achieving full electrification. We are helping companies participate in the supply chains of EVs, specifically those involved with the engine and parts related to the gasoline system, which will need to start producing components for EVs. Materials are also changing. EVs use more plastic and aluminum and we are encouraging Tier 2 suppliers to adopt these materials. For example, we were working with a stamping company that only worked with steel. We helped them switch to aluminum.

There will be a point where we are going to be involved in both the ICE and EV worlds. But we cannot wait for this shift without

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preparing. As long as there is no public policy in Mexico, the transition toward electromobility will not accelerate. If there are no incentives in the country, decarbonization will not happen because EVs are expensive. There are many EVs in the EU because the region incentivizes their use.

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from the

Q: In your last interview with MBN you said that carriers’ itineraries would be regularized by early 2Q22. Did your forecast pan out?

A: It did but not completely. As rates started to drop by the end of 2Q22, Many carriers started to cut some ships from their rotation, reducing the number of vessels on a typical service link from five or six to four or five, for example. This situation is ongoing and we expect many more blank sailings during 3Q22.

This year, unlike previous years, carriers are really focusing on maintaining higher freight rates in the market. They have not been completely successful as rates have continued to come down in the last six to eight weeks. In any case, we expect them to increase rates again as soon as we get into the peak season in early 4Q22. However, the big question then becomes what type of peak season will we see this year.

As far as service levels and schedule reliability, shipping lines have finally started to improve their on-time performance (although from very low levels) and freight forwarders are able to plan shipping with a decent amount of predictability, but the service level still remains far from what we would expect. Itineraries are improving but only from China to the US West Coast; those from Asia to the EU are still a complete mess with issues at port of origin as well as many congested terminals in Europe.

Boris Franchomme

Q: How have labor negotiations at California’s LA/LB ports evolved and what is your outlook on this situation?

Managing Director | Sparx Logistics

A: Their contract expired in July and both parties continue to negotiate, seemingly in good faith. Of course, we all remember the last time this process took place and the ensuing strike on the West Coast. Clearly nobody has an interest in this happening again today because it would have a major impact

Forecasting Is as Important as Flexibility: Sparx Logistics

on the economy of the US and China. The US government is quietly getting involved trying to get both sides to agree on the next contract.

While negotiations seem to be heading in the right direction, the timeline is clearly off because this should have been done much earlier. This time however many customers took notice and organized their peak season shipments much earlier. Large retailers in the US, for example, have planned their year-end holiday season much earlier during 2Q22; instead of shipping their cargo in July or August, as in previous years. While this brings additional costs in terms of inventory, it allows them to have goods readily available for Halloween, Black Friday, and of course the largest shopping event of all, Christmas.

Q: What goals does Sparx aim to achieve by the end of 2022?

A: This is a very competitive industry because there are so many players, large and small. Our goal is first and foremost to gain the trust of our customers, by ensuring top-notch service levels and always being very transparent and clear about what can and cannot be done. We will never promise

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something we cannot deliver. Our goal is not to be the largest player but the most reliable and trustworthy partner for our clients, especially on the transpacific trade. By doing so, I am convinced that we will increase our presence in the market and attract more and more customers.

Conference

State of the Industry | 16

Highlights

Building Resilient Supply Chains Through Communication, Alliances Daniel Hernández Director General | Queretaro Automotive Cluster

Nathaniel Kenniger Principal | Boston Consulting Group

Xavier Ordóñez Lead Supply Chain Partner | Deloitte

Paris Hirschberg Head of Procurement Trucks + Bus Mexico & CPO | Daimler

N

ew communication strategies and partnerships are being implemented to make the supply chain more resilient, as adapting to emerging challenges will allow Mexico’s automotive industry to transform this crisis into an opportunity for growth, experts say.

Already experiencing significant hurdles regarding sustainability and technology, the industry has been further challenged after the COVID-19 pandemic introduced shortages of raw materials and end products, says Daniel Hernández, Director General, Queretaro Automotive Cluster. “Raw material shortages and disruption in supply chains have become the main challenges for the recovery of the automotive sector.” The hostile environment is leading automotive players to find new strategies to strengthen their supply chain and make it more resilient.

To achieve this, suppliers need to transform the way in which they communicate with clients. “Suppliers must be transparent regarding their capabilities to implement resilient strategies in the face of supply chain disruptions,” says Nathaniel Kenninger, Principal, Boston Consulting Group. Additionally, communication needs to be thought of in two directions: operational and strategic.

Operational communication should not focus on the “if” but on the “when,” allowing suppliers to be ready for any unforeseen challenge and approach OEMs with options to solve the problem, rather than just transferring the responsibility to manage the crisis.

Strategic communication focuses on understanding customers and their main needs by asking questions.

Moreover, companies must rely on good strategic partnerships as suppliers are now considered business partners. “Not all disruptions are created equally. Different challenges will require different solutions and companies, thus the relevance of creating strategic partnerships and remaining agile,” says Paris Hirschberg, Head of Procurement Trucks + Bus Mexico & CPO, Daimler Truck and Bus Mexico.

By implementing these strategies, crises can become opportunities for the automotive supply chain, specifically in Mexico, experts agree. “Supply chain disruptions represent a great opportunity for Mexico to develop a local supply chain to substitute imports,” says Xavier Ordoñez, Lead Supply Chain Partner, Deloitte. “Mexico must take advantage of its

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strategic location, not only to integrate with North America but also to become a continental hub in the Latin American value chain,” he adds.

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from the

Q: What opportunities and challenges has this e-commerce boom presented to Estafeta?

A: We saw the market boom during the past two years but there is still room for growth. Traditional retail is moving online across the world. For example, 50 percent of the total retail sales in China are done online. In the US, this number is around 20 percent and in Mexico, it is close to 10 percent. In only two years, this figure doubled from 5 percent to 10 percent.

E-commerce represents a large opportunity and Estafeta is investing heavily in it.

Q: What makes Estafeta the ideal logistics partner for companies and the industrial sector?

A: We identified 12 interesting industries that we expect will grow in the coming years, one of which is e-commerce. Another crucial sector for Mexico is the automotive industry. Estafeta is this sector’s ideal partner thanks to its infrastructure and knowledge of the country as a 100 percent Mexican company, among many other reasons. We comply with regulatory changes, such as the Carta Porte and the outsourcing reform, which are crucial for transport operations. Companies working with Estafeta do not have to worry about any legal or compliance problems. Estafeta’s coverage includes the entire Mexican territory and the company is flexible. We can offer both standard and tailor-made solutions. If

Ingo Babrikowski

our client has specific needs, we can get a proposal very quickly, since all decisions are taken in Mexico.

Q: How does Estafeta help automotive clients in their supply

CEO | Estafeta Mexicana

chain operations amid ongoing challenges within the sector?

A: We implemented a special service with three delivery options: same-day delivery, next-day delivery and ground service, which takes one to three days to deliver depending on several factors.

Reliable Deliveries Through an Experienced Mexican Partner

We offer automotive clients the combination of our network in Mexico and fast, dedicated services at a competitive cost. This combination has brought great results to our automotive clients.

We offer great traceability too. This might seem common in logistics but for automotive companies, we implement traceability solutions related to shipments or parcels and integrate the data quickly. Estafeta operates its own network to manage hazardous materials, which is important as well for the automotive industry. In addition, we offer return logistics for spare parts or packaging totes.

Q: How is Estafeta contributing to greener logistics?

A: Estafeta participates in several yearly reforestation initiatives.

We also signed the UN’s Global Action Plan as a guidance toward more sustainable operations, which include recycling and the optimization of our network. If we drive fewer kilometers, we pollute less. In addition, this year, we carried out an initiative to adopt electric vehicles (EVs). Estafeta conducted tests with two companies and is buying its first 30 EVs in 2022. It is challenging due to Mexico’s reduced EV offer compared with the EU and the

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US but it is a good start. The company also launched the Envíos Verdes project alongside the government of Mexico City to make deliveries using bicycles, a useful strategy across short distances.

Finally, Estafeta also offers customers the opportunity to pay a small fee to compensate for pollution and we buy carbon offsets.

Conference

Highlights State of the Industry | 18

M

exico has significant experience with international agreements, as it has numerous free trade agreements (FTA) with countries in Oceania, Asia, the EU and the Americas. However, most of Mexico’s exports head to the USMCA region and

the treaty, while allowing trade to grow, has also caused issues that must be addressed.

The Mexican automotive industry has 28 years of experience exporting across the world, while adhering to the different rules of origin that each agreement demands, says Fausto López, Free Trade Agreements and Customs Manager, Volkswagen Mexico.

Mexico’s privileged geographical position opens the door to trade with two of the world’s most important economies: the US and Canada. The North American Free Trade Agreement (NAFTA) provided a trilateral bloc in North America and created a freetrade zone where tariffs were reduced. During former US President Donald Trump’s administration, the US renegotiated NAFTA and changed the tariffs on steel and finished vehicles that would apply to Mexico. Since its entry into force on July 1, 2022, the new treaty has caused a constant back and forth between the three countries.

USMCA Brings New Challenges to Mexico’s Automotive Industry Fausto López Free Trade Agreements and Customs Manager | Volkswagen

During the negotiations of what would be the USMCA, the US Trade Representative (USTR) presented some issues that were found to be “controversial,” says López, who called them “poison pills.” The issues were: a “Sunset Clause,” which demands a review of the USMCA every five years; “seasonal tariffs” for agricultural goods; the Dispute Settlement Transportation of goods within the region; modifications to the textile sector rules; and the rule of origin for the automotive industry.

Before the USMCA, Mexico was seeking to reduce regional content in the automotive sector. But this changed with the USMCA, which demands an increase in regional content. NAFTA required a 62.5 percent or more of regional value content based on the net cost of the vehicle. However, the required regional value content increased to 75 percent based on the vehicle’s core and key parts. Automakers must also comply with metal and aluminum requirements.

Changes in the regional value content per vehicle triggered a panel for a state-to-state dispute. “The US is currently subject to a dispute panel on the core and key parts issue according to the auto trade agreement with Mexico and Canada,” says López. On Jan. 6, 2022, Mexico called for a meeting of this panel. Canada joined later.

The panel is convening and a resolution is expected in November 2022. If Mexico and Canada win, the US will be forced to start the new rule of origin calculations in 45 days.

Mexico’s trade partners have also called for consultations to address the country’s energy policies, claiming these policies favor local state-owned companies in violation of the USMCA. If the consultations do not reach a solution within 75 days, they will enter a solution panel that Mexico is most likely to lose, says López.

The USMCA also includes a rapid response mechanism, which six companies have already used to denounce alleged violations of labor laws. These businesses have 45 days to reach a remediation with the local government and later with the labor committee of

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the USMCA. If one of these steps fails, a discussion panel is raised and if no agreement is reached, sanctions for both the country and the company are applied.

VIEW TOP State of the Industry | 19

from the

Q: What have been UPS’ main milestones after 30 years in Mexico and Latin America?

A: UPS has a remarkable footprint across Latin America through its direct presence in countries like Mexico, in addition to many other countries in the region where it operates through partners.

We serve over 40 countries in Latin America, with more than 8,000 employees, top-rate infrastructure and over 2,000 UPS access points. Our infrastructure provides all types of companies, especially SMEs, with global access and connectivity. Supporting SMEs is one of our proudest achievements. In Mexico alone, we have over 2,000 employees and we connect local businesses with over 220 countries.

Q: How is big data shaping the logistics industry and how has UPS leveraged data collection, analysis and demand forecasting to increase operational efficiency and save costs?

A: UPS focuses on generating efficiencies. We have a strong engineering department that continuously innovates and updates processes. Processes that worked fine a year ago might not work today, forcing us to reimagine and recreate them to make them more efficient.

We seek to create density. Years ago, we looked to the future and knew that e-commerce was going to play a crucial role in global

Wilfredo Ramos

economies. Therefore, UPS invested heavily in its access point network. We have many UPS counters to create density and be closer to customers. UPS made partnerships in the EU to expand its network to various locations, such as pharmacies or flower

President | UPS Latin America

shops, giving customers more options to deliver their packages.

Q: How is UPS supporting the automotive industry during the ongoing supply chain disruption?

Connecting Latin American SMEs With the World

A: UPS leverages its powerful supply chain, connecting automotive companies with their suppliers and clients across the world. We help them obtain the material they need to continue production efficiently and deliver it to the next tier in the automotive supply chain. The pandemic has disrupted the supply chains of several industries, especially automotive. Having materials like semiconductors at hand to continue manufacturing efficiently is essential to our customers. In times of low inventory, efficiency is even more important. UPS is an integral part of the supply chain and logistics is used as a tool for efficiency.

Q: How does UPS help Latin American SMEs beyond logistics?

A: Thanks to our knowledge of the Latin American market, UPS has several initiatives to help SMEs. We are working on the Proudly Unstoppable program, which helps small merchants feel unstoppable by taking their product to the entire world.

UPS has partnered with several organizations, including Tec de Monterrey, to provide the necessary knowledge for these SMEs to take their businesses to the next level. UPS takes the entrepreneurial spirit of SMEs and, based on best practices, trains them to market their product, finance the company and

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manage their inventory. Through different modules, we help them leverage important tools to keep their businesses viable.

In Latin America, there are many startups and needs that go beyond logistics. Through the Proudly Unstoppable program, we train them to be successful.

Risks, Challenges, and the Road Ahead for the Auto Industry Guillermo Prieto Independent Contributor

A Light at the End of the Tunnel for the Auto Parts Sector Antonio Martin López Díaz President | ARIDRA

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2

Powering the Vehicles of Tomorrow The automotive sector is becoming a greener and more sustainable industry, mainly through the production of EVs and the development of new fuel alternatives. Aside from decreasing carbon emissions, EVs offer a more efficient mobility method. Automakers are committed to continue increasing their electric offering to boost the transition toward electrification.

However, this transition has been unequal across the world due to the high costs of these units.

While some countries have been quick to adopt EVs, developing economies, such as Mexico, have been slower. To democratize electrification and achieve the common objective of net-zero emissions, battery producers are looking for ways to reduce the cost of the battery and bring down the overall cost of EVs. There are players that are also developing alternatives to fuel internal combustion engine (ICE) vehicles while reducing CO2 emissions.

Hydrogen and natural gas are being used to power both heavy and light ICE vehicles. OEMs are investing in launching units with these technologies, such as fuel cell electric vehicles (FCEVs) powered by hydrogen, which offer more efficiency and emit only water vapor and air as residue.

This chapter will explore how EVs and alternative fuels are shaping the mobility of the future. It will also address Mexico’s main challenges to keep up with the electrification and sustainability trends shaping the industry.

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Powering the Vehicles of Tomorrow

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Analysis Improving Chemistry, Design for the Battery of the Future

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View From the Top Luis Lozano | President | Toyota Motor de México

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View From the Top Isidoro Massri | Director | JAC Mexico

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View From the Top Edgar Carranza | COO | Hyundai Mexico

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View From the Top Jorge Navarro | Director of People Transport Solutions | Scania México

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Analysis Natural Gas, Hydrogen to Power the Vehicles of Tomorrow

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View From the Top Andrés Bayona | President | AMGNV

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Conference Highlights The Fuels Making ICE Vehicles Sustainable

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View From the Top Miguel Elizalde | President | ANPACT

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View From the Top Alexandre Nogueira | CEO | Daimler Buses/Mercedes-Benz Autobuses

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Powering the Vehicles of Tomorrow | 24

Improving Chemistry, Design for the Battery of the Future The need to cut carbon emissions is driving the transformation of the industry. Even though battery-electric vehicles (BEVs) have been available for a while, automakers and battery producers are focusing on developing future-proof batteries to make BEVs truly mass-market and affordable enough for mainstream buyers. A tight supply of raw materials, however, has led companies to invest in innovation within the chemistry and design of batteries.

Global demand for BEVs is strong and expected to increase in the coming years, prompting intense competition among companies for cost and technology leadership. Improving battery cells and packs, which account for 35 to 50 percent of the total vehicle cost, could significantly increase profits, while making BEVs a mainstream reality globally, according to the McKinsey report, Building better batteries: Insights on chemistry and design from China. Improving the performance of batteries is crucial to meet future BEVs needs, according to McKinsey. While batteries were a simple technology initially, their development has been slow compared to other areas of electronics, according to the European Commission. “The main research hurdle lies in finding suitable materials for electrodes and electrolytes that actually work well together without undue compromise to other aspects of a battery’s design. There is much trial and error in selecting the best combination of design parameters,” according to a report published on the Journal of Power Sources.

Battery competitiveness relies on an affordable final price. BEVs require high power and high-energy density (the amount of energy they store per gram of weight), long autonomy, long life, low cost and high levels of safety, while reducing their negative environmental impact through a reuse or recycle plan for batteries.

Although traditional lithium-ion batteries continue to improve, limitations persist, according to the MIT Energy Initiative. One problem of current battery designs is that under certain voltages and temperatures, the liquid electrolyte can become volatile and catch fire. In addition, lithium-ion batteries are “not well-suited” for use in vehicles due to their size and weight, which increase the vehicle’s overall weight and reduce its efficiency. The difficulty is in making batteries smaller and lighter while maintaining their energy density, according to the MIT Energy Initiative.

To solve those two problems, researchers are changing certain characteristics of the lithium-ion battery. One of the solutions is to replace the liquid electrolyte with a thin, solid electrolyte, which remains stable at a wide range of voltages and temperatures.

This allows for a smaller battery size while maintaining its energystorage capacity. “Enhanced safety and greater energy density are probably the two most-often-touted advantages of a potential solid-state battery,” says Kevin Huang, Research Scientist, MIT, in the “Designing Better Batteries for Electric Vehicles” article published on MIT Energy Initiative. These challenges have not been met, however, and researchers are working to find materials and designs to deliver on that promise, he adds.

While developing technologies for grid-based storage at a large scale is critical, the automotive sector “is focusing on adapting

Powering the Vehicles of Tomorrow | 25

today’s lithium-ion battery to make safer, smaller versions that can store more energy for their size and weight,” says Elsa Olivetti, Associate Professor in Materials Science and Engineering at MIT, in the same report. Thinking beyond the lab is essential to improve batteries, agree Olivetti and Huang. Researchers use metrics such as energy-storage capacity or charge/discharge rate to evaluate batteries. While these metrics remain necessary, the aim is implementation. “We suggest adding a few metrics that specifically address the potential for rapid scaling,” says Olivetti.

Scalability, in the end, depends directly on the availability of raw materials and the production cost.

The Chinese BEV Market The Chinese BEV market has been growing by around 80 percent annually since 2014, according to the McKinsey report. China remains the world’s largest market for these vehicles, accounting for 2.9 million units sold in 2021, compared with 1.2 million in the EU, according to Statista. China is expected to remain the leader in BEV sales, with an estimated 9 million units sold in 2030, compared with around 5.5 million in the EU, according to McKinsey’s Electrification Model.

China is not only the global sales leader but also self-sufficient when it comes to BEV production. The country’s local supply chain comprises all Tier-1 and Tier-2 parts and components, such as battery cells, battery-pack components and drivetrain modules.

Chinese BEVs offer “very competitive cost-to-range ratios compared with their international counterparts,” states McKinsey.

In 2017, Chinese OEMs started using lithium iron phosphate (LFP) technology for low-performing vehicles and nickel, manganese and cobalt (NMC)-based cells for high-performing ones. Meanwhile, Western OEMs were still experimenting with first generation NMCbased cells and lithium manganese oxide-based cells.

While NMC-based battery cells are the most used globally nowadays, China remains at the forefront of battery innovation. In 2019, two Chinese OEMs introduced to the domestic market nickelrich layered oxide (NMC811), which remains the latest-generation technology and is a promising future cathode material for lithiumion batteries due to its high specific energy density. However, it exhibits fast voltage and capacity fading. NMC811 arrived in the Western market two years after its debut in the Chinese market.

China-based CATL was the leading lithium-ion battery maker in 2021 with a market share of 32.5 percent, followed by Korea’s LG Chem with 21.5 percent and Panasonic with a market share of 14.7 percent, according to Statista. Cell-to-pack technology, which directly integrates cells into the battery pack without battery modules, was introduced jointly by CATL and automaker BAIC in late 2019.

Recently, in March 2022, CATL announced the third generation of its cell-to-pack (CTP) battery technology, which is ready for mass production. While Chinese OEMs are expected to hold their position as battery-technology leaders, the next leap involves cellto-chassis technology, in which battery cells are directly integrated into the chassis, without battery packs, according to McKinsey. CTP technology has significantly increased the volumetric utilization efficiency of the battery pack, going from 55 percent for the Read the complete article More about this topic

first-generation CTP battery to 67 percent for the third generation (Qilin), claims CATL. The energy density of the latest NMC Qilin battery can reach 250Wh/kg, compared with LFP’s 160Wh/kg.

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from the

Q: After 20 years of operations in Mexico, what milestones has Toyota achieved in the country?

A: 2022 is a very important year for Toyota. In hindsight, these 20 years have passed very quickly. Toyota has generated a great deal of value for Mexico and the country has given us great opportunities, too. Toyota has produced 1.7 million vehicles and sold over 1.3 million units in Mexico over the past 20 years. We have a dealership network with 98 distributors and over 11,000 direct and indirect employees. It is time to plan our next 20 years in this country, which has given so much to Toyota.

Q: What role do electrified vehicles play within the company’s operation and toward further electrification in Mexico?

A: Mexico represents the 16th-most important market for Toyota Motor Corporation. We have introduced several innovations in Mexico. Toyota is the global leader in electrified vehicle sales. We have been selling electrified vehicles since 1997, with the sale of more than 20 million electrified vehicles in the world, including more than 90,000 hybrid electric vehicles in México. Through these efforts, Toyota has saved over 160 million tons of CO2 globally.

Luis Lozano

México is an important market to further vehicle electrification, both in sales and manufacturing. Toyota’s plants in Baja California and Apaseo el Grande, Guanajuato, are two of the automaker’s most modern facilities across

President | Toyota Motor de México

the world. We are very proud that Toyota chose Mexico to produce 100 percent of the Tacoma models sold in North America.

Q: How has Toyota’s HEV offer in

Toyota México Celebrates 20 Years of Moving Toward the Future

Mexico grown in recent years?

A: Historically, Toyota has been recognized for listening to the market. This is one of the reasons for our success. Currently, Toyota ranks third in Mexico in terms of market share (as unitary brand), which is the result of introducing products that are adapted to the market. Our HEV offer in the country has grown steadily. In 2010, we introduced Prius and today we have a wide HEV offer, which includes Prius. In addition to Camry, Corolla, our superstar RAV4 and Sienna, which is now exclusively produced in its HEV version, and until now, we have sold more than 90,000 hybrid electric vehicles in the country.

Q: The Toyota Hilux is one of Mexico’s top sellers. What role do pickups and commercial vehicles play within the company’s sales?

A: Hilux is one of our superstar vehicles; we import it from Thailand and it is our best-seller in the country. In April we sold 1,834 units.

Regarding larger pickups, Tacoma, which is manufactured in Mexico, sells well in the US, where Tundra is also successful.

Pickups are very important for Toyota in Mexico and in North America. Our plant has the installed capacity to produce 266,000 vehicles a year for the North American market.

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from the

Q: Toyota recently introduced the Raize model to the Mexican market. What market is this mini-SUV targeting?

A: Raize is a mini-SUV that arrived in Mexico alongside Corolla Cross, after Toyota’s decision to return to the miniSUV market. Raize mainly targets young customers, who are looking for an agile, versatile and fun vehicle and it has had an incredible reception. In March, it was the brand’s second-highest selling vehicle, just behind Hilux. Guillermo Díaz, who is Toyota Motor Sales y Lexus de Mexico has run a great team work to introduce this new vehicle into a very well received segment.

Toyota’s vision is to offer products across all vehicle segments. Over the past 20 years, we have built a strategy in which customers can experience the brand regardless of the type of vehicle they are looking for. This sets us on the right path for the full electrification transition in Mexico.

Q: What does the future of fuel-cell electric vehicles (FCEVs) look like?

A: Toyota will continue to innovate in different solutions to improve mobility in general. Around the world, Toyota offers its customers the possibility to choose the powertrain they need, taking into account their preferences and the markets they live in. There are markets for HEVs, PHEVs, BEVs and even for FCEVs, such as the Mirai, which we have had in the market for over seven years.

Toyota Motor Corporation is optimistic about FCEVs and the general potential of hydrogen. Currently, regulations have led countries to move toward electrification but once hydrogen becomes cheaper to produce, it will become a real option for several countries. Most of the countries that have boosted BEV adoption will end up embracing FCEVs too. Regardless of preferences, Toyota offers four electrified powertrains to its customers.

Mirai is currently sold in specific markets, such as California in the US, where there are over 200 hydrogen stations. In 2015, Mirai began mass production and it has already sold over 10,000 units globally.

Q: How is Toyota innovating in passenger experience through its in-vehicle entertainment and infotainment systems?

A: In-vehicle entertainment is key to Toyota and most of our vehicles have CarPlay. An important aspect regarding CASE is that the future will no longer be hardware-driven. Toyota manufactures vehicles, which are hardware, but software will now become an important part of our business.

Toyota has carried out two main global strategies toward CASE mobility. First, we have partnered with nontraditional automotive companies, such as Microsoft. Second, Toyota Connected, a separate company, was created to focus exclusively on software.

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In the future, there will be applications that will enable cars to park autonomously and it will be possible to buy additional horsepower through Toyota’s software. Customers will focus more on the complete passenger experience, including software, rather than the vehicle performance itself.

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from the

Q: After five years of operating in Mexico, how has JAC adapted its offer to the Mexican market?

A: JAC is one of the few multinational brands in the industry with a unique strategy for Mexico. Our unique product planning, timing and availability have improved our penetration in the country, specifically regarding EVs. In Mexico, JAC has been electric since 2011 and has six electric products, three for passengers and the others focused on the commercial market. China believed in us and has worked closely with Mexico, which is a reference for Latin America. During the past three years, we invested heavily in electrification and obtained significant results in the country.

Q: How has JAC become the leading EV brand in the Mexican market as it slowly transitions to electromobility?

A: We recently met with Minister of Foreign Relations Marcelo Ebrard’s team. They said that what it took JAC 20 years to achieve in China regarding electrification, took only three years to achieve in Mexico. This shows that Mexico is not significantly lagging in electrification but the transition could be faster. We are re-educating the market and we have a large challenge and responsibility but, simultaneously, a large opportunity.

Car buyers are no longer chasing brands; they are choosing a vehicle because of its characteristics. We want to change traditions

Isidoro Massri

and we understand that we need to tell stories, share experiences and be patient. For every EV we sell, we reach 10 more clients.

Companies buying electric fleets have an important role in this transition. We want to be the leader and maintain this position in

Director | JAC Mexico

the transformation of the automotive sector.

Q: What goals does JAC aim to achieve regarding EVs in Mexico?

A: We want to be a reference and be considered No. 1. We also

Mexico’s Electrification Transition Needs Education: JAC

want to bring pride to Mexico. Mexicans do not buy EVs not because they do not want to but because they do not have the opportunity to do so. We want to give them that opportunity.

Q: How is JAC digitalizing its sales processes?

A: Even before the pandemic, we were already there; we are just accelerating the digitalization process. Disruption and creativity have been key to our work since 2017. In January 2019, we launched jac.mx, the first and only platform to allow customers to purchase a car in a human-free process. We do not want to eliminate all human interactions; we want to digitalize as many steps as we can. Before the pandemic we needed to hire someone to be fully focused on the leads generated on our platform because they were often ignored. After the pandemic, these leads are our biggest source of income. The Mexican population has been receptive to this new trend. Clients do not fulfill the entire process online as they still need to touch the car but they appreciate the small details that digitalization offers.

People consider nine brands before buying a vehicle and discard seven throughout the decision process, often following bad online

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experiences. For this reason, digitalization has become extremely important for companies. We are adapting and we believe in the “phy-gital” model, which consists of transforming physical spaces into digital experiences. We are not going to replace physical experiences but we need to digitize them.

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from the

Q: What strategies allowed Hyundai to become a Top 10 seller in the Mexican market?

A: In May 2022, we celebrated eight years of operations in Mexico and our sales surpassed 300,000 units. This motivated us to continue proving our commitment to be the users’ preferred brand.

Hyundai has introduced innovative products with technological features and an excellent cost-quality relation to the Mexican market. In 2021 J.D. Power ranked Hyundai’s Creta, Elantra, Tucson and Grand i10 models as the vehicles with the highest quality and reliability in the Mexican market. Additionally, we recently renewed some of our vehicles, such as the Grand i10, Elantra, Tucson,Santa Fe, and Creta. We also introduced the new Palisade to the market.

Q: What innovations are transforming Hyundai’s operations?

A: In Mexico, we offer the Hyundai Live experience to offer potential buyers an adviser in real time through our live chat.

Additionally, distributors can show the vehicles virtually. We are connecting these tools with our client database to gain insight into the habits of each customer, generate a relationship built out of loyalty and start rewarding them. Globally, Hyundai has strategic partnerships and investments for new technology. Hyundai is also developing an aerospace division and working in automation and electrification. Hyundai will succeed in transitioning toward smart mobility solutions.

Edgar Carranza

Q: What steps will Hyundai take toward further electrification in Mexico?

COO | Hyundai Mexico

A: By 2030, electric and hybrid vehicles will achieve an 8-10 percent penetration in Mexico, as forecast by IHS Markit.

Collaboration between the authorities and the automotive sector is necessary to boost electromobility. Globally, Hyundai has competitive electric and hybrid models. The IONIQ 5 can

For Smooth Electromobility Transition, Collaboration is Necessary

be 80 percent charged in less than 18 minutes, which begins to solve some problems that have stopped clients from buying an electric model. Hyundai aims to bring several hybrid models to Mexico, to be followed by electric models. By 2045, Hyundai expects to achieve zero-carbon emissions. All automakers are working toward this same goal.

Q: What are Hyundai’s expectations in the SUV, compact and subcompact segments?

A: We expect to have a stable product supply and we want to be cautious regarding our sales expectations because prices are increasing amid shortages and inflation. We are about to launch hybrid vehicles and we are going to introduce new lines of sedan products to the market. We also want to strengthen our SUV segment.

Q: What specific strategies implemented under your watch have led to an improvement within the organization?

A: During my first month in the company, I spent a lot of time talking with my team and getting to know them. Once I understood

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who they were and what they were trying to achieve, I set in motion a strategic plan to ask the team to pitch their own ideas. As a result, we selected a series of projects and implemented them. Six months later, we have increased sales and our company is becoming more profitable. We are making progress and the team is engaged.

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from the

Q: Recently, Scania México announced the Scania Volt with E-Urviabus body. What are the bus’s main features and how will it disrupt mobility in Mexico’s main cities?

A: The Scania Volt is a fully-electric, 19-ton, 11-meter chassis vehicle with a low floor designed for main cities. It can carry 90 to 110 passengers. It is pluggable and has 10 batteries that charge 330kW per hour and an autonomy between 250-300km.

We decided to develop this bus in Mexico. Chassis made in the EU are not always adaptable to the needs of the Mexican urban market. Therefore, we decided to build the body locally with Beccar, a body builder with which Scania México has had partnerships before and which is also betting on electromobility.

Q: How is Scania México preparing to launch its first e-bus?

A: We will have a demo vehicle circulating in Mexico City for several months. Then, we will test it in Monterrey, Guadalajara, Aguascalientes and Merida, which are cities interested in renewing their fleet and reorganizing public transportation routes. This technology is new and we are still developing it and learning its implications. While we already dominate aftersales in diesel and gas, Scania México is still learning and perfecting EV aftersales.

Jorge Navarro

Finance plays a key role. Electric buses are three times more expensive than diesel. New engineering training, specific tools and battery management are also important. The goal is to begin production of the Scania Volt with E-Urviabus body in January

Director of People Transport Solutions | Scania México

2023, starting with 20 units.

Q: What are the main challenges to boost electromobility in Mexico?

Scania Prepping to Make Electromobility a Reality in Mexico

A: The transportation industry is a virtuous triangle: the bus manufacturers, carriers (our clients) and the public sector. The first challenge is the vehicle. Bringing an EU chassis to Latin American markets does not always work. Needs and demands are different, which is why we take the time to test the technology and tropicalize it. Governments usually demand the cleaner, most beautiful vehicles but in that case payment becomes a problem. Buses are not subject to credit and tariffs are politically standardized. For instance, in certain cities, rates should be around MX$15, but due to social implications, they remain at MX$10, generating a 30 percent income deficit.

Q: What challenges do carriers face and how can other actors contribute to solving them?

A: New trends and mobility concepts demand long-term business plans. Owner-operators must become companies to have access to credit and be able to invest. Scania México brings international finance and insurance companies to the country but operators have to become established companies. Once owneroperators become companies, the next step is the public sector.

Governments must give carriers guarantees and incentives to

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invest in a 15-year loan. For example, Santiago de Chile and Bogota already have over 1,000 e-buses rolling. Those cities’ governments created incentives and owner-operators became bankable. In Mexico, the ROI depends entirely on the people transport business, making it more challenging for carriers.

Powering the Vehicles of Tomorrow | 31

Natural Gas, Hydrogen to Power the Vehicles of Tomorrow As the world advances toward decarbonization, the industry remains at the center of the conversation. While the popularity of battery electric vehicles (BEVs) grows, stakeholders continue to bet on alternative, sustainable fuels to power internal combustion engine (ICE) vehicles as an extra effort to reduce carbon emissions.

Although the costs of using sustainable fuels are projected to be higher than long-term alternative like BEVs, the use of these fuels can achieve comparable greenhouse-gas (GHG) reductions, enabling faster decarbonization of existing fleets in the short term, according to McKinsey. In addition, commercial heavy transportation is expected to see electrification only in the longer term. Therefore, sustainable fuels for trucks and buses are set to play a pivotal role in the industry’s path toward decarbonization.

BEVs are not the only alternative for sustainable passenger cars, either. Fuel cell electric vehicles (FCEVs), powered by hydrogen, have been available in the market for several years. These vehicles use hydrogen to produce electricity. Like ICE units, they can refuel in less than 5 minutes and have a driving range over 480km. “BEVs and FCEVs will be Hyundai Motor Group’s ultimate technologies to achieve carbon neutral mobility, while eco-friendly ICE technology that combines eco-friendly fuel and ultra-lean burn engines will be the key to reduce GHG emissions during our transition to EVs,” says Alain Raps, Executive Vice President of Hyundai Motor Group and Leader of its Electrified Propulsion Technical Unit.

Natural Gas: Challenges One of the alternatives to traditional ICE fuels is natural gas, which offers several benefits to users, from safety to savings. Natural gas is less flammable and safer than gasoline. Lighter than air, it dissipates quickly in case of accidents. However, it remains far from being adopted by the public. Currently, there are over 40 million natural gas vehicles (NGV) worldwide, according to Mexico’s Vehicle Natural Gas Association (AMGNV).

Natural gas production in Mexico is mostly destined for PEMEX but the country has one major advantage: it is close to the US and, therefore, close to some of the cheapest natural gas available in the world, as reported by MBN. With Mexico’s pipeline growing on a yearly basis, wider access to compressed and liquified natural gas (CNG) and (LNG) could become more feasible, as well. Using natural gas for heavy-duty vehicles has become increasingly attractive in recent years. Costs for LNG and CNG are relatively low. There are also clear environmental benefits and the fuels also run relatively silently when burned. NGVs generate 26 percent less carbon dioxide emissions than traditional ICE vehicles. “Natural gas reduces CO2 emissions by 70 percent in comparison to diesel and is 50 percent cheaper per kilometer than traditional fuels,” says Luis Echavarría, Director General of Enco GNV, in an interview with MBN. While the benefits of growing Mexico’s NGV fleet are clear and the figures show a major increase over the past few years, these are still far from representing a significant percentage of the country’s heavy-vehicle fleet. One of the main issues holding back NGVs

Powering the Vehicles of Tomorrow | 32

has been the limited number of refueling stations across Mexico.

In addition, NGVs are usually expensive, making the upfront cost high for some users. In a positive development, the number of Mexican natural gas refueling stations grew exponentially during the pandemic. There are 85 stations in operation, with another 67 under development and construction, according to AMGNV. However, there are close to 13,000 gasoline stations in Mexico, according to Statista.

FCEVs: Challenges Research and commercial efforts continue to expand the limited hydrogen fueling infrastructure and increase the production of FCEVs. When used in a fuel cell to provide electricity, hydrogen is a zero tailpipe emissions alternative fuel, according to the US Department of Energy. Drivers of FCEVs can fuel up at retail stations in less than 5 minutes, similar to ICE vehicles, and have a driving range of about 480km. With 142 new hydrogen refueling stations, the total number of stations by 2021 was just 685 worldwide. Just like with natural gas, there is a problem of incentives to open more stations but also to buy FCEVs. However, in this particular case, the situation also includes skepticism among some players regarding the potential of hydrogen for vehicle applications.

According to The Conversation, hydrogen is inefficient. In FCEVs, energy must move from wire to gas to wire to power the car.

Compared with BEVs, FCEVs are considerably less efficient, the article says. “Let’s take 100W of electricity. To power an FCEV, that energy has to be converted into hydrogen, possibly by passing it through water (the electrolysis process). This is around 75 percent efficient, which means that a quarter of the electricity is automatically lost,” according to The Conversation article. Then, the hydrogen produced has to be compressed, chilled and transported to the refueling station, “a process that is around 90 percent efficient.” Once inside the car, hydrogen must be converted to electricity, a process that is 60 percent efficient, to finally power the motor to move the vehicle at a 95 percent efficiency rate. “Put together, only 38 percent of the original electricity – 38W out of 100 – are used.”

The hydrogen fuel cell requires double the amount of energy than BEVs, according to BMW: “The overall efficiency in the powerto-vehicle-drive energy chain is, therefore, only half the level of a BEV.” A Volkswagen article compared the energy efficiency of both technologies. “The conclusion is clear,” it stated. “In the case of the passenger cars, everything speaks in favor of batteries and practically nothing speaks in favor of hydrogen.”

However, the US Office of Energy Efficiency and Renewable Energy (EERE) still believes in the potential of FCEVs. Although it remains pricey and limited to certain regions, hydrogen is not an expensive fuel and 10 million tons of it are produced annually. While FCEVs remain the most expensive vehicle to refuel, they can drive up to twice as far as ICE vehicles. In addition, the popularization of this technology would drive prices down, says EERE. Today’s commercial FCEV market is limited to three models sold in California, where most hydrogen-refueling stations are located and where the government offers incentives to customers for their Read the complete article More about this topic

purchase. The Honda Clarity, for instance, comes with a US$15,000 fuel credit from the OEM, just like the Toyota Mirai. The Hyundai Nexo, an SUV, comes with free hydrogen fuel for three years.

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from the

Q: Why should the automotive industry turn to vehicular natural gas and how is AMGNV promoting its adoption in Mexico?

A: Mexico has over 50 million vehicles in the country, so it will be hard to transition to natural gas in a short period of time. ICE vehicles will prevail in the market for some time because there is no infrastructure to fully supply the market with fuel alternatives. The transition to clean energies will take a long time, which is where transitional fuel energies, such as natural gas, come into play.

AMGNV focuses on developing the elements required to accelerate the transition to natural gas. There is interest from the main automakers to popularize the use of natural gas vehicles.

Q: What role does vehicular natural gas play in the transition toward safer, less expensive and cleaner transport?

A: Natural gas will be especially important in the short and medium term. Natural gas vehicles show a sharp difference in emissions compared to ICE vehicles. Producing a liter or a gallon of gasoline or diesel is also a complex process, while producing natural gas is a much simpler and less expensive process. An electric vehicle will never be less expensive than a natural gas alternative, at least with the existing technology. We must promote all sustainable energies until we reach a point where there is the necessary infrastructure to meet the country’s energy needs. At the moment, the infrastructure is not mature enough to ensure coverage of service.

Andrés Bayona

Q: Who are the main players within the natural gas ecosystem and what role does AMGNV play in their integration?

President | AMGNV

A: This alternative fuel requires the development of technology for its use, so we are working with many players in the automotive industry, including manufacturers of buses, trucks and equipment, maintenance workshops, natural gas compressor manufacturers, infrastructure builders, financial institutions, natural gas

Natural Gas: A Transitional Energy on the Road to Sustainability

distributors and others technology developers building the accessories to convert traditional ICE vehicles to natural gas. The key is to have the participation of the government because the transition involves many extensive and complex requirements that lead to long waiting times to gain regulatory approvals.

We are constantly trying to enforce communication with the government and to receive their feedback. The government is an essential actor that will allow the acceleration of the decisionmaking process. Verification units are responsible for evaluating and regulating the quality of these vehicles and ensuring they comply with regulations. They are similar to a middleman between the government and users and simultaneously help the development of the industry.

Q: What is the current role of natural gas in Mexico’s energy mix?

A: Mexico imports about 70-80 percent of the natural gas it consumes from the US. Luckily, Mexico buys natural gas from one of the least expensive sources in the world. The natural gas that comes from the US already complies with the Mexican Standard 01, which establishes the characteristics that natural

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gas must adhere to for its use by the general public. Natural gas represents a large opportunity for Mexico. The country is expected to find and explore new markets, especially in exporting gas from the US to the European and Asian markets after undergoing a liquefaction process in Mexico.

Conference

Powering the Vehicles of Tomorrow | 34

Highlights

The Fuels Making ICE Vehicles Sustainable Miguel Ogazón Technical and Engineering Director | ANPACT

Óscar Ruiz Regulatory and Innovation Manager | Daimler Truck México

Javier Valadez Director of Operations | Kenworth, PACCAR

Andrés Bayona President | AMGNV

W

hile most in the sector are focusing on electric vehicles (EV), others are exploring the use of alternative, sustainable fuels as transition energies to reduce the emissions from internal combustion engine (ICE) vehicles.

Sustainable fuels may smooth the transition of the vehicle fleet in many parts of the world, especially in emerging economies where the penetration of EVs has been slow, such as Mexico. Mexico City and Guadalajara, for example, have implemented electricpowered public transportation. While an interesting initiative, measures of this kind have limited impact in Mexico as electricpowered vehicles for public transportation represent less than 0.01 percent of the country’s fleet, explains Miguel Ogazón, Technical Engineering Director, ANPACT. While emissions reduction often goes hand in hand with EVs, these vehicles are not the only option available. Alternative fuels like natural gas or hydrogen also represent important benefits, especially in the short term. However, Mexico lacks the necessary infrastructure to fully exploit these alternative energies. “As we develop new technologies, the industry must take into account the ecosystem that will absorb them and its supply sources,” says Javier Valadez, Director of Operations, Kenworth-PACCAR. There has also been substantial progress in reducing the carbon emissions from ICE vehicles. Thanks to new technologies that allow for cleaner fuel extraction, the emissions from ICE vehicles have been reduced by about 85 percent. “Comparing Euro III technologies with Euro VI, the reduction in emissions is substantial,” says Óscar Ruiz, Regulatory and Innovation Manager, Daimler Truck México. The region is already working on Euro VII, which will ensure that emissions are measured in real time. In emerging economies, however, these technologies and regulations are still being deployed and it may take some time before they make a significant difference.

One of the most popular alternatives to traditional fuel is natural gas, which offers several benefits to users and automakers, from safety to savings. Natural gas is a viable alternative and fleets in large cities in the US have already seen its benefits, especially in last-mile deliveries, says Andrés Bayona, President of AMGNV. Mexico has many opportunities

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in this area but they are held back by over-regulation and difficulties to obtain permits to sell natural gas, he adds, which also delays the development of the necessary infrastructure.

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from the

Q: How is the Mexican heavy-vehicle industry adapting to electrification and natural gas trends amid ongoing challenges?

A: The challenging circumstances have also impacted the way vehicles are produced. Practices such as just-in-time manufacturing are impossible now. New trends, such as nearshoring, have become stronger, potentially leading to the reconfiguration of North American supply chains. This transformation comes amid the heavy-duty vehicle industry’s transition toward net-zero operations.

Mexican production is composed of 99 percent diesel vehicles, while natural gas and electric heavy-duty vehicles represent less than 1 percent. However, this trend will gradually change toward cleaner vehicles and manufacturing operations across the supply chain.

Mexico is the top exporter of tractor trucks in the world, the fourth-largest exporter of heavy-duty freight vehicles, the fifth-largest manufacturer of passenger and freight heavy-duty vehicles and the eighth-largest manufacturer of buses worldwide.

Mexico’s largest challenge is to remain a global leader during the transition to cleaner heavy vehicles, including electric units.

Q: How important is it for Mexico to renew its heavy-vehicle fleet?

Miguel Elizalde

A: Mexico needs a balance between what is desirable and what is feasible. Many say that the country should have predominantly EVs but this will take time. Mexico’s heavy-vehicle fleet has an

President | ANPACT

average age of 23.9 years in the case of two- and three-axle trucks, 17.7 years for tractor trucks and 17 years for buses. Before electrification, the main challenge in Mexico is renewing the fleet, a crucial step in the industry’s transformation that will benefit all of society. Emissions and accidents are caused mainly by older

Heavy-Vehicle Industry in the Midst of a Major Transition

trucks. Most owner-operators own between one and five trucks in Mexico. The challenge is to provide tools for these small-business owners that will enable them to renew their fleets. It is difficult for them to invest in their fleet renewal and still have cash flow.

Q: How should fleet renewal be promoted and what is the importance of decarbonizing the supply chain?

A: The country needs public policies to promote fleet renewal.

The new General Law of Mobility and Road Safety was recently approved. While this regulation originated within that part of society that wants to improve mobility by using bicycles and walking, the next important piece is buses and mass transportation. Heavy vehicles are crucial for logistics and the pandemic proved it. Without them, we cannot survive.

We need to reduce vehicle emissions and generate zeroemission supply chains. Exports to the EU may require netzero production, so it is not possible to backtrack from these decarbonization trends.

Q: How does ANPACT work to promote environmental and gender equality trends?

A: ANPACT is committed to the environment. We will focus on working with the authorities to boost the adoption of cleaner technologies. ANPACT is convinced that the authorities and

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from the

the industry, together, can push Mexico toward adopting more inclusive, cleaner transportation that improves mobility for millions.

We are working with the federal government. Financing is limited but certain states are promoting their own programs for buses fueled by renewable sources. Financing schemes and a regulatory framework that promotes sustainability should be prioritized. ANPACT is also working to promote gender equality through its “MujerEsAutotransporte” platform.

Q: What are the main points addressed and the areas of opportunity in the General Law of Mobility and Road Safety?

A: The new General Law of Mobility and Road Safety includes several positive aspects, such as vehicle modernization, which is the first step toward promoting newer technologies. Among the areas of opportunity is the promotion of financing. ANPACT is also urging Congress to continue improving regulation regarding road safety and emissions reduction. The country needs to get its older trucks off the highways and acquire cleaner, safer trucks.

Q: How does ANPACT collaborate with the government to promote beneficial initiatives for the heavy-vehicle industry?

A: Currently, ANPACT has a good relationship with the government. Most public policies are not orientated toward small businesses but toward individuals. There is a big area of opportunity to support SMEs. The sector’s economic impact is large, representing almost 6 percent of the country’s GDP and generating 3 million jobs. Also, there is a large opportunity regarding highway security.

The government is applying subsidies so diesel prices remain stable, which is expensive. Public and private sectors must align common goals for the future well-being of Mexico. ANPACT is collaborating with the government to improve safety regulations in Mexico and promote new technologies to reduce emissions, including natural gas and ultra-low sulfur diesel (ULSD). There are interesting alternatives to reduce emissions but we need regulations. For example, there is still no regulation regarding EVs in Mexico.

Q: How has ultra-low sulfur diesel grown in availability and how has it pushed the adoption of Euro VI technology?

A: Due to the lack of investment, Mexican refineries cannot produce 100 percent ULSD. They mainly produce regular diesel.

However, the government has promised that the Dos Bocas refinery will be inaugurated in one year and that the Tula refinery will be remodeled.

Few companies are buying Euro VI because ensuring the supply of ULSD is difficult. ULSD must be made available and those that sell it must advertise it so truckers know where to acquire the fuel. According to CFE, pumps dispatching ULSD must have Read the complete article More about this person More about this company

a sign to inform truck drivers. These signs should be larger and be located outside gas stations so everyone knows where ULSD is being dispatched. Gas stations also face challenges ensuring ULSD is available on a daily basis. Furthermore, gas stations use the same pump for both regular and ULSD.

VIEW TOP Powering the Vehicles of Tomorrow | 37

from the

Q: What are some of the challenges standing in the way of Mexico’s mobility electrification?

A: One of the booming trends in the transportation industry in Mexico is electric motorization in favor of modernity and environmental care, for which anti-pollution regulations are becoming more restrictive regarding the use of combustion vehicles, especially in large cities.

However, solving the challenge of electromobility in Mexico requires a great commitment and teamwork to coordinate actions of the public and private sectors, technological advances, marketing, financing, public policies and innovation that improve productivity. This will create more sustainable environments and more efficient transportation in our cities.

For this reason, Mercedes-Benz Autobuses is firmly committed to developing solutions that improve urban mobility in large cities. The proposals are designed based on the integration of transport, operators, authorities, the environment, pedestrians and users, with the last two elements being the most relevant for the company.

In Mexico, we have a dedicated bus chassis engineering team that helps design the right products to meet local mobility needs.

The Mercedes-Benz family works together to overcome current

Alexandre Nogueira

and future challenges.

Q: Models like the OC 500 LE are already meeting Euro VI standards. What is still missing for this

CEO | Daimler Buses/ Mercedes-Benz Autobuses

technology to reach the Mexican market?

A: First, all our buses meet the highest quality standards and are configured with a BlueTec 5 engine that has the Euro V certification, which includes environmentally friendly technology.

Daimler Brings Tomorrow’s Buses to Mexico

It should be noted that we launched this technology in the country before the local law required it. When the regulations required it, we already had nearly 10,000 vehicles with this technology, which is the cleanest in the country.

Mercedes-Benz Buses is ready for Euro VI as soon as the infrastructure allows it. Our goal is to make Mexico the first country in Latin America to receive this technology. However, it was delayed until 2025 due to the availability of Ultra-Low Sulfur Diesel (ULSD) in all the country.

The eO500U chassis is ready to work but for Mexico to have this type of motorization, first it must have the adequate infrastructure. It should be noted that Germany already has buses with new generation batteries that optimize the vehicle’s energy consumption. The eCitaro is already the benchmark for electric buses and we are bringing this technology to Mexico as a chassis.

We decided to start electrifying urban transport and from there expand to other types of buses, sizes, and applications. Parallel to product development, we will build intelligent transport

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systems to optimize fleet management because when we think of electricity, we must think of recharging, energy availability and fleet organization. The process involves much more than the bus; you need a complete ecosystem to organize and provide excellent transportation.

Sustainability, Policy to Improve Sector’s Outlook Guillermo Rosales Executive President | AMDA

Will Mexico Be Ready for Vehicle Electrification?

Francisco Enciso Director Mexico | Grupo Surman

What Tech Will Help Achieve Carbon Neutrality, Sustainability?

Manuel Macedo President | Honeywell Latin America

Hyundai Bets on E-Fuel Research 03/31/2022

Foreign Affairs Working on Transportation Electrification 08/18/2022

Mexico Will No Longer Export ICE Vehicles to the EU From 2035 07/01/2022

Mexico to Meet Hybrid, EV Goal by 2030: President 07/ 20/ 2022

General Motors Will Produce Electric Vehicles in Mexico 03/29/2022

Lightyear to Produce Solar-Cell Powered EVs 06/22/2022

Bolivian EV to Arrive in Mexico 08/05/2022

3

Manufacturing Trends New technologies are transforming manufacturing processes, while innovative materials are replacing their traditional counterparts, fundamentally changing the nature of vehicles. These changes are expected to improve the driver experience and strengthen supply chains.

Materials like foam and plastic are replacing heavier options. Simultaneously, plastic injection and additive manufacturing are aiming to improve delivery times and quality.

Although these changes aim to help the vehicle adhere to industry trends, such as automation, their main objective is to offer the user safer and more efficient mobility solutions.

Scientific advances have been essential for the sector to continue evolving.

Nanotechnology, for example, is introducing new materials and solutions to improve designs, while helping the industry to transition to recyclable materials.

This chapter will address the benefits of adopting new manufacturing technologies and the benefits of using alternative materials for building the car of the future. It will also focus on how Mexico can leverage these opportunities to continue being a referent in manufacturing, while it works to gain relevance in automotive design.

3

Manufacturing Trends

40

Analysis Material Technology’s Pivotal Role in Industry Transformation

42

View From the Top Alex Zúñiga | Research Group Leader | Tecnológico de Monterrey

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View From the Top Fadi Abro | Director of Automotive Business | Stratasys

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Conference Highlights Innovation in Material Technology Key for Automotive Sector

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View From the Top Felipe Villarreal | CEO | Alian Plastics

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View From the Top Gerardo Angulo | Country Manager Mexico | The Timken Company

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View From the Top Saulo Guzmán | General Manager | Wieland Metal Services Queretaro

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Conference Highlights Infrastructure, Consumer Readiness Underpin EV Takeoff

49

View From the Top Udo Storck | Managing Director | Masterfoam Group

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View From the Top Tomoaki Inoue | President | JATCO Mexico

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View From the Top Alberto Bustamante | Director General | INA

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View From the Top Miguel Pacheco Ancona | Country Manager Latin America North | Bridgestone

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Content Links

Manufacturing Trends | 42

Material Technology’s Pivotal Role in Industry Transformation LIGHTWEIGHT VS. TRADITIONAL MATERIALS Lightweight Material

Mass Reduction (percentage)

Magnesium

30-70

Carbon fiber composites

50-70

Aluminum and Al matrix composites

30-60

Titanium

40-55

Glass fiber composites

25-35

Advanced high strength steel

15-25

High strength steel

10-28

Source: US Office of Energy Efficiency & Renewable Energy

For decades, steel and metal alloys have been the preferred materials for vehicle manufacturing, mainly because of their performance and cost. However, current industry trends demand more advanced materials to boost the fuel economy of modern vehicles, while maintaining safety, performance and cost-effectiveness. The industry’s adoption of e-mobility and sustainability trends will be enabled by constant innovation in lightweight materials, magnesium and aluminum alloys, highperformance polymers and 3D-printing, among others.

Lightweight materials offer great potential for increasing vehicle efficiency, as it takes less energy to accelerate a lighter object than a heavier one. A 10-percent reduction in vehicle weight can result in a 6-8 percent fuel economy improvement, according to the US Office of Energy and Renewable Energy (EERE): “Replacing cast iron and traditional steel components with lightweight materials, such as high-strength steel, magnesium alloys, aluminum alloys, carbon fiber and polymer composites, can directly reduce the weight of a vehicle’s body and chassis by up to 50 percent and, therefore, reduce a vehicle’s fuel consumption.”

Vehicles are increasingly incorporating new technology components, emission control systems and safety devices.

With lightweight structural materials, cars can carry additional components without increasing the overall weight of the vehicle.

To replace steel, however, materials must deliver high strength, energy intensity or the ability to absorb impact, manufacturability, minimum weight, corrosion resistance and maintainability, according to the paper, Modern Materials for Automotive Industry, published by Havorun et al in the Journal of Engineering Sciences. Moreover, although lightweight materials are important for any vehicle, they are especially important for HEVs, PHEVs and BEVs. Lightweight materials in these vehicles can offset the weight of power systems, such as batteries and electric motors, improving efficiency and increasing their all-electric range, according to EERE. The average vehicle body in the US fleet today is 65 percent steel, 13 percent aluminum, 4 percent magnesium, 6 percent plastic and polymer composites and a variable percentage of glass, adhesives, sealers and foam, as reported by MBN. While automakers continue exploring and developing alternative materials, copper will remain an essential raw material, says Saulo Guzmán, General Manager of Wieland Group. “EVs require a lot of copper. So far, it is used in motors, batteries, inverters, wiring and fuses.” However, EVs require new copper alloys composed of “more specific materials, not the regular copper we used to have in the past.”

Short-Term Lightweight Materials Research In the short term, R&D is mainly focused on replacing heavy steel components with materials like high-strength steel, which is stronger and more ductile than typical steel. Advanced high-strength steel can reduce component weight by up to 25 percent, according to EERE. The material can also improve the vehicle’s performance in crashes, while still allowing suppliers to manufacture components using conventional techniques.

Manufacturing Trends | 43

Aluminum alloys represent another important alternative.

Aluminum car bodies have already reached mass production, although only for expensive models. Premium brands tend to experiment with aluminum alloys, including Jaguar-Land Rover, Audi and BMW, as reported by MBN. Thanks to its use in aerospace and construction, scientists have a good understanding of aluminum’s characteristics and processing, says EERE. The main persisting issues with aluminum alloys are cost and manufacturing, in addition to issues with joining, corrosion, repairs and recycling when the metal is combined with other materials. The US Vehicle Technologies Office is working with The Pacific Northwest National Laboratory and Ford to improve how manufacturers pre-process sheets of aluminum to increase formability during stamping.

Long-Term Lightweight Materials Research Advanced materials, such as magnesium and carbon fiber reinforced composites, could reduce the weight of certain vehicle components by 50-75 percent, according to EERE. While magnesium can reduce component weight by over 60 percent, its use is limited to less than 1 percent of the average vehicle by weight. The main barriers for magnesium’s scalability in the short term include the raw material’s high cost and price instability, difficulty to form a sheet with it at low temperatures, low ductility of finished components and difficulties to join, repair and recycle when used in multimaterial systems. Magnesium is used in gearboxes, steering columns and driver’s air bag housings, as well as in steering wheels, seat frames and fuel tank covers. The desire to identify solutions and opportunities regarding the use of magnesium in vehicles has been growing over the past years, according to the International Magnesium Association.

Carbon fiber reinforced polymer composites, on the other hand, can reduce component weight by over 60 percent. However, automakers use this only in high-performance vehicles due to costs of the input material and required processing, according to EERE. 3D Printing: A Feasible Alternative?

Originally used only for prototyping, additive manufacturing (AM), also known as 3D printing, is disrupting the automotive value chain and finding its way into more industrial processes. AM can now be used in numerous processes, says Sebastián Romo, CEO of Tridi.

The automotive and aerospace industries have been the biggest adopters of 3D printing but the way the automotive sector uses this technology is changing. “OEMs are increasingly using this technology. Almost all OEMs in Mexico own a professional or an industrial (3D printing) machine,” says Romo.

While the adoption of AM in the automotive sector is challenging due to cost factors, it is a useful tool during supply chain disruptions. “During assembly, AM helps to print all the needed components while the supply chain catches up. While 3D printing raises the price per piece, it prevents supply chains from stopping,” says Adi Fabro, Director of Automotive Business at Stratasys.

The potential of AM is significant. In the future, vehicle bodies could become 3D-printed, enabling not only lighter vehicles but a path to a future of rapid customization and personalization of cars, going from unique design to computer modeling and printing in days rather than years, according to the Society of Plastics Engineers.

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In the future, new companies could enter the automotive industry aiming to build 3D-printed cars that meet both government safety standards and consumer performance expectations.

VIEW TOP Manufacturing Trends | 44

from the

Q: How are electrification and efficiency trends driving innovation in raw materials and manufacturing operations?

A: Most companies are trying to reach zero emissions by 2050.

By prioritizing sustainability and the creation of new materials and processes, the automotive industry will be able to produce EVs and reach those zero-emission goals. The circular economy and the recycling of materials are essential for the achievement of electrification goals but we also need new materials that reduce the weight of components, specifically EV batteries. This is an enormous challenge because we have to come up with new components while we fulfill standards and regulations. We also need to implement new manufacturing technologies. While many are interested in additive manufacturing, it currently cannot fulfill industrial requirements due to its low-volume production processes. However, companies are trying to generate new processes to achieve high-volume production.

Q: How can nanotechnology be applied to improve efficiency, reduce costs and make EVs more sustainable?

A: Developing lasting batteries is essential. The challenge is to increase battery life and vehicle efficiency. With nanotechnology, we are developing new materials that take advantage of the porosity and the fragile structure of some materials to increase the capacity and efficiency of batteries. These efforts aim to

Alex Zúñiga

generate long-lasting batteries and reduce their weight. By achieving the latter, we will be able to increase the autonomy of EVs. Sustainability also plays an important role because the automotive sector demands eco-friendly manufacturing processes

Research Group Leader | Tecnológico de Monterrey

and recyclable components. Hydrogen has been globally used to make EVs more sustainable. The problem in Mexico is that we do not have many related initiatives.

The automotive sector is looking for new materials that can

Nanotechnology Adds Value, Solves Problems

improve the capability and strength of vehicles, while reducing their overall weight. For this, we are exploring new technologies and developing hybrid composite materials, which are the result of a combination of carbon fibers and metallic components. With these materials, we can develop components that can reduce weight and address structural and durability issues. We are also working on force composite materials for the aerospace industry.

We want to create materials that are mechanically efficient and provide high conductivity and thermal dissipation. We are working with a global electric company to develop materials to reduce the size and weight of some vehicle parts. If successful, this project will have a significant impact on EVs. Q: What efforts are needed to boost the transformation of the automotive industry in Mexico?

A: Before, our main challenge was to convince leaders in the automotive industry that nanotechnology offers a competitive advantage. This is widely known now. We have been working with an engine manufacturer that is concerned about the fading prevalence of internal combustion engines. For this reason, the company wants to create new products that can add value to

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EV manufacturers by developing materials to replace aluminum with hybrid composites. Other companies are exploring replacing thermoset materials with thermoplastic. At Tec de Monterrey, we created thermoplastic materials with very similar properties to thermoset materials, proving that this is a cost-effective solution.

VIEW TOP Manufacturing Trends | 45

from the

Q: What has been Stratasys’ role in the adoption of additive manufacturing by the automotive manufacturing industry?

A: The sector has been using additive manufacturing longer than any other. Prototyping is the necessary evil of creating a product but the more prototyping a company does, the more it prevents future problems. Prototyping allows developers to identify potential production problems that many customers will face.

The automotive sector produces a new vehicle every 50 seconds, so the industry has little time to fix unexpected issues. It needs to prototype. 3D printing has helped the industry prototype products for over 30 years, allowing it to identify future problems.

For example, a test drive of a prototyped vehicle can provide manufacturers with live feedback from focus groups, allowing the company to give customers what they really want.

Q: How has Mexico adapted to additive manufacturing and how open have companies been to this solution?

A: Mexico has been a hub for manufacturing rather than design, which happens mainly in California or Detroit. One of the biggest challenges the automotive sector faces is the limited availability of talent. Recent engineering and design graduates are not enough to cover the talent demand. Mexico can use additive manufacturing for printing surrogate parts (non-functional

Fadi Abro

substitutes of high-value parts). By 3D printing surrogate parts, factories do not have to wait for parts to be delivered before starting the prototyping process, shortening production time and cost. Many of the challenges the sector is facing require new

Director of Automotive Business | Stratasys

methods of assembly and the best way to support assembly is through surrogate parts.

Q: What role is additive manufacturing playing in the supply chain crisis?

Mexico’s Automotive Sector to Benefit From Additive Manufacturing

A: During assembly, additive manufacturing helps to print all the needed components while the supply chain catches up. While 3D printing raises the price per piece, it prevents supply chains from stopping. In tooling, the main problem is the low volumes involved and the high value of the pieces, which is a problem because few suppliers are willing to manufacture only a few pieces. Through additive manufacturing, a supplier can provide the design and send it to a printer, avoiding complications.

Q: What are the benefits of investing in tooling innovations and services?

A: In tooling, additive manufacturing saves money and time and provides high-quality products. Numerous materials can be replaced by less expensive alternatives during tooling. For example, aluminum can be replaced by polymers or plastic components with the same functionality. Additive manufacturing is always faster than other alternatives. A piece that would take five days to produce through other means can be printed in 10 hours.

Tooling can also help companies achieve better quality. For

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example, we are seeing numerous model changes during the transition of ICE vehicles to EVs. This change involves the entire vehicle and if a part is missed, it should be adjusted. During this process, 3D printing the necessary tools can help perform these changes faster, leading to products of better quality.

Conference

Manufacturing Trends | 46

Highlights

Innovation in Material Technology Key for Automotive Sector Felipe Villeral CEO | Alian Plastics

Sebastián Romo Managing Partner | Skala Ventures

Carlos Gómez Purchasing-SQM Director | Continental

José Luis Treviño Vice President Strategic Planning | Metalsa

Alex Elías Zúñiga Research Group Leader of Nanotechnology for Device Design | Tecnológico de Monterrey

A

s materials play a critical role in the deployment of green solutions, automakers are searching for more advanced building materials to boost fuel efficiency and performance, while providing more cost-effective and safer vehicles.

Materials like steel and metal alloys were the standard for the sector but automakers have not shied away from exploring alternatives. “Material science has always been present in automotive development, helping to make cars safer and more efficient,” says José Luis Treviño, Vice President of Strategic Planning, Metalsa.

New opportunities represent diverse challenges for the industry. In the future of materials, sustainability of the entire supply chain is key for both consumers and automakers.

Companies must know and understand their carbon footprint throughout their entire supply chain. “Sustainability is the future of materials. We must become more environmentally friendly in our material choices and strive for circular processes,” says Carlos Gómez, Purchasing-SQM Director, Continental Mexico.

Additive manufacturing (AM) can help automakers find the solutions they need to produce lighter pieces and reduce fuel consumption. While this technology has existed since the 1980s, the democratization of 3D printing has allowed for major advances in the production network of parts for trucks and specialized vehicles, says Sebastían Romo, Managing Partner at Skala Ventures. The industry should still seek new ways to provide for better and more efficient materials that allow for a more efficient and sustainable sector, however, experts say.

Nanotechnology will play an essential role in the future of materials, as it can target specific problems. “It gives us the ability to manipulate at molecular levels the structures of materials and add other desired functionalities,” says Alex Elías Zúñiga, Research Group Leader of Nanotechnology and Device Designing, Tec de Monterrey.

The industry’s future relies on material technology so key players in both the private and public sectors need to continue betting on sustainability and security by putting their

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investments where their needs are. “Innovation and technology development cannot happen without continuous investment in scientific research,” says Felipe Villareal, CEO of Alien Plastics.

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Q: What are the trends that Alian Plastics has detected within the automotive sector and what are its main challenges in keeping up with production?

A: Changes in the automotive industry have opened up opportunities for Alian Plastics, mainly to serve the EV market.

We provide components for Tesla’s Model 3 and we just won a program for the Model Y, which will be manufactured in San Antonio, Texas. EVs, and vehicles in general, are turning to plastics and aluminum as the ideal lightweighting materials.

During the pandemic, there was not enough human capital to produce the raw materials we required, so we ran out of components for our resin extractors. The plastic injection market is seeing a large boom but resin extractors remain the same and their capacity to produce has decreased.

Some days are better than others as suppliers may run out of raw materials at any time. There is constant tension and uncertainty.

Q: What strategies has Alian Plastics implemented to secure supplies in this difficult environment?

A: Internally, we increased our purchase orders to have more inventory available. Previously, the lead time was four to eight weeks depending on the resin but now suppliers are asking for

Felipe Villarreal

a lead time of 24 to 28 weeks.

Most of the components we produce, such as those for Audi, BMW and Tesla, use directed resins. We can find additional

CEO | Alian Plastics

suppliers to produce those specific resins. Diversification remains key, not only regarding different markets and industries but also with suppliers. Doing this can save companies not only in the present situation but also in the future.

Diversification of Markets, Suppliers Key for Success

Q: How is Alian Plastics investing in new processes, technologies and machinery to improve operations?

A: Quality and timely delivery are at our core. Talent is behind our success in both areas but people require tools to work with. Alian Plastics has invested in measurement tools for its metrology laboratory, 3D arms to scan parts and an Industry 4.0 system that detects problems in real time and sends alerts immediately. Our entire staff is alerted when a machine stops.

They immediately know the reason for the stoppage and the person responsible for fixing it. In addition to addressing the problem and allowing operations to continue, the system has inadvertently created a healthy competition within the team.

No one wants to receive an alert that a machine has stopped due to lack of maintenance or material. This technological approach has helped us a great deal.

Q: How does Alian Plastics work to make the most of its technological tools?

A: The best result is obtained by taking into account the

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opinion of the user, whether it is the operator, metrologist, quality manager or maintenance manager. They are the ones who enrich these tools. If we do not listen to their needs as we listen to those of our customers, we cannot get the most from our investment in those tools.

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Q: How does Timken contribute to vehicle lightweighting?

A: We are constantly innovating to serve different industries and emerging trend. In the automotive sector, new bearing design and materials features enable vehicles to incorporate smaller bearings with the same working conditions. In particular, Timken’s products can offer innovative bearing surface finishes, lubricants and internal design geometry that reduce wear and make products more efficient by accommodating higher stress operating conditions with smaller bearing sizes. The use of smaller power-dense bearings can contribute to reducing vehicle weight.

Q: How has the Guanajuato plant increased the company’s competitiveness in the Mexican and North American markets?

A: Our Guanajuato location builds on the company’s manufacturing strategy to serve customers where they need us. Our plant uses state-of-the-art technology and automation to achieve the standards for quality and consistency Timken employs around the world. What we are doing here in Guanajuato helps us advance our global bearing leadership by providing a high level of value and service for our customers in the region and globally.

Q: How has the company worked to secure supplies amid the global disruption?

Gerardo Angulo

A: It has been challenging, but we have strong relationships with our suppliers and we have been focused on improving every day. Despite significant disruptions to supply chains as

Country Manager Mexico | The Timken Company

well as inflationary pressures, these are still good times for industrial markets.

Q: How does Timken address the aftersales battle between quality and low cost?

Timken to Continue Growing Its Mexican Footprint

A: We strive to be as competitive as possible. We maintain the same high standards for quality and consistency at all of our manufacturing sites around the world.

Q: What role does the aerospace industry play within Timken’s operations in Mexico?

A: We are trusted across the aerospace industry because of our performance and safety requirements. The company has a division focused on aerospace technology serving global customers. In Mexico, we provide components used primarily in aircraft interiors.

Q: How could the acquisition of Aurora boost the company’s participation in the Mexican aerospace sector?

A: We are working to integrate Aurora products into our portfolio. We are very pleased with the opportunities the acquisition creates for us, but it is too early to say what impact that may have for our business in Mexico.

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Q: What are your plans for the near term in Mexico?

A: We are continuing to build capacity and expertise and look forward to serving customers in the region and globally – for years to come.

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Q: How has Mexico’s vehicle production crisis impacted demand for WMSQ’s copper?

A: Copper is required in many industries. Although the automotive sector went from representing 50 percent of our copper sales to only 27 or 30 percent, diversification has allowed WMSQ to keep its business running. Building and construction demand, for example, has increased, compensating for the decline in sales to the automotive industry.

Q: Considering the importance of diversifying the business, what are the challenges to enter the aerospace sector?

A: There are several barriers for suppliers to enter the aerospace industry. The AS9000 certification is difficult to obtain. While entering the automotive supply chain is not easy, due to quality and traceability controls, the aerospace industry is more restrictive.

Every product is intensely inspected and, usually, you need to build relationships with OEM-approved brass mills. Even if a product meets all specifications, you can only buy it from approved suppliers.

Although products have a large profit margin, volume is very low.

The aerospace sector is profitable but if your structure was created to serve the automotive industry and its high levels of required volume, it is difficult to transform into an aerospace supplier, where projects have a longer life span and volumes are much lower.

Saulo Guzmán

Very few companies have the capability to adapt but WMSQ is one of them.

Q: What strategies has WMSQ implemented regarding EV growth?

General Manager | Wieland Metal Services Queretaro

A: The group has made a number of investments in recent years.

In December, it announced a US$50 million investment to increase casting and the production of special alloys at our brass mill in Illinois.

This project will begin production by 2025. In addition, the company

Securing Copper Demand Amid Global Shortages

has invested in secondary processes, which are important to give shape to castings.

Regarding strategies in Mexico, we will open a branch office in Juarez, Chihuahua, to position ourselves in the north of the country.

Part of the strategy has to do with EVs because. While Juarez does not have a long automotive history, it is an industrial city and it can develop auto parts. In addition, we will be covering all central north region of Mexico from our new branch office.

Q: How has USMCA influenced WMSQ’s operations?

A: Copper was completely left out of the discussion regarding the rules of origin, which is understandable because vehicles have much more steel and aluminum than copper. In terms of regional content, USMCA did not help us; however, the nearshoring boom that the country is experiencing does benefit WMSQ. Q: How has WMSQ benefited from its IMMEX status?

A: IMMEX certification is a great competitive advantage. Copper itself is an expensive material and paying an extra 16 percent for an

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expensive product would pressure any company’s cash flow. For WMSQ, IMMEX is almost like a requisite to operate and the biggest benefit is for our clients. This certification allows us to import products tariff-free from Asia, the US and the EU, where we have developed our supply chains.

Conference

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Highlights

Infrastructure, Consumer Readiness Underpin EV Takeoff Mark Sánchez President | ANVES

David Zambrano COO | Maserati Mexico, RollsRoyce Motor Cars Mexico

Enrique Mendoza General Manager | Beat México

Alfonso Reyes

F

avorable policies have served to signal a willingness to support the successful rollout of EVs, despite significant barriers, including limited supporting infrastructure and little certainty on returns, according to industry leaders. Nevertheless, Mexico has a strong

underlying network infrastructure, so “investors should keep an eye on this as a developing opportunity,” according to ARCADIS. The country, experts say, is poised for a leading regional role in the segment. “Mexico will be an important part of international electromobility and will continue to spearhead the Latin American automotive industry,” says Mark Sánchez, President, National Association of Electric and Sustainable Vehicles (ANVES).

ICE transport accounts for 21 percent of global carbon emissions, which makes it the largest emitting sector in many developing countries, according to the World Economic Forum. In the face of

Plant Director | ZF

recurring and increasingly devastating extreme weather events,

Mauricio Rosales

this data has helped propel a public-led interest toward tackling

Carbody Sales Manager IQS-MX | Zeiss

transport emissions. ANVES has been working with the private and public sectors at the local and federal level to establish an official standard for the conversion of ICE vehicles into 100 percent EVs. This is a primordial step because “a challenge to the expansion of mobility electrification is that combustion cars remain more affordable than electric vehicles,” says Enrique Mendoza, General Manager of Beat México. “In Mexico, we need a cultural change that allows us to lose our fear of EVs and to trust in technological advances,” says Alfonso Reyes, Director General, ZF Powertrain Modules Saltillo SA. Despite a concerted effort to bridge the electrification gap, there are still extraneous elements that threaten to hamper Mexico’s intended transition, such as its limited access to raw materials.

While there have been efforts to reorganize global supply chains with the adoption of technology applications, sustained complications threaten to curtail “the electrification wave drastically from one moment to the next,” says Mauricio Rosales, Carbody Sales Manager IQS-MX, Zeiss.

“EV supply is growing in different segments, offering more accessible options for diverse purchasing powers,” says Reyes.

Within this early market space, Mexico’s “premium segment is the one buying more EVs. These are the brands that have

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managed to bring more fully electric vehicles to the market,” says David Zambrano, Operations Director, Maserati México and Rolls-Royce Motor Cars México.

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Q: How is Masterfoam facing international challenges?

A: We had to adapt our purchasing strategy. We used to buy raw materials from the EU but prices grew fivefold, leading us to look for local suppliers. This was not easy but we tried to include our customer base in this decision as much as possible.

All companies are suffering from high prices, especially in the automotive sector. Compared to these crazy high prices, it almost feels like COVID-19 was easier to solve Q: What other opportunities in the Mexican market can boost Masterfoam’s growth?

A: We work with the automotive, white goods and mobility industries, among others. We have a great deal to offer the market. We attended the exhibitions in Queretaro and the Foam Expo in the US so potential customers could become acquainted with our broad range of services. Masterfoam has been in the Mexican market for three years and is a solid company that can guarantee stability, a good product and a wide range of different technologies of several materials. We are eager to grow together with our customers.

Q: How is Masterfoam capitalizing on the electrification trend? How do its solutions benefit EVs?

Udo Storck

A: Our products are mainly for car interiors, which have not changed much replacing the drive system. Therefore, we supply besides the previous brands also to Tesla, Lucid Motors, Lightyear and Fisker. These vehicles require the same products

Managing Director | Masterfoam Group

as ICE vehicles, which we provide.

In the middle term, it will be easier for new OEMs to enter the automotive market. Electrification gives many companies the chance to enter the automotive sector, which was impossible

Foam: Common Denominator Between EVs and ICE Vehicles

with the complex combustion engine technology of the past.

The market will see heavy competition but it will not affect us in the short term because we have positioned ourselves in the EV industry.

Q: What role does the heavy-vehicle industry play in Masterfoam’s operations?

A: This industry represents about 15 percent of our sales; the rest is light vehicles. We have a different business model for heavy trucks. The strategy is to offer smaller volumes and more personalization of each article, which is impossible to do with passenger vehicles. We adapted to this market and now run two business models.

Q: What are Masterfoam’s plans for the rest of 2022?

A: Our main priority is to increase our market share in Mexico. We work one-on-one with clients because parts are developed together with them. We also plan to invest in more machinery and in sustainability at our plant in Mexico by installing solar panels on the roof. Our goal is for the plant

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in Mexico to be CO2-neutral in 2025 at the latest. We are also focusing on Spain. By the end of the year, we will have integrated another manufacturing plant in Spain into the Group and we are going to introduce another product range to the EU and USMCA markets.

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from the

Q: What are the differentiators that have made JATCO one of the main players in the automotive transmission market?

A: JATCO, headquartered in Shizuoka, Japan, was established in 1999 but has numerous plants across the globe and about 12,700 employees. Our stakeholders are Nissan Motor Company, Mitsubishi Motors and Suzuki Motor Corporation. We have a strong offer of transmission control technology, with our main product being several models of the Continuously Variable Transmission (CVT). The latest model is the CVT-X transmission, offering the best technological solution in CVT market. In 2021, we had a cumulative production of 55 million units globally.

We are a passionate and motivated company with specialized knowledge that ensures we can exceed customer expectations.

JATCO’s main goal is to develop new possibilities for mobility using technology and passion. We believe in facilitating the movement of people and goods. Our mission is to provide new value to mobility by providing clean, safe, comfortable and exciting products and services. We are also working on reducing CO2 emissions, water consumption and waste and are promoting corporate social responsibility activities.

Q: How has demand for CVT systems evolved among other OEMs and how has JATCO marketed its products?

Tomoaki Inoue

A: Our main automotive customers are Nissan Mexicana and Nissan North America but we also sell to Renault, GM, Infiniti, Compass and Renault-Samsung. We have also worked with Chrysler and while our contract ended, we still produce for one of

President | JATCO Mexico

its manufacturing units. While Nissan was growing, we did not have the time to look for new customers but, now, we are looking for new clients in the Mexican, South American and the US market.

Q: How would you describe JATCO Mexico’s engagement

JATCO to Increase Operations at Aguascalientes Plant

with its workers and the community in Aguascalientes?

A: We have a strong relationship with the government of Aguascalientes and have collaborated with it on many projects.

We recently invited Aguascalientes Gov. Martín Orozco to the launching ceremony of our new CVT-X, which will replace the CVT8. In collaboration with local authorities, we built a childcare center close to our plant and created the JATCO high school program, which now has 100 graduates.

We have two locations in Aguascalientes and a production capacity of almost 2 million units per year. We established JATCO in Mexico in 2003 and started production at the first site in November 2005 and at the second site in September 2014. As of April 2022, we have about 4,098 associates in Mexico. From 2003 to 2020, we produced 15 million units. In terms of recent introductions to Mexico, we now have the CVT-X (AXO) for the Rogue, X-Trail and the Kadjar vehicles and the CVT-X (CBO) for the Kicks and Sentra models.

Q: What are JATCO’s goals for the near-term?

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A: The market is moving at a high speed toward electrification so JATCO is developing products for EVs. We also want to expand our mass production sites located in Aguascalientes and other cities in Mexico and the US. We are approaching OEMs to make our expansion a reality.

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from the

Q: What challenges could compromise Mexico’s position as the world’s fourth-largest auto parts producer?

A: The shortage of semiconductors, the rise in the cost of raw materials and the Ukraine war are affecting every country at the same level. Mexico’s fourth-place ranking is not being threatened because supply chain issues are affecting all countries equally.

Germany, which is now the fifth-largest auto parts producer, will close 2022 with production valued at US$94 billion while we will close with production valued at US$102 billion. It will take Germany about eight years to reach our auto parts production levels.

Q: Mexico has been a hub of manufacturing rather than design. What is needed to transform Mexico into a design hub for vehicle components?

A: Mexico performs auto parts design and R&D but it does not take part in vehicle design because this process takes place in the OEMs’ countries of origin. Mexico has talent for vehicle design and many Mexicans are currently designing vehicles for OEMs abroad.

Q: What role can INA play in the global transition toward electromobility?

A: We are the main auto parts supplier for the US, as 36 percent of US auto parts imports come from Mexico. For over 25 years, we have

Alberto Bustamante

supplied the US with auto parts and during the past 10 years, we have also supplied auto parts for EVs. We know the market. When Mexico produces more zero-emission vehicles, it will have to invest in adapting production lines. Our core business is the ICE auto parts

Director General | INA

market, followed by the zero-emissions segment. In the next 10 years, producing auto parts for EVs might be our main business. This shift is contemplated in the strategic plan of the auto parts industry.

Recently, President Andrés Manuel López Obrador presented a

EV Transition: A Historic Moment

decalogue regarding the shift toward clean energies. Its third point says that by 2030, 50 percent of the manufactured vehicles in Mexico will be EVs but for this to happen, infrastructure and government support are needed. Mexico only has about 350 charging stations for EVs, while Holland has about 40,000. The country needs infrastructure and corridors for both light and heavy vehicles.

Consumer collaboration is also needed. They must be conscious of their responsibility to decrease their carbon footprint but they also need access to efficient vehicles. Aside from fiscal incentives, clients need greater benefits, such as free parking and toll-free driving.

Q: What other emerging trends is the auto parts market preparing for?

A: New players are entering the auto parts industry by manufacturing hardware and software. Vehicles are changing and, in the future, the main core part of a vehicle will be its hardware. The new players are going to be more relevant because vehicle maintenance will also include software updates. Cybersecurity is also required by new vehicles that are connected to the IoT. People do not realize the importance of the historic moment that we

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are living in. This era is as important as when the first ICE vehicle was launched or even when the internet was created. Future generations are going to live in a world where only EVs circulate on the road and they are going to be told stories about the times when ICE vehicles existed.

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from the

Q: How is Bridgestone continuously innovating in sustainability?

A: Innovation at Bridgestone starts with technology. We are increasing our investment to provide clients with sustainable products. From 2022 to 2050, Bridgestone will continue working as a sustainable solutions provider. The company’s vision encompasses energy, ecology, efficiency, extension, economy, emotion, ease and empowerment to bring a different perspective to each part of the business. We are not just about selling tires; we want to provide sustainable mobility solutions.

Q: What is the expected demand for highperformance tires in the Mexican market?

A: Mexico has a great mix of products. Over the past few years, SUVs have grown exponentially in popularity. Bridgestone develops and manufactures a wide variety of tires from different categories, including high-performance tires. Currently, low-rim diameter tire demand is decreasing in the Mexican market, while high-rim diameter tire demand is increasing. Mexican clients are consuming better cars. At the same time, materials are changing and new technologies are arriving, helping Bridgestone to grow its high-performance tires sales, which have shown doubledigit growth.

Q: How have Bridgestone’s manufacturing operations

Miguel Pacheco Ancona

performed over the past challenging years?

A: The Mexican workforce is great. It can innovate while adapting to several challenges. Bridgestone executed a large vaccination

Country Manager Latin America North | Bridgestone

campaign at its facilities in Cuernavaca, helping the plant to continue operations in the safest possible environment. By 2021, we had already completely recovered our production figures.

Thanks to our great planners, we carried out several strategies to secure raw materials during this global supply chain crisis.

Sustainability, Mobility Are Priorities for Bridgestone

Bridgestone has constantly invested in Mexico, showing the confidence that the company has in both the country and its workforce, which has the necessary energy and knowledge to overcome challenges.

Q: How is Bridgestone investing and pushing its R&D global operations?

A: Innovation is a key part of our global strategy. Both in the OE and aftersales markets, the company works and invests heavily to develop new and sustainable products and technologies. The strategy includes R&D centers across the world to innovate in products directed to specific regions. For example, our main headquarters in Japan focuses on solutions for that region. A great deal of investment is being put into mobility solutions, which are at the core of Bridgestone’s new strategies. WebFleet was born in the EU but it is now part of our global strategy.

Q: What are Bridgestone’s main objectives and goals for the Mexican and Northern Latin America market in 2H22?

A: Our commitment to sustainability will remain a top priority

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during 2H22. We have grown over 10 percent in the replacement market. Still, the global and US macroeconomic scenario is difficult to predict. Inflation is worrying but remittances continue to arrive in Mexico. The company will remain cautious in 2H22 given the macroeconomic scenario.

The New Age of Lubricants for EVs Salvador Orozco Sales Director | Bechem Lubrication Technology

Additive Manufacturing Opens Door to Solutions: Intelligy 3DLab Sebastián Romo Managing Partner | Skala Ventures

Adding Value Through Heat Treating Services Mark Hemsath Vice President of Sales, Heat Treating Services Americas | Nitrex

Robots Could Accelerate the Automotive Industry’s Transformation Mauricio Rosales Carbody Sales Manager | ZEISS México

Mexico: One of the Leaders in Manufacturing Equipment Sales Carlos Mortera International Director Latin America | AMT

Hyundai, Michelin to Develop Tire Technology 07/01/2022

Automakers Are Increasingly Adopting Circular Economy Strategies 03/17/2022

Volvo: First Truck Manufacturer to Use Fossil-Free Steel 05/25/2022

Toyota Implements AI in North American Manufacturing Operations 05/05/2022

Ford Introduces Motorcraft Absorbent Glass Mat Battery 06/15/2022

4

A Digital Era Technology is making connected, autonomous, shared and electric (CASE) vehicles possible.

Although automation is a main priority in this digital era, these changes are not expected to replace human talent but to enhance it.

Additionally, digitalization is contributing to the creation of a connected ecosystem that will ensure a safer environment and data exchange.

Automakers are also increasingly reliant on technology as users are now demanding vehicles that assist them and offer them new experiences. Investing in R&D is crucial to increase competitiveness through technology and companies, including Forvia, Continental and ZF Group, are gradually choosing Mexico for their R&D operations.

New players are also supporting the sector by offering 5G networks and data analysis: useful tools as vehicles become smart devices.

These technologies allow vehicles to connect with their surrounding infrastructure, boosting the development of autonomous vehicles and helping automotive companies to make strategic decisions.

This chapter will explore how the digital transformation is shaping the future of the industry through a balance between what technology can offer and the ideas that only humans can bring to the table, all the while prioritizing both human and environmental sustainability.

4

A Digital Era

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Analysis Digitization: Disruption Driver

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View From the Top Ricardo Anaya | Product Manager | Qualcomm

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View From the Top Marcela Barreiro | President and CEO | Daimler Truck México

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Conference Highlights Industry 5.0: New Revolution

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View From the Top Elena Donahue | Head of Commercial Vehicle Aftermarket and Fleet Business North America | ZF Group

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View From the Top Gerardo San Román | Head of Latin America | JATO Dynamics

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Expert Contributor Daniel Echeverri Restrepo | CFO | Renault Mexico

67

Analysis From Automotive Manufacturing to Mind-Facturing

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View From the Top David Pineda Deom | Head of R&D Queretaro and ADAS Mexico | Continental

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View From the Top Paolo Benea | CEO | Pirelli México

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Conference Highlights Forvia Will Use Mexican Research to Reach Carbon Neutrality

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Content Links

CONSUMER WILLINGNESS TO PAY FOR ADVANCED TECHNOLOGIES

From optimizations within logistics and manufacturing to autonomous driving, shared-mobility models, remote diagnostics and repairs, customized insurance contracts and the aftermarket,

80

digitization fuels the transformation of the automotive supply chain, enabling new business models.

30

49%

40

45%

50

New technologies have permeated companies across the entire supply chain. Logistics has been one of the areas that

55%

65%

60

69%

70

has benefited the most from innovation. “All technological innovations must be applied to automotive logistics. From route optimization, traceability and fuel savings to the overall reduction of the supply chain’s carbon footprint,” says Milton Magos,

20

Country Manager, UPS Supply Chain Solutions. Logistics partners are leveraging several technologies, from AI and machine learning

10

to telematics and robotics. These technologies impact logistics

0 Infotainment

Connectivity

Safety

Autonomy

at all levels, including storage, warehousing, materials handling, Alternative engine solutions

A Digital Era | 59

Digitization: Disruption Driver

packaging, inventory, transport and control. In the warehousing and handling area, AI and robotics are automating processes, collecting and analyzing information, increasing efficiency and boosting revenues.

In-vehicle technologies, such as telematics, also play a crucial role within logistics. GPS technology can be used to triangulate the position of vehicles, while collecting large volumes of data to be used for optimization processes, as reported by MBN. The transmitted data covers everything from location and vehicle diagnostics to driving style. Telematics can even be applied in the insurance sector, says Fernando Ardura, CBO, Traffilog Latin America. “Insurance companies require low accident rates to remain profitable. In the automotive segment, there is a 62-68 percent accident rate, which means the net profit for insurers does not exceed 5 percentage points over sales. Decreasing the accident rate by 4-5 percentage points would double the profit for an insurance company.”

In manufacturing operations, technology has always played an essential role. However, the current speed at which new innovations are being developed has taken industrial operations to new levels. While the automotive industry is still considered to be operating according to Industry 4.0 standards, companies are already transitioning to Industry 5.0. “Over 200 years passed between Industry 1.0 and 4.0. The gap between Industry 4.0 and 5.0 was only 10 years,” says Marco Galindo, Managing Partner, KPMG Mexico. Industry 5.0 has brought a sustainability and wellness approach to the industry. According to the European Union, Industry 5.0 “provides a vision of industry that aims beyond efficiency and productivity as the sole goals, reinforcing the role and the contribution of industry to society … It places the well-being of the worker at the center of the production process and uses new technologies to provide prosperity beyond jobs and growth while respecting the production limits of the planet.”

New OEM Business Models The impact of digitization has not been limited to manufacturing and distribution. Sales, aftersales and the very idea of ownership have also been transformed by new technologies. Traditional vehicle ownership, for example, is shifting toward car-as-aservice and mobility-as-a-service (MaaS) models, shifting

A Digital Era | 60

Consumer Interest (percentage)

Connected Vehicle Feature Updates regarding traffic congestion and suggested alternative routes

72

Suggestions regarding safer routes

68

OEMs’ business models from automakers to mobility providers.

“Owning a car has been a dream that resembled freedom for about 100 years. (New models) have to enter that space and provide the same personal freedom,” Sampo Hietanen, Founder and CEO, MaaS Global and Whim says.

Beyond the mobility approach, OEMs are transitioning from being automakers to becoming technology companies, thanks

Updates to improve road safety and prevent potential collisions

71

Customized/optimized vehicle insurance plans

61

Maintenance updates and vehicle health reporting

70

Maintenance forecasts based on driving habits

63

Customized suggestions regarding ways to minimize service expenses

67

Over-the-air vehicle software updates

62

Access to nearby parking

63

to increasing in-vehicle technology features and 5G connectivity.

Most of the cars available three years ago would run the same software until the end of their useful life and the only way to upgrade those systems was to buy a new car, reported MBN. Nowadays, most OEMs offer over-the-air upgrades, following Tesla’s business model. “In the future market, clients will be able to buy an entire package of software from their car brand, in addition to several other services,” says Jaime Pedraza, CEO of AutomotiveSolutions.

From a sales standpoint, the dealership model has dominated the market for over 120 years, with OEMs and dealers operating as independent entities. While experts are divided regarding the future of this model, some dealerships might see OEMs as possible threats due to the digitization of vehicle sales, which enables direct sales from automakers to end customers. “The (automotive) industry has existed for over 100 years and only in

Special offers regarding non-automotive products and services related to the passenger's journey or destination

54

Discounts for access to a Wi-Fi connection in the vehicle

60

this new millennium has it started to change substantially. Now, investments are changing considerably. The centralized one-stopshop automotive distribution model is increasingly at risk. We

Source: Deloitte 2022 Global Automotive Consumer Study

see fewer dealerships and tighter margins,” says Daniel Esponda, Founder and CEO of Odetta.

Mexico has experienced a massive e-commerce boom over the past three years. In 2020, online shopping grew by 81 percent, according to the Mexican Association of Online Sales (AMVO).

In 2021, growth was 27 percent. The fast and wide adoption of e-commerce has attracted new players to the market focused on a more efficient and streamlined way of doing business with customers. “We are finally beginning to see the fruits of our efforts. With the COVID-19 crisis, people are buying most things online. It has become clearer than ever that digitalization is very important,” said Nazareth Black, Founder and CEO, Car Fast.

While digitization has grown substantially, physical spaces remain crucial for automotive sales, says Roberto Villalobos, Country Manager, OLX Autos: “The world has become omnichannel.

The convergence of the physical world with the digital world is a reality. In the second-hand vehicle market, 67 percent of customers who bought a car first saw it online and confirmed the decision when they saw it in person. The car is a good that people want to see physically before buying it. In the future, however, 100 percent digital sales will also play an important role.”

The car’s transformation into a large producer of data is also raising new questions about who owns this data and who can use it, which will have implications in the maintenance of vehicles, as reported by MBN. OEMs are increasingly collecting and keeping data produced by cars, alleging cybersecurity issues and data protection. The market and consumers do not seem to be on board with this idea, though, explains Ben Brucato, Vice President

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of Engagement for AASA: “The independent aftermarket, along with consumers, demands the right to choose where their vehicles are repaired, what products to use and a fair marketplace.”

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from the

Q: How will 5G improve the driving experience compared to what 4G offered?

A: We need 5G to support the needs of the next decade and the growing number of connected devices. 5G, compared to 4G, brings 10 times more capacity for downloads and uploads. It also provides 10 times less latency, which is crucial for automotive processes. Autonomous driving needs a latency closer to 1 millisecond, which can be provided by 5G. Autonomous driving also needs high bandwidth and the high capacity for connected devices because it will involve about 1 million connected devices per square kilometer. The automotive industry is one of the large drivers of this technology because it has high requirements for connectivity and processing.

Q: What challenges does Mexico face to successfully implement 5G? A: The whole world is working to implement 5G. The first step in any new network is finding spectrum availability. Spectrum is a state-owned entity where users transmit thousands of gigabytes of data. 5G requires the allocation of a spectrum with high capacity and bandwidth. Mexico has two major infrastructure operators already developing 5G infrastructure using a spectrum at 3.5 gigahertz, which is the most deployed band in the world.

However, operators need access to the millimeter wave spectrum,

Ricardo Anaya

which ranges from 24-52 gigahertz. With this, we can get the full capacity of gigabytes and data sub-millisecond latencies.

In Latin America, only Brazil and Chile have allocated this

Product Manager | Qualcomm

spectrum for 5G, while the US allocated it several years ago. The EU, Korea and China are also taking this step. Mexico needs to allocate this spectrum to facilitate infrastructure development.

We also need to promote the implementation of optical fiber because despite being a wireless technology, it still requires the

5G to Enable Digital Automotive Ecosystem

support of optical fiber.

Q: How can the Snapdragon Digital Chassis transform OEM offerings and shape consumer preferences?

A: The digital chassis is the cherry on top of our technology, leveraging decades of innovation and R&D. It is one of our most advanced solutions and enables the digital transformation of the automotive industry.

The digital chassis is open and scalable, packing a great deal of technology that can fit the needs of an OEM or Tier1. It is customizable and it merges all technologies involved in the computer vision: reverse camera, sensor processing, connectivity and our AI platform, among others. This is one of the unique experiences that cars will offer in the future.

Its ultimate goal is to prevent accidents. Snapdragon promotes safety by connecting to other cars, to the infrastructure and to the network but it has to be enabled by multiple OEMs, not just a single one. We have worked with several governments to deploy this technology. For example, the Department of Transportation

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in the US state of Virginia facilitated the infrastructure development for the network. Afterward, we talked to Ford, Audi and Ducati to launch units that can communicate with each other, send safety alerts, collaborate and communicate with the infrastructure, among other abilities.

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from the

Q: A year after your appointment as President and CEO of Daimler Truck, what specific strategies have led to an improvement within the organization?

A: Our main priority is client satisfaction, as we want to offer excellent aftersales services. We have a solid, strong and motivated company with effective processes that help to meet the different needs of our clients.

Through our HR division, now known as “People,” we help our associates align with our corporate values and structures to ensure we are delivering the results our clients expect. My experience in this area has helped me to understand others and the overall functioning of the organization.

Q: How does Daimler’s electrification strategy stand out from those of its competitors?

A: From its beginnings, Daimler has focused on product and technology innovation. We have a good relationship with governments and we are well aware of sustainability and other trends. Electromobility is not the future, it is the present. We are adapting to the changes it brings. Daimler Truck North America already started producing electric trucks and we are open to the possibility of manufacturing these vehicles in Mexico.

Marcela Barreiro

To have fully independent EVs, government and society must cooperate. This process will take time but we are already working to accelerate the electrification transition. Our fleets

President and CEO | Daimler Truck México

can be adapted by working with third parties. The transition has not fully arrived in Mexico but some companies will start investing in this technology.

We are always up to date with technology. Data compilation

Technology Prevents Accidents, Improves Driving

has always been essential for our units to prevent accidents and forecast road conditions, among other applications. It is no longer optional to offer technology; it is mandatory. Daimler discarded the option of launching basic trucks during the pandemic because the company did not want to go back to the past. We always aim to keep all of our units connected to prevent accidents and ensure safety and efficiency on the road.

Q: In April, Freightliner announced that the DriverCOACH tool will be available in Mexico in 2023 models. How useful will this tool be for drivers on Mexican roads?

A: This tool has a camera that records the driver and alerts both the driver and the client of unsafe driving practices.

Distracted driving can happen to anyone who may be tired or distracted by their cellphone. This information will be provided to third-party operators, which are seeking excellence, and which they can use to motivate their associates to perform at their best.

This tool also has an exterior camera that records accidents and helps identify who was at fault. With this tool, the driver

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can remain attentive. DriverCOACH complements Detroit Assurance to help correct driving practices. We are eager to implement DriverCOACH because our customers have strongly liked it. Some wanted to install it on other vehicles but this is not yet possible.

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Highlights

Industry 5.0: New Revolution Marco Antonio Galindo Auditing Partner of the Bajio Region | KPMG Mexico

Francisco Solano Head of Technology and Portfolio | Logicalis NoLA

Keiichi Harasaki CTO of Business 4.0 | TCS

Miguel Saldamando CEO | CEAT

Ricardo Anaya Product Manager | Qualcomm

Mauricio Blanc Sr. Director | Omron Mexico

T

he automotive sector, in line with much of the rest of the world, is transitioning from Industry 4.0 toward Industry 5.0, which entails a central focus on people and sustainability. Consequently, the automotive industry is seeking to achieve a synergy between

machines and human talent. “Over 200 years passed between Industry 1.0 and 4.0. The gap between Industry 4.0 and 5.0 was only 10 years,” says Marco Galindo, Auditing Partner of the Bajio Region, KPMG Mexico.

Industry 4.0 is the convergence of new technologies in manufacturing. It is characterized by an increase in automation and the use of smart machines, smart factories and the use of informed data to strengthen the value chain, according to IBM. “Mexico has managed to implement Industry 4.0 in different industries and regions to an extent, leaving a broad opportunity to consolidate the digital transformation,” says Keiichi Karasaki, CTO of Business 4.0, TCS. Industry 5.0 aims to merge the expertise of humans with the capabilities of intelligent machines. “Industry 5.0 is more friendly with people, providing them greater adaptability and resilience,” says Mauricio Blanc, Sr. Director, Omron. Additionally, it promotes sustainability and environmental goals through the rethinking of production processes. While Industry 4.0 was centered on profitability and productivity, Industry 5.0 promotes a humancentric, socio-environmental sustainability.

With people at the center of the strategy, the focus moves from mass production to customization. To successfully adapt to customization, companies must listen closely to their customers’ needs. “Communication is key with customers. Personalization creates value and is achieved through listening to customers,” says Ricardo Anaya, Product Manager for Qualcomm.

For Industry 5.0 to unseat Industry 4.0, 5G is essential. This will support the connectivity that automation needs and the whole world is working to implement it. The security of information within Industry 5.0 has to be assured, however, cybersecurity plays an important role as the management of data gains relevance. “The power of data processing enables decision-making regarding future business transformations. This is an issue that is still

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addressed in a general way in the industry and demands that the computation and data storage layer is working perfectly,” says Francisco Solano, Head of Technology and Portfolio at Logicalis.

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from the

Q: How is ZF working to create innovative solutions for mobility, efficiency, safety and vehicle autonomy?

A: The evolution of mobility for all vehicle classes, in particular commercial and transport, is indeed smart and connected and involves standard and premium services for customers throughout the transport journey.

ZF is mobilizing commercial vehicle intelligence in fields such as vehicle motion control, integrated safety, automated driving and electric mobility.

This transformation is not just the result of incremental technological advances; it is radical in the way that the expectations of end customers and users have changed. In that sense, ZF Aftermarket sees its role not as a component supplier but as a partner, preparing and accompanying customers through this transformation.

Q: How does ZF Group help mobility-as-a-service (MaaS) companies to provide quality services?

A: At its core, mobility generates, harvests and transforms energy to move people, goods, and services from point A to point B. The difference is that the ecosystems and customer demands are evolving to ensure such mobility is used at its max

Elena Donahue

potential beyond its core purpose and with a customer journey in mind, including sustainably and eco consciousness.

To be a successful participant of the “Mobility as Service”

Head of Commercial Vehicle Aftermarket and Fleet Business North America | ZF Group

market ecosystem, companies must ensure partnerships that can support the best technology and products: hardware and software to offer increasingly connected solutions. ZF Aftermarket offers workshops to stay on top of new technology trends as they are being introduced.

Enabling the Commercial Transportation of the Future

Q: How does ZF Aftermarket Motion generate a competitive advantage for premium clients?

A: The recently-launched ZF Aftermarket Motion offers a premium service through a monthly subscription, allowing customers to access higher levels of services that help them to differentiate themselves in the market. Motion members can Skill up on Demand, have VIP routing, access of dedicated talk time with a technical product expert, Toolkits and ZF TECHROOM access among others.

Q: What are the main challenges to implement commercial transportation technologies in Mexico?

A: The challenges that Mexico faces to implement mobility technologies are not unique. All countries in Latin America face similar challenges, to a different degree. The future of mobility involves improving and adopting telecommunication infrastructure as an important building block for digitalization and data intelligence and, infrastructure in Mexico has always been a challenge. To provide quality services and take

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commercial transportation to the next level, the country must have this connectivity. Expanding broadband access in Mexico and availability of commercial charging stations is as crucial as to transportation infrastructure as roads, bridges and fuel stations.

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from the

Q: How are you helping companies understand that the intelligence solutions that JATO offers?

A: We gather a lot of unbiased information to avoid any conflict of interest. We research market facts but do not interpret the data so that our customers receive a factual view of the market. The data is divided into different segments, such as performance, measures, dimensions and capacities. Every single segment is unique. For example, we track specific characteristics of SUVs that are not present in compact cars. We compile this information in a single file so the customer can start doing comparisons according to their interests. Analysis can later go deeper and analyze price charts, historical prices, reports or value to compare the value of vehicles.

Q: What specific information does JATO Dynamic collect and how does the company use it?

A: We research all incentives offered by dealerships, such as discounts, subsidies, specific rates, terms and other factors that can help them to close a deal. In Mexico, we use our own methodology to predict the available volumes and prices. Using our market knowledge, we can calculate the versions and prices available in the market, allowing customers to make better decisions. For example, if an automaker increases the price of a model that sells thousands of units per year, the market impact

Gerardo San Román

would be much higher than if they increased the price of a vehicle that sells less than 10 units per year. For that reason, it is necessary to have all available information at hand.

Head of Latin America | JATO Dynamics

We also track the Total Cost of Ownership (TCO), which allows clients to know how much a vehicle will depreciate, how much fuel it will consume and what the user will pay in taxes, among other information. Using this information, we offer an accurate picture of how much a user will invest in a vehicle during its

Comprehensive Data Allows for Better DecisionMaking

lifetime. This information is important for fleet companies and manufacturers, among others. We do not make the decisions; we provide data and we help to analyze it, allowing the client to make the final decision. We are very active with OEMs but also work with leasing banks, financial companies, car dealerships and marketplaces.

Q: How can JATO’s Flex Academy help the industry to overcome the shortage of skilled labor in the market?

A: JATO Flex, designed for salespeople at dealerships, works from any device. There are many offerings in the market and it is challenging for salespeople to really know the competition.

Moreover, those interested in buying a car have already done their research. For that reason, we decided to empower sellers and help them become experts in their field by providing information that no one will be able to find anywhere else. We packed the platform with incentives and a quick picture of the cost. The main goal was to allow salespeople to deliver good and powerful arguments to interested buyers.

JATO’s Flex Academy trains salespeople and provides advice

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to use and interpret the information. Selling is not just about describing the car; it requires transferring information regarding the future and benefits. When salespeople communicate the real advantages of a specific technology, buyers start valuing those technologies and truly understand what they are buying.

N

owadays, employees have access to high-end technology in their own hands on a daily basis.

How do we explain, then, that somehow within companies, leaders have been failing to take the leap toward the digital transformation?

Recent research from BCG shows that 70 percent of digital transformations fall short of their objectives, often with profound consequences. This is certainly the case for most finance teams, where traditional spreadsheets are transformed into slide presentations that are subsequently sent via email to many recipients and finally discussed in endless meetings.

The traditional way in which finance leaders usually approach the digital transformation is not good enough. This traditional approach results in never-ending projects, a lack of results and discouraged teams. But the negative impact will not be

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only within the finance department, it will permeate to all the

Plug and Play: The Digital Transformation Daniel Echeverri Restrepo CFO | Renault Mexico

related internal and external clients because an error on the digital transformation usually increases the workload for the surrounding teams. Nevertheless, there is indeed a path that can lead to the digital transformation for finance, and here are some of the main levers that need to be activated in order to get to the right outcomes: 1. Results: Before starting the transformation journey, it is important to have a solid base of company results. Even though the digital transformation should bring along positive results, the company should remain in good shape throughout the process, so the focus can be the transformation itself instead of fighting fires.

2. Culture: Culture is the main lever. People must be brought together onto the ship of a new digital world. This requires discipline, and nurturing it with examples from companies succeeding is always a good option.

3. Agile methodologies: There are books like “Scrum: The Art of Doing Twice the Work in Half the Time” from Jeff Sutherland that already explain why the traditional way of tackling projects by working in silos isn’t good enough. And why it should be changed to a model where short iterations between the teams constantly produce value-added results throughout the project.

4. Data mindset: Being digital is not measured by how many systems the company uses, but by how fast the data can be retrieved and how deep it is. Therefore, it is important that employees are trained on having one single data pool across all the departments that can be easily consulted.

5. Managers joining the force: The path for the transformation is not easy and needs to be supported by managers in every step of the process to motivate and guide the teams to achieve the expected results.

6. Focus on the clients: The stakeholders or clients of the finance digital transformation should be not only the board of directors but peer areas, such as marketing, sales, HR, quality, and the final customer.

They should always be considered in the evolution process and the results should also add value to their work.

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After these levers are activated, results are keen to come. Not only because the financial internal and external processes will become digital, but also because this will empower teams to use these same levers to increase the company’s performance overall.

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From Automotive Manufacturing to Mind-Facturing Companies across all industries, including the automotive sector, are increasingly interested in the country’s potential for R&D and engineering operations and are starting to invest accordingly.

However, several indicators show that a great deal of work by the government, academia and private sector remains to be done for Mexico to move from manufacturing to mind-facturing.

R&D operations enhance industrial activities and are an important driver of economic growth, according to UNESCO. Studies have found that every US$1 invested in R&D generates nearly US$2 in return, according to the organization. As of 2021, global spending on R&D had reached a record high of US$1.7 trillion, according to UNESCO’s Institute of Statistics (UIS). Successful R&D efforts involve, at least, three major players under what is known as the triple-helix scheme: the private sector, academia and the public sector. These work together on a common project that results in the creation of jobs, talent development and sustainable development for the region. Several additional helixes can be added to the model, says Alejandro Arredondo, Managing Director of the Bajio Aerospace Cluster. Society or “the public” must be added as a fourth helix for a successful model, say Leydesdorff and Etzkowitz (2003). Clusters can also become part of the R&D model. “(We) have the objective of increasing collaboration between companies and institutions, generally bringing together a group of industries and companies, including suppliers, distribution channels and services,” wrote Pedro García González, President of the Industrial Cluster of Aguascalientes, in an article for MBN. Balancing R&D Investment R&D investment can be measured in terms of GDP and purchasing power parity (PPP$), which uses the prices of specific goods to compare the absolute purchasing power of the countries’ currencies and their people’s living standards.

In terms of purchasing power parity, the US is in the lead with a yearly R&D investment of PPP$476.45 billion, followed by China with a US$346.26 billion investment in PPP$. Japan occupies third place, with a US$169.55 billion yearly spend, according to UNESCO’s latest data. Another important measurement is researchers per million inhabitants. In this regard, Denmark leads the way, with 7,310, despite a US$7.87 billion yearly spend in PPP$.

However, Japan and the US also make the Top 20 in researchers per million inhabitants, with 5,328 and 4,205, respectively.

Regarding expenditure in terms of GDP, Korea has the global lead, with 4.1 percent of its total GDP going to R&D, or US$73 billion in PPP$, and 6,826 researchers per million inhabitants. Japan ranks second, with a 3.4 percent of its total GDP, followed by Switzerland, Finland, Austria, Denmark, Germany, the US, Belgium, France and Australia. The US spends 2.7 percent of its GDP on R&D. According to this data, Mexico is well behind the leading countries when it comes to relative R&D expenditure as a percentage of GDP, with 0.4 percent, and with only 260 researchers per million inhabitants. It may be tempting to blame the public sector for this state of affairs but a common denominator in all of the leading

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R&D countries is the balance between business, government and university expenditure, in which the Top 20 countries have close to an 80 percent participation of the private sector in the total investment. In Mexico, of the total R&D spending in PPP$, universities invest US$4.6 billion (48 percent), the government US$3.05 billion (32 percent) and the private sector just US$1.69 billion (18 percent), with a small margin corresponding to private nonprofit investment.

In Korea, for instance, the private sector is responsible for 78 percent of the total R&D investment in PPP$, while the government and universities spend 11 percent and 9 percent, respectively.

The private sector leads the R&D investment among all leading countries, such as Japan (77 percent), the US (71 percent), Germany (68 percent), Switzerland (71 percent), China (77 percent), Sweden (67 percent) and the UK (65 percent).

When it comes to Latin America, Brazil leads the way, with US$40.5 billion R&D spending in PPP$, making up 1.3 percent of total GDP and with 887 researchers per million inhabitants.

Argentina is below Mexico in terms of R&D spending in PPP$, with US$.498 billion. However, this amounts to 0.6 percent of its total GDP, with 1,206 researchers per million inhabitants. In Argentina, the government participates in 47 percent of the total R&D investment, universities in 30 percent and the private sector in 20 percent. Other countries, such as Costa Rica, Chile and Ecuador, have a more balanced investment between the three helixes, with the private sector slightly leading the way.

Attracting Private R&D Investment One first step to attract more R&D investment could be to look at success cases in Mexico and analyze what factors led to their positive performance. In May 2018, the German multinational automotive company Continental inaugurated its R&D center in Queretaro, with an initial US$53 million investment. At this center, the company develops mobility, vehicle autonomy, safety and connectivity solutions, meeting Continental AG’s global targets.

“Queretaro’s strength is its education system. We have equipped technical and technological universities in the state, including Universidad Politécnica de Querétaro (UPQ), Universidad Tecnológica de Querétaro (UTEQ) and Universidad Tecnológica de San Juan del Río (UTSJR). UPQ, for example, has all the equipment students need to participate in dual education programs and provides students with access to automotive companies’ tests, laboratories and workshops,” says Marco Antonio Del Prete Tercero, Minister of Sustainable Development of Queretaro (SEDESU).

Collaboration between helixes remains crucial for an environment of legal certainty and openness to investment. In Queretaro, SEDESU inaugurated a test track alongside the state’s automotive cluster and the Mexican Institute for Transportation (IMT), available to any interested party that wants to put technologies, vehicles and autonomous mobility platforms to the test, added Del Prete Tercero. “IMT’s test track was a direct investment from the state government to benefit the sector,” he told MBN. The state has also attracted companies to innovate in the automotive industry, such as Continental Automotive, which is developing Read the complete article More about this topic

sensors for autonomous vehicles in the state in a smart cities’ environment. Harman and Visteon are also designing infotainment clusters in the state.

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from the

Q: How is Continental’s center in Queretaro advancing vehicle autonomy?

A: In Queretaro, we have several teams developing state-ofthe-art automotive technology. One of these teams was coresponsible for the first solid-state light detection and ranging (LiDAR) sensor, which allows the vehicle to create a 3D model of its environment in real time. This sensor is equipped on a vehicle that was introduced to the Japanese market in 2021.

LiDAR technology is essential for the autonomous vehicles of the future. This milestone directly involves Queretaro in the autonomy of the future.

Q: What role did Continental’s center in Queretaro play in the development of the Trailer Reverse Assist system?

A: The automotive industry is going through a huge transformation involving not just products but functionalities with a focus on software and algorithms as a product. The Queretaro center designed between 70-80 percent of the algorithms that enable the Trailer Reverse Assist system, which has been incorporated on a pick-up truck from a well-known brand in North America that is already on the market.

The Trailer Reverse Assist system allows the driver to control the trailer with a knob using only a video camera. Drivers decide

David Pineda Deom

where they want the trailer to go and the truck’s steering wheel moves on its own.

Q: Considering limited supplies and semiconductor

Head of R&D Queretaro and ADAS Mexico | Continental

shortages, how can the R&D division develop solutions that require fewer components?

A: The biggest impact on the automotive industry has been the semiconductor shortage, which also spurred us to increase

Continental Queretaro Advances Global Vehicle Autonomy, Safety

development activities. When a component is not available, we kick off a redesign process to look for alternatives with available components. This redesign needs a complete series of validations to ensure that the final product works perfectly.

The changing needs of society and final customers are pushing the industry to adapt to new trends, such as cloud computing, software-as-a-service (SaaS) and cybersecurity. This represents a challenge but also a large opportunity. The industry transformation allows us to form these specialized teams that develop new technologies to get involved in the new trends.

Q: What will the mobility of the future look like and how is Continental shaping it through R&D? A: The mobility of the future is safe, autonomous, intelligent and connected. The new mobility and business models have pushed us to transform our approach and skills and experiment with new business models. The Queretaro center is not only focused on developing LiDAR sensors. We also have teams focused on brakes, which are developing a contained brake-by-wire system in which the pedal is electronically connected. This equipment

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will also play an essential role for the autonomous vehicle of the future. We also have teams working exclusively on telematics and on the implementation of automotive technologies in other industries. For instance, using LiDAR sensors for the fishing industry.

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from the

Q: How does Pirelli innovate in tires for the future of mobility?

A: Innovation has always been Pirelli’s core value. The company has amassed more than 6,700 patents over its 150-year history, ranging from coatings for velocipedes to tires for supercars, from self-repair and noise-canceling systems to the latest cybernetic tire technologies. Pirelli Cyber Tire communicates with the vehicle’s electronics through sensors placed in each tire, providing the car and driver information about the status of the tires. Since the tire is the only part of the car that touches the ground, we collect valuable and unique data. Thanks to advanced data processing and artificial intelligence, we can enable innovative features to make cars safer and improve their performance.

Q: How is Pirelli advancing its sustainability efforts globally?

A: Pirelli R&D produces increasingly sustainable products using new materials and innovative processes. The company has set itself the goal of using more than 40 percent renewable materials, over 3 percent recycled materials and less than 40 percent fossilderived materials in new product lines by 2025. By 2030, Pirelli will increase its use of renewable materials by over 60 percent and of recycled materials by 7 percent and reduce fossil-derived materials to less than 30 percent. The targets are ambitious considering that today’s tires, on which Pirelli is entirely focused, are made with an average percentage of less than 20 percent renewable and

Paolo Benea

recycled materials.

Q: How has Pirelli confirmed its position as a global sustainability leader?

CEO | Pirelli México

A: The company obtained a position in the Climate A 2021 list created by the non-profit CDP, an international NGO that collects and disseminates information about environmental issues. Pirelli has many sustainable projects such as the use of silica derived

Pirelli Expands R&D Operations in Mexico

from rice husks. Pirelli also obtained the “S&P Global Gold Class” recognition, a ranking that is compiled yearly based on the S&P Global Dow Jones Sustainability Indices Corporate Sustainability Assessment. In 2021, Pirelli was confirmed as one of the best performing companies in the Automobiles and Components sector in the context of the Dow Jones Sustainability World and Europe indices, with a score of 77 points compared to the sector average of 31.

Q: Regarding its manufacturing operations in Silao, how much has Pirelli invested in Guanajuato and what have been the company’s main achievements?

A: Our facilities in Silao, Guanajuato, are one of the most important for the group. The Silao plant is a benchmark in technology and a leader in manufacturing processes in the tire industry. Pirelli has invested US$750 million in Silao, creating over 3,000 direct jobs and providing continuous training both internally and abroad. The plant uses automated machinery and state-of-the-art production processes. It has an annual production capacity for over 6.6 million high-performance and ultra-high-performance tires for premium and prestige cars and EVs, which are sold to the local and North American markets.

Q: How is Pirelli working in the Mexican Original Equipment (OE) segment?

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from the

A: Pirelli is a strategic supplier for premium automakers in line with its global strategy. It participates in the OE markets alongside German Premium brands operating in Mexico and manufactures tires for electric and high-performance cars at the Silao plant. In Mexico, Pirelli also participates with other automakers of premium vehicles and EVs, in line with Pirelli’s Premium strategy.

Q: Recently, Pirelli announced a US$15 million investment in an R&D center in Guanajuato. What role will this center play in Pirelli’s global research strategy?

A: Technological innovation is an essential element of Pirelli’s strategy and plays a crucial role in the company’s business model. The R&D center in Mexico joins Pirelli’s 13 R&D centers around the world. Pirelli’s R&D center will incorporate state-ofthe-art technology to produce tires designed for the mobility of the future, which will be electric, sustainable and connected.

The Silao R&D center will help increase Pirelli’s technological and industrial competitiveness throughout the North American region and increase the company’s ability to serve and support premium brands, primarily in the US. The center will have an area of 6,680 m2, which will be next to the plant’s 200,000 m2. It will adopt the principles of Industry 4.0 and strengthen the innovation ecosystem in the already called “Mentefactura Valley in Guanajuato” (Mindfacturing Valley in Guanajuato).

Q: How is Pirelli innovating within its product portfolio to meet customer needs amid the automotive industry’s transformation towards electric and connected vehicles?

A: The electric and connected vehicles market segments are continuously growing. Pirelli Elect tires, which are also manufactured at the Sialo plant, are well-suited for EVs because they are designed to increase the autonomy of the car.

They have low rolling resistance that helps increase their range of autonomy and reduce energy consumption. Environmental care and innovation are key elements in the design and manufacture of Pirelli Elect tires.

Tires for a performance car must also contribute to the effective noise reduction. In premium vehicles, external components such as tires are often the main sources of noise.

Safety is also essential for all vehicles. All of Pirelli’s products ensure safety by adhering to the specifications of each vehicle.

Q: How is Pirelli positioned as a leader in Formula 1?

A: Since 2011, Pirelli has been the exclusive supplier to Formula 1, one of the best testing laboratories for tire technology. For over half a century, Formula 1 vehicles used 13-inch tires but now have switched to 18-inch tires. The design of those tires took over 10,000 hours of indoor testing, over 5,000 hours of simulation and over 70 virtually developed prototypes, which were used to create 30 different specifications that were tested Read the complete article More about this person More about this company

by nearly every Formula 1 team for over 20,000 kilometers.

In addition, Pirelli is the first and only tire manufacturer in the world to receive three stars in the FIA’s environmental accreditation program, a prestigious recognition of the company’s efforts for sustainability in motorsports.

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A

fter the successful acquisition of HELLA by Faurecia on Jan. 31, 2022, the resulting group, Forvia, became the seventh-largest global automotive supplier. The company, a leader in automotive technologies, is focusing on

reducing its carbon footprint to net zero through numerous initiatives, which include Mexican R&D. To implement its global sustainability strategy, the company began investing in R&D at its manufacturing locations.

“Ten years ago, we launched an R&D center in Mexico for both exteriors and interiors. This has made the country a protagonist in the company’s innovation projects,” says Karla Góngora, R&D Director for Forvia.

Traditionally recognized for its manufacturing operations, Mexico has become a promising location for R&D and engineering operations. “Apart from its excellent manufacturing quality, the country has strong potential to develop innovation and design capabilities that add value to the automotive industry’s development,” adds Góngora.

Forvia has two R&D centers in Mexico that focus on seating

Forvia Will Use Mexican Research to Reach Carbon Neutrality Karla Góngora Rueda Seating R&D Director Mexico | Forvia

and interiors.

In total, Forvia has 77 R&D centers around the world and invests 7 percent of its total expenses on R&D. The company seeks to achieve CO2 neutrality in its internal emissions by 2025 to fight climate change. “Climate change, bad air quality and vulnerable ecosystems affect all people and represent a growing threat for humanity,” says Góngora. This is why the company is prioritizing the fight against climate change by implementing a recycling culture and circular economy, she adds.

The group combines cost-effective growth and innovation to transform its solutions according to the changes in the automotive industry. It is focusing on electrification and energy management, automated and safe driving, as well as sustainable and digital cabin experiences.

Forvia treats mobility as an essential tool to empower people, giving them access to diverse opportunities and proximity to loved ones. “The challenges that impact mobility are climate change and access,” says Góngora. The company aims to be a pioneer in the mobility experiences that are important to people.

Forvia is also a responsible employer that promotes the development of all talent with a proactive focus in line with its values, says Góngora. Diversity and inclusion are both cornerstones for the company, which aims to have 35 percent of women in leadership positions, including directorships, by 2030. Over the past four years, the company increased its female talent by 13 percent. In 2021, “37 percent of the manager, director and professional hirings were women,” says Góngora.

These achievements have been made possible thanks to the company’s inclusion projects, such as its “Back on

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Track” initiative. This project seeks to help women rejoin the automotive industry after a long pause from work due mainly to family reasons.

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5

OEM of Tomorrow Recent changes are forcing OEMs to transform their business models. Players are adapting as passenger needs and preferences shape the future of mobility offerings, while dealerships modify their sales strategies following shifts in the perception of vehicle ownership.

OEMs have also identified opportunities in the transformation of interior design and cabin experience, two important elements for clients when choosing which car to buy. Additionally, companies are encouraging dealerships to adopt technology trends to improve service and communication with customers, turning into consultants and providers of customer service and playing an important role in generating loyalty among customers.

This chapter will analyze the new roles OEM are taking on, exploring their key priorities and strategies to remain relevant and keep up with consumer demands amid the technological revolution.

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Analysis Interior Design, Cabin Experience Are New Differentiators

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View From the Top Miguel Barbeyto | President | Mazda México

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View From the Top Fidel Vaca Reyes | Senior Program Director for Interiors North America | FORVIA

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View From the Top Ricardo Rodríguez | Managing Director | INFINITI Motor Company

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View From the Top Pablo Herrera | CEO | Maserati México & Rolls-Royce Motor Cars Mexico

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Conference Highlights Top Priorities: Design, Infotainment and Connectivity

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View From the Top Enrique Mendoza | General Manager | Beat Mexico

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Analysis Car Subscriptions: The Future of Vehicle Ownership?

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View From the Top Sampo Hietanen | Founder and CEO | MaaS Global and Whim

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View From the Top Fernando Enciso | Director México | Grupo Surman

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Conference Highlights Digitization, Customer Experience Reshaping Vehicle Sales

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View From the Top Israel Escutia | CEO | GarantiPLUS México

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View From the Top Jorge Vallejo | President and CEO | Mitsubishi Motors de México

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View From the Top Magdalena López | CEO | Renault México

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Interior Design, Cabin Experience Are New Differentiators As the automotive industry faces arguably its biggest transformation in history, with connectivity, autonomy, shared mobility and electrification (CASE) as the main drivers of change, vehicle interior design and cabin experience have become a major opportunity for differentiation among automakers, as driving itself becomes commoditized.

While CASE mobility is advancing unevenly in different regions across the world, megatrends remain the same for OEMs. Selfdriving, Level 5 autonomous cars will shift driver (or occupant) focus away from the road, creating a new, easy way to experience the vehicle. There is still a long road ahead and although full vehicle autonomy has yet to be achieved, connectivity has already changed interior design. OEMs are continuously working to develop in-house infotainment technology and are partnering with tech giants to access state-of-the-art technology in communications, sound, video and even gaming.

The industry’s shift toward EVs, in addition to changing customer needs, has also made engine power less relevant against other aesthetic and comfort-oriented features. The cabin experience is expected to take the spotlight away from automotive elements that have traditionally dominated headlines, according to McKinsey. Finally, shared mobility, which is impacting the vehicle ownership concept worldwide and continuously introducing new players to the automotive industry ecosystem, is also expected to impact car interior design.

New Designs In December 2021, several media outlets reported that UK startup Arrival had revealed the final design of its first bespoke passenger car, which was developed jointly with mobility giant Uber. Simply called the Arrival Car, the EV will begin production in 3Q23 and aims to accomplish Uber’s all-electric goals in London by 2025, while providing a cabin specifically designed for ride-hailing purposes. Priorities for the design and engineering teams were visibility, comfort, cost, safety and convenience, in addition to a projected annual kilometrage between 45,000 and 50,000 per year, instead of the 9,500km expected of the average private vehicle. “We have been working closely with Uber’s drivers to create a vehicle specifically for the ride-hailing industry, making it affordable, durable and great to look at. (We aim) to give the best possible experience to both drivers and passengers,” said Arrival.

Conventional OEMs are also working to meet the ever-changing mobility needs of the present and future. Kia, which has previously stated its intention to become a leader in purpose-built vehicles, recently presented the Niro Plus, which will be designed around the requirements of taxi and ride-hailing services. Based on the first-generation of the brand’s hybrid and electric SUV, the dedicated taxi variant of the Niro Plus will be offered exclusively as an EV. The automaker stretched the original vehicle body by nearly half an inch and raised the roof by 3.1 inches for additional interior room. Furthermore, the vehicle also features a singledisplay integrating navigation and taximeter, among other data, such as EV charging station locations.

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The shift toward interior, cabin and in-vehicle experience as a key differentiator was reflected in McKinsey’s ACES Survey, in which 50 percent of customers perceive interior as very important, 71 percent of automotive executives expect interior to become more important, while only 38 percent expect exterior to gain importance. Furthermore, 40 percent of global customers have a high interest in post-purchase feature activation and 56 percent of Chinese customers would change their car brand for better connectivity.

Successful Strategies While the exact direction of the automotive industry remains difficult to predict with absolute precision, CASE mobility trends are clearly impacting interior designs and, therefore, the entire supply chain. This has led OEMs to welcome new technology players, in addition to forcing traditional interior suppliers to keep up with new trends and demands. According to McKinsey’s The Future of Interior in Automotive study, there is no single, one-size-fits-all approach to preparing OEMs and suppliers for success in interior differentiation. However, the study does highlight “strategic imperatives” that all OEMs and suppliers should consider.

Given the importance of in-vehicle technology, OEMs and suppliers must build substantial new knowledge on HumanMachine Interface (HMI) and Over-The-Air (OTA) technologies, says the firm. Smart surfaces, holographic systems and voice recognition will be the most important HMI features by 2030, according to the study. On the OTA side, updates and connectivity features on demand are set to shift OEMs’ business models. However, there are still electrical/electronic architecture investments and advancements to be done, says McKinsey.

McKinsey recommends two types of partnerships across the supply chain: horizontal and vertical. In the former, two or more players combine capabilities required for the future of interior and HMI concepts partnering within the same step of the value chain, such as a tier-one lighting supplier partnering with a tierone plastic trim supplier to jointly develop an auto part. Vertical partnerships, on the other hand, aim to combine capabilities across value chain steps, including those beyond the traditional automotive ecosystem, such as technology players.

Partnerships are also a way to ensure competitiveness in a growing industry. As vehicles become more softwaredominated, automakers are pushing to control the relationship with consumers, as tech giants could represent a threat to their businesses, reported MBN. “As we transition to softwaredefined vehicles, OEMs realize they run a significant risk of losing whatever ability they have to interact with the consumer unless they get their act together,” says Evangelos Simoudis, Founder and Managing Director, Synapse Partners.

While automakers continue pushing toward innovative interior design, they have already negotiated several deals with tech giants. Amazon recently cut deals with OEMs to integrate its Alexa voice assistant in vehicles. Qualcomm Corp has signed chip deals with Volvo Group, Honda Motor and Renault, while Read the complete article More about this topic

Google has agreements with General Motors, Volvo Cars and the Renault-Nissan Alliance to provide software for the next generation of vehicle systems.

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from the

Q: How have Mexican consumer preferences changed in recent years?

A: In Mexico, consumers are increasingly becoming more digital and have realized that the most important thing in life is time.

Before the pandemic, Mazda was beginning to digitalize its sales but since March 2020, we have accelerated this process and focused all our efforts in that direction.

The digital strategy not only focused on sales but also on our aftersales service. Mazda gives its clients the choice to schedule maintenance appointments online and we collect the vehicle at the client’s home or office, take it in for maintenance and return it. This digital revolution was already happening but the pandemic accelerated it. However, most Mexicans like face-toface contact. While digital tools play an important role, most clients still prefer to visit the dealership, have direct contact with the salesperson, feel the car, smell and touch it. Mazda México is implementing a hybrid model and it is working out well.

Q: What role will Mazda’s Mild-Hybrid technology play within the Mexican market?

A: Mild-Hybrid Electric Vehicles (MHEVs) are Mazda’s first step toward electrification in Mexico. We launched the technology with Mazda2 in October 2021. In March 2022, we launched the

Miguel Barbeyto

Mazda3 sedan MHEV and the CX-30 MHEV. Globally, Mazda continues innovating within HEVs, PHEVs, MHEVs and EVs. We have a strategy called Zoom-Zoom 2030.

President | Mazda México

By that year, all our models will have an electrified version and aims to reduce the carbon emissions generated by Mazda to 50 percent by 2030.

Q: How has Mazda maintained production in

Mazda México Innovates but Remains True to Its Essence

Salamanca over the past two years amid supply chain shortages and logistics issues?

A: Mazda2, Mazda3 and CX-30 are produced at our plant in Salamanca, Guanajuato. The past two years have been challenging. At first, we had the necessary supplies to manufacture new vehicles but there were no buyers. Now, there are numerous customers but there are not enough supplies to produce vehicles.

These have been two difficult years. However, Mazda’s great advantage is its agility within production lines. Not many brands have a similar agility. Mazda can produce from a Mazda2 to a CX-9 within the same production line. Our speed and flexibility also help the company to change the destination of production from one country to another in a fast, efficient manner to meet the demand of different markets.

Although production has dropped, we have optimistic projections for when the supply chain stabilizes. According to our five-year plan, Mazda will produce between 200,000 and 220,000 yearly units, from the 250,000 total capacity at Salamanca.

Q: Why is Mazda’s technology a competitive advantage for the brand?

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from the

A: Mazda has a robust global strategy to develop technology, engineering and manufacturing innovations that are different to those of our competitors. Mazda, which is a small multinational automaker with a 2 percent market share, cannot afford to make mistakes. Our engineers work from scratch to offer the best technological solutions within a tight budget.

Currently, we are seeing several alliances within the automotive industry. Many automakers have turned to Mazda to understand our tech, which ranges from the chassis to the body, that enables us to produce lighter, more efficient and sustainable vehicles.

Q: How is Mazda addressing the increasing degree of vehicle autonomy?

A: Mazda will not forget its DNA. We believe autonomous vehicles are a trend. For Mazda, the priority is the driving experience. However, the company continuously develops security systems to protect the driver, passengers and everyone else on the road. We are not investing in fullyautonomous vehicles but we are introducing some automations to increase safety. Full-autonomy is difficult to achieve in most countries. Mazda seeks to create balanced, light vehicles with efficient engines and an appealing design.

Q: How is the automotive industry preparing for the future of mobility and car-as-a-service trends?

A: The industry is already late to these trends. Vehicles will no longer be important for the newer generations. They will not care about the means of transportation; the crucial thing will be mobility, although the preference will vary from one country to the next. For example, it is difficult to imagine living in the US without a car, considering its long freeways. However, in Mexico, ride-share services and vehicle subscriptions for certain time periods could work. The industry is late in the development of these solutions.

Another trend, which might sound too futuristic, is for urban mobility to be aerial. The ground is increasingly becoming saturated. Currently, only the richest people travel by air but in the future, this mode of transportation may become a reality for many.

Q: What are Mazda México’s plans for the next five years?

A: Mazda has ambitious global plans and the company sees Mexico as a country with a great deal of potential thanks to its manufacturing facilities and strategic location within the USMCA region. Despite all the challenges, Mexico remains a thriving economy.

In Mazda México’s best year, we had 4.9-5 percent market share. The goal is to double that in five years. Despite the current challenges within the automotive sector, Mazda will implement a comprehensive strategy, with a wider variety Read the complete article More about this person More about this company

of products and an aggressive price strategy to grow our dealership network across the country. As we grow in Mexico, we will continue putting our clients at the center of our operations, always looking for their full satisfaction with our brand.

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from the

Q: What are the main megatrends impacting vehicle interior design?

A: The Cockpit of the Future will be customizable and safe, making travel a pleasant experience. FORVIA Group is focusing on enhancing comfort and personalization of vehicle interiors.

The company is also committed to the environment and aims to be CO2-neutral in its internal emissions by 2025 and reach net zero in all our emissions by 2045, an objective corresponding to the most ambitious standard of SBTi. The Cockpit of the Future will allow people to make increasingly longer trips without sacrificing comfort and will include adaptations for more in-vehicle features. In addition, space customization is important. The cabin could be divided into four individual bubbles for the pilot, the co-pilot and two passengers.

Each bubble would have its own customization, enabling a different in-vehicle experience without sacrificing safety.

Increasing degrees of autonomous driving also impact interior design. The car went from being a means of transportation to becoming one more room where people spend a part of their lives. We must take great care regarding comfort while favoring the largest number of media interfaces for users.

Q: What role could interior design play as a

Fidel Vaca Reyes

differentiator among OEMs and how do FORVIA’s solutions adapt to different vehicle segments?

A: A few years ago, many benefits and features were exclusively

Senior Program Director for Interiors North America | FORVIA

linked to premium cars, which are not accessible to everyone.

FORVIA has developed technological solutions that adapt to premium and entry-level vehicles. The Cockpit of the Future cannot be elitist; it must be available to the entire market.

However, each segment will use it differently. In the premium and

The Cockpit of the Future: Comfort, Entertainment and Safety

luxury segment, the passenger will probably not even drive the car. In the other segments, experiences will focus on whoever is driving. FORVIA has focused on making its technological solutions adaptable to any automotive segment.

Q: As mobility-as-a-service becomes more popular, how could interior design adapt to this trend?

A: We think of solutions that can be applied to the entire range of vehicles. However, as shared cars, ride-hailing and clean transportation become more popular, some brands have sought us out to work on solutions for these types of vehicles. FORVIA’s innovations are adaptable to any type of vehicle. Several brands are looking for tailored solutions and we work together to adapt these technologies.

Q: What are FORVIA’s main plans and strategies in Mexico for the immediate future?

A: The two new facilities in Nuevo Leon will start production by the end of 2022, giving FORVIA greater penetration in the US market. In addition to our sustainability goals, we have ambitious

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plans now that the Group is integrated. This integration puts us in a unique position because we can offer comprehensive solutions for vehicle cabins, by being the world’s 7th largest automotive technology company, giving FORVIA a larger participation share.

We will continue offering technology and innovation for OEMs.

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from the

Q: How have demands changed in the premium vehicle segment over the past few years and how does INFINITI work to meet customer expectations?

A: As time goes by, the products and services offered by the market evolve, as do customers’ needs and demands. Clients want more than a product that indicates economic power and prestige; they want vehicles with these characteristics but that also provide practicality and comfort for everyday use.

In the past few years, INFINITI has worked to provide not just a technologically-advanced, good-looking vehicle but an integral solution for our customers. For example, we include maintenance services for three years in the vehicle’s price, so clients do not have to worry about this service. We also have the premium INFINITI Black service, which provides road assistance during any emergency.

Q: What role does in-vehicle technology, passenger comfort and safety play within INFINITI’s SUV offering in Mexico?

A: We are focused on turning INFINITI vehicles into solutions that simplify our customer’s lives because we do not want our clients to worry about maintenance. We are renewing our portfolio to relaunch the brand in Mexico, following the incorporation of the QX55 and QX60 into our product line.

Ricardo Rodríguez

We will also reassure clients that safety is still our top priority.

Our integral security suite alerts the driver if someone is crossing behind them while driving backward and corrects

Managing Director | INFINITI Motor Company

the steering wheel when the vehicle is moving sideways and the driver is not reacting, among many other features. This is the beginning of autonomous driving and INFINITI is working to provide it as part of our approach to technology, comfort and safety.

Users Now Demand More of Their Luxury Vehicles

Q: Electromobility trends are gaining more popularity in both customers and automakers, how is INFINITI adapting to them?

A: By the end of this decade, most of INFINITI’s production will be EVs. We will continue to provide maintenance for ICE vehicles because some clients prefer traditional gasoline engines, so we do not want to close our doors to them and become 100 percent electric. However, by 2030, INFINITI will mostly focus on electric-powered vehicles.

The company’s first EV will be released in 2025, which will be produced in the US. Some final details still need to be decided.

For example, we have not determined if there will also be a hybrid model that functions as a transitional step between an ICE vehicle and an EV. Q: What are INFINITI’s global plans for the short term and how does the operation in Mexico adapt to the brand’s strategies?

A: We are executing our Transformation INFINITI plan. The first stage took place between 2020 and March 2022 and proved

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that the company could be profitable despite recent challenges.

We had a couple of rough years but we optimized and managed the situation to become profitable. We are starting the second stage of that plan, which is expected to take three years. It focuses on investing for the future, especially in EVs.

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from the

Q: What is the near-term outlook for the Mexican luxury car market?

A: The Mexican luxury car segment is growing and users are increasingly becoming more demanding, forcing brands and their R&D teams to go further and create increasingly competitive, safer and efficient cars. These demands drive up vehicle prices, as we have seen in recent years. Unfortunately, the current challenges that the global supply chain is facing have created a greater demand than supply. Once the availability of units regularizes, we will get a real picture of the demand in the Mexican market.

Q: How is Maserati adapting to electrification trends?

A: Maserati’s portfolio includes two hybrid-electric versions (HEV): Levante and Ghibli. In addition, the brand introduced Folgore, our new electrification program. This year, Maserati presented the midsize SUV Grecale in its BEV version. Later, the brand will revive the iconic Gran Turismo, which will come in a fully-electric version with a powerful engine, in-vehicle technology and brilliant design.

Q: What sales strategies has Grupo Herrera implemented at its showrooms in Mexico?

A: We have three Maserati showrooms in Mexico City, Guadalajara and Monterrey. The sales strategy is to be very user-

Pablo Herrera

friendly. Customers can find all the information on each Maserati vehicle on our digital communication platforms. We have good strategies to serve other markets close to the physical showrooms and we deliver nationwide because Maserati

CEO | Maserati México & RollsRoyce Motor Cars Mexico

has clients all over the country. In addition, the brand offers aftersales service at home for customers who do not want to travel to our maintenance centers.

This year, Maserati will open a fourth showroom in Queretaro.

Customization, Powertrain, Design Drive the Luxury Segment

With all the latest technological systems and digital support, the showroom will serve different markets in Mexico, meeting the needs of all customers in the country. We are implementing an e-commerce platform that will provide online quotes, pre-authorizations from our financing branch and everything the customer needs to buy a car, including digital tools to configure the vehicle.

Q: What role does aftersales service play within Maserati México’s overall strategy?

A: The three showrooms have a maintenance center authorized by Maserati. We take care of our clients, whom we call ambassadors.

It is essential that our entire team knows the importance of customer satisfaction; we want them to be happy with their purchase. Maserati México focuses on staff training and our technicians have all the certifications required by the brand.

Q: How has Maserati México performed in sales during 1H22 and what are the expectations for the year?

A: It has been a good year for Maserati in Mexico. We just

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introduced the Levante and Ghibli HEV versions and customers are responding well. In 1H22, we doubled sales compared to 1H21. By 4Q22, we will have the Grecale BEV in Mexico, which has already attracted our customers’ attention. With our current portfolio, we expect to double sales in 2022 compared to 2021.

Conference

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Highlights

Top Priorities: Design, Infotainment and Connectivity Ricardo Apaez Innovation Director | CLAUT

Sampo Hietanen

A

s customers increasingly prioritize customization, interconnectivity and infotainment, the industry must find new solutions that satisfy clients, automakers and all the actors involved in the mobility sector. “To forecast for the future, we

must look back to how we perceived vehicles about five or six years ago. Not only have vehicles shifted dramatically but the concept of mobility as a whole has changed,” says Fidel Vaca, Senior Program Director for North America Division, Forvia.

Digital disruptions have impacted every single aspect of daily life,

Founder and CEO | Maas Global

while real-time technology has led to significant changes in how

Mónica Aceves

people interact with their vehicle. “The car of the future will also

Head of Passive Safety and Sensorics R&D | Continental México

Heiko Wenczel Director of Automotive and HMI for Unreal Engine | Epic Games

Fidel Vaca Reyes Senior Program Director for North America Division | Forvia

Gerardo San Román Head of Latin America | JATO Dynamics

be part of a mobility ecosystem. We cannot think of the vehicle as an isolated element,” says Mónica Aceves, Head of Passive Safety and Sensorics R&D, Continental México.

There is a great opportunity in the area of safety, says Gerardo San Román, Head of Latin America, JATO Dynamics. “Cars are going to become a lot safer thanks to technology and infrastructure advancements.” New tools will also facilitate important tasks of everyday life but it is unlikely that a “onesize fits all” solution will be enough for customers. Automobile interiors will be transformed, changing from simple spaces to sit and drive to rooms that offer everything from stores and video game consoles to fitness centers, says Heiko Wenczel, Director of Automotive and HMI for Unreal Engine, Epic Games.

Despite the industry’s transformation, automakers still need to consider user’s emotions when buying a car, which is critical when choosing one brand over the other, explains Sampo Hietanen, Founder and CEO, Maas Global. The idea of ownership will change, however. Shared mobility, which is impacting the concept of vehicle ownership worldwide, is allowing new players to disrupt the automotive industry’s ecosystem, as new businesses are emerging from the opportunities that arrive with business models like leasing or co-buying of vehicles.

The large number of potential changes makes it impossible for a single company to provide all solutions in-house, so collaboration across the industry is critical. Manufacturing companies will shift toward a more digital-based business. Due to these changes, the key components of vehicles, such as brakes, engine, airbags and

Read the complete article More about this topic

others, will also need to adapt to comply with the new changes in structure. “The challenge will be to understand the dynamics inside the car to provide safety for users,” says Aceves.

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from the

Q: What is Beat’s added value that makes it stand out from other mobility apps?

A: Beat offers a wide portfolio of services and what really makes us stand out is our fully electric services: Beat Tesla and Beat Zero. Through them, we became pioneers of electromobility in Mexico and in Latin America. Both services have the highest quality standards regarding passenger experience because we own the fleet and the drivers are hired and highly trained. We are committed to providing the best experience to passengers in a fully electric car with the highest safety standards, as we have cameras in and out of the cars that are always monitoring their activity. We are the only mobility app in Mexico that can deliver this.

Q: Has the implementation of Beat Zero in Mexico met the company’s expectations?

A: Definitely. Beat Tesla uses a premium EV but it is also the most expensive choice. By launching a separate service, we aimed to make electromobility more accessible to the general public. With Beat Zero, we are offering the same service users like. We are receiving great passenger feedback, with ratings of over 4.95 out of five stars. We are really happy with how this service has entered the market and we are glad to offer mobility solutions that are more sustainable.

Enrique Mendoza

Q: What are the challenges that Beat is facing in Mexico as it transitions to electromobility?

A: To have launched two successful electric mobility services in

General Manager | Beat Mexico

Mexico, at Beat we have invested in excellence in operations, in having two charging hubs in the city and in selecting, background checking, onboarding and training of the drivers, upgrading the passengers’ ride to ensure a premium customer experience.

Pushing Mexico’s Ecosystem Toward Electromobility

There are two main challenges we have faced during our launch of our electric mobility services. The first has to do with the charging infrastructure. Creating two charging hubs from the ground up was no easy task like finding the correct balance of the charging power and personnel to handle this. With Beat Tesla and Beat Zero, we created never before seen charging hubs in the city. We have worked with experts in order to have superchargers that can support the operation. We are still learning how to have the optimal use of the chargers and have the best performance in order to have a sustainable, safe and comfortable service. We have also faced operating challenges like managing the over 800 drivers that we employ in Mexico City and the hundreds of vehicles they drive. We have learned a great deal over the past two years and we are moving in the right direction.

Q: What is Beat’s role in improving the mobility environment in Mexico City?

A: As part of the broader mobility ecosystem in Mexico City, we provide sustainable mobility options and collaborate with local authorities to promote the responsible use of all forms of transportation, including walking and cycling. In Mexico City, the local mobility authority (SEMOVI) organizes workshops and training on road safety, in which our drivers have participated. For this commitment, SEMOVI has recognized Beat as “Road Safety Ally”, becoming the first and so far the only ride hailing app to get this certification.

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from the

We are providing accessible, sustainable and safe mobility options for everyone and supporting the Sustainable Development Goal 11 of the UN 2030 Agenda, which aims to build sustainable cities and communities. With Beat Tesla and Beat Zero in Mexico City, we promote, from the private sector, the existence of safe, affordable mobility solutions that generate a positive impact for the people and the planet.

Q: What needs does the partnership with the InterAmerican Development Bank aim to fulfill?

A: This is a regional partnership that includes Peru, Colombia, Chile and Mexico. We wanted to understand the behavior of drivers and their role in the economy. We surveyed over 5,000 drivers across Latin America to understand if they are saving and how they are spending their earnings. We observed that apps like Beat have become more relevant for generating income in the post-pandemic era. In Mexico, over 80 percent of drivers started to use Beat because they lost their jobs during the pandemic.

Drivers see Beat as a flexible way to earn money that they can combine with other part-time jobs or sources of income.

The partnership also aims to generate and pilot mechanisms that allow drivers to start saving for long-term goals. Latin America lacks a saving and planning culture. Through this partnership, we will enable mechanisms in Colombia, Mexico and Peru to allow drivers to save for retirement, to face emergencies, and other long-term goals. For example, in Mexico, we are working with the National Commission of the System for Retirement Savings (CONSAR) to build these mechanisms and create awareness of the need to save for retirement.

Q: What impact will the Technological Innovation and Engineering Hub in Mexico City have on the success of Beat’s strategy?

A: This is the next chapter of our global expansion. Our fist hub was built in Greece and the second in Amsterdam, the Netherlands. As we grow in Latin America, it made sense to have a tech hub in the region. We decided to open the hub in Mexico City because it has a large amount of engineering talent available and improving the app in a country where we operate provides us with faster feedback loops. The Latin America hub will focus on developing features and improving experiences for our electromobility business verticals for Mexico City, Colombia and Chile. With the hub we will continue improving our operations. We have made a great deal of progress and 80 percent of our team are back-end and frontend developers and managers.

Q: How is the alliance with Technolatinas adding value to this project?

A: At Beat we also impulse diversity in our hiring process.

For the launch of our Tech Innovation and Engineering, we teamed up with the NGO Technolatinas in order to generate a closer community with women interested in working in tech.

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We invited them to our hub in order to have a full day of tech talks and for them to get to know Beat a little further. With this collaboration we want to continue to position the company as an inclusive one and we are constantly inviting everyone to look out for our hiring opportunities.

OEM of Tomorrow | 87

Car Subscriptions: The Future of Vehicle Ownership?

The COVID-19 pandemic boosted diverse trends across industries. In the automotive sector, OEMs are beginning to offer vehicle-subscription plans in a “car-as-a-service” model as an alternative to leasing, car rental and purchasing. While Mexican culture has favored traditional car ownership, vehicle subscriptions could become popular among younger generations in the coming years, according to Anasofía Sánchez, Director General of Waze LATAM. “We are one of the countries with fewer financial incentives for buying new cars but there is significant interest from the general public in acquiring one,” said Sánchez during Mexico Automotive Summit 2021.

The vehicle subscription model, similar to subscriptions offered by streaming applications, offers consumers vehicles direct from automakers and third-party leasing companies. This provides flexible terms and vehicle choices not often found in lease agreements. The difference between this business model and leasing is that the latter allows customers to “rent” a car from a dealership for a certain period of time. Customers usually make monthly payments and at the end of the lease, usually between 24 months and 36 months, customers can decide whether to buy the car or change it for a newer vehicle.

Although leasing requires a down payment, the monthly fee is usually lower when compared to financing the same vehicle.

This model allows drivers to move to a new vehicle every two to three years, while bypassing the nuisance of selling their current vehicle. However, unlike car-subscription customers, lessees have to take care of insurance, maintenance and repairs for the duration of the lease. Neither service offers ownership.

Vehicle subscriptions are targeted for “those who hate commitment and do not mind overpaying versus a standard lease, rental or financing arrangement to access the associated perks,” says Clifford Atiyeh, Vice President of New England Motor Press Association.

Vehicle-Subscription Market While some subscriptions allow customers to replace the car weekly or monthly, others do not allow them to switch vehicles at all. Currently, Audi, Volvo, Lexus, Porsche, Nissan and Jaguar Land Rover offer vehicle subscriptions in certain locations in the US and Europe.

Audi’s offer features a Core plan (US$995 per month), which includes the A4, Q5, S3, TT, and the Premier plan (US$1495 per month), which adds the Q7, S5 Coupe, A6 sedan and A5 cabriolet. Currently offered exclusively in Texas, Audi’s vehicle subscriptions allow two swaps every month. The client must be at least 25 years of age and the same car may be used for a maximum of 180 days.

Recently, Jaguar Land Rover entered the OEM subscription services business with “Pivotal.” Like most subscription services, it is all-inclusive, so customers only take care of fuel. Pivotal, which is only available in the UK, does not require an initial deposit and monthly prices range from £910 (US$1,025) to £2,200 (US$2,475), depending on the chosen model.

“Care by Volvo” is the most complete vehicle subscription service, with presence in the EU, in markets such as Italy, the 2021

2022

January

81,657

78,585

February

82,863

79,598

March

96,319

95,199

April

84,287

83,459

May

86,710

91,215

R-Design. Customers start with a US$500 deposit, which is

June

86,688

90,368

applied to the first monthly payment.

July

82,157

83,137

“We are shifting away from a vehicle ownership culture; we are

August

78,235

91,124

entering the car-as-a-service model. We are testing this model in

September

76,930

-

October

76,640

-

just occasional,” Raymundo Cavazos, Director General of Volvo

November

82,829

-

Cars México told Excélsior.

December

97,420

-

1,012,735 vehicles

692,685 vehicles

Total

UK and Spain, as well as the US, where the program is widely available. Volvo’s service is virtually a 24-month lease but with insurance, maintenance and extra add-on insurance items included. Similar to traditional car leasing, at the end of the agreement, subscribers can purchase the vehicle at a preset price. XC40 subscriptions in the US start at US$600 per month for the T5 Momentum trim and go up to US$700 for the T5

some countries since younger generations are more interested in the car as a service to satisfy a need that can be daily, monthly or

While the subscription model has been offered mainly by luxury brands, Nissan announced its “Switch” service in February 2022, which is only available in Houston, Texas. The Japanese automaker offers two tiers for this service, at US$699 and US$899 monthly. The first tier includes basic models, such as Altima and Rogue, while the latter includes the Leaf, Murano and 370Z.

YEAR-ON-YEAR VARIATION (percentage)

—

—

2021

150

A Possibility in Mexico?

Vehicle subscriptions may help automakers to stay relevant

2022

and attract new customers. However, this opens several challenges. This new ownership model aims to lower barriers

141.3

between customers and OEMs, building a direct-to-consumer

120

channel that “may upset the dealers who pay close attention

106.3

to inventory and lot management,” according to an analysis

90

from Red Chalk, which also highlights the difficulties OEMs may face when trying to build a new business while balancing

60

a legacy operating model.

41.1

30 12.7

correctly manage a functional fleet of cars from which customers can choose. Automakers “have traditionally not participated in

-13.5

November

December

-7.7

-9.1

October

-1.1

September

1.4

August

1.2

July

1.9

June

-20.6

-1

5.2

May

-1.2

April

-3.9

-22.1

Vehicle-subscription models will require OEMs to build and

16.5

10

March

-30

-3.8

February

0

January

OEM of Tomorrow | 88

LIGHT VEHICLE SALES

fleet ownership or operation and may struggle managing the complexities of fleet composition,” according to Red Chalk.

While OEMs will compete directly for the market, new thirdparty players may get involved, as well as companies focused on mobility solutions, traditional car rental and car leasing.

LIke most other automotive trends, vehicle subscriptions will

Source: INEGI

eventually arrive in Mexico. Although an analysis regarding Mexico’s situation will be necessary, it seems probable that OEMs will begin pilot programs in main cities, such as Mexico City, Guadalajara and Monterrey.

The car rental industry is growing annually in Mexico. Revenue in this segment is projected to reach US$1.2 billion in 2021, according to Statista. The number of users is expected to reach 9.8 million, with a penetration of 7.3 percent by 2025. Looking to take advantage of the trend, Volkswagen is getting close to acquiring 100 percent of car rental company Europcar’s stocks Read the complete article More about this topic

through a US$3 billion deal, reported MBN. Europcar has offices in 150 countries around the world and has 125 branch offices and 2,500 cars in Mexico.

VIEW TOP OEM of Tomorrow | 89

from the

Q: How are preferences regarding car ownership impacting the demand and reception of MaaS Global and Whim’s services?

A: There is an ongoing technology disruption within the mobility sector, which has led to the development of Mobility as a Service (MaaS) and will shape the future of mobility.

Vehicles represent 76 percent of the total value of the mobility market and 20 percent of a household’s expenses go toward mobility. But because household cars entail a large amount of idle time, it is likely that this model will be disrupted. The challenge is changing the historical attitude toward car ownership. Owning a car has been a dream that resembled freedom for about 100 years. Therefore, we have to enter that space and provide the same personal freedom.

To our advantage, 15- to 35-year-olds do not dream of owning a car anymore, especially in the developed world’s urban areas.

Even in the US, which is the dream land for car ownership, the age when people get their driver’s license has been increasing for the past two decades. Simultaneously, those without cars are extremely underserved and their freedom to go anywhere anytime on a whim is more limited. Our job is to provide these services without a change to personal freedom.

Q: What services do most customers seek

Sampo Hietanen

beyond public transportation?

A: It is possible to offer customers all the public transportation of a city but they will still want to know what happens if

Founder and CEO | MaaS Global and Whim

they need a car. One of the largest challenges is to create liquidity. If I were to say, “Push a button and within five minutes a beautiful car will be delivered to you,” would that be good enough? This can be done using the inventories of different vendors.

The Future of Mobility Needs to Prioritize Personal Freedom

There are four reasons people need cars: immediate need, which free-floating car-sharing services can provide; a need for cars with space for groceries that are only needed for a few hours, which can be covered with station-based cars; weekend travel cars, which car rentals and serviced cars provide; and what we call in the EU summer cars, for which car rentals and modern car leases are good enough.

Q: What sustainability benefits does MaaS Global offer clients and the cities in which its solutions are adapted?

A: Transportation represents a large percentage of CO2 emissions. In the EU, transportation represents 25 percent of all emissions but will climb to 40 percent by 2030. In Sao Paulo, Brazil, about 70 percent of emissions are related to transportation.

People cannot stop moving but replacing car ownership opens the door to other services. In Helsinki, Finland, we observed that once the population started making that shift, the city introduced several sustainable services: more public

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transport, micro-mobility and bikes. The problem with many of the existing policies is that they accept the status quo of transportation and try to change it a bit when policies should focus on replacing the whole system. That is where the largest impact will come from.

VIEW TOP OEM of Tomorrow | 90

from the

Q: How has Surman maintained its business even as vehicle production has hit historic lows?

A: Crises usually have positive and negative sides. Before the pandemic, Surman was already working to improve its efficiency.

The pandemic accelerated the implementation of these new processes because the team was less resistant to change.

Early in the pandemic, we started reducing the weight of new vehicle sales in the group’s general profits. We carried out a strategy to grow other business segments, such as insurance, auto parts and second-hand vehicle sales.

Q: How has this crisis impacted the different brands sold by Surman?

A: In general terms, the crisis impacted all brands similarly, with some variations. Suddenly, some carmakers were producing while others stopped and vice versa, altering market shares in the country.

We have noticed that demand is not necessarily reflected in sales.

For example, the same client will be looking for a vehicle from five different brands to see which one has something available. This makes it appear the market is larger than it really is. The dealership that can deliver the car with the specified characteristics will sell

Fernando Enciso

the most. Loyalty to a brand is no longer the most important factor.

Q: How has Surman’s second-hand vehicle market grown in the last year?

Director México | Grupo Surman

A: As part of its diversification strategies, Surman developed the second-hand vehicle segment, strengthening and growing our acquisition areas. Dealerships must operate with the understanding that second-hand vehicles must look, smell and be presented

Adaptability Is Crucial for Vehicle Sales: Surman

as new. With the introduction of specialized companies in the segment, purchasing and sales rules have changed. The key is to continue adapting to the market.

Q: How has the hybrid and electric vehicle (HEV) market grown in recent years?

A: The HEV market has been steadily growing thanks to environmental awareness and less fear of these technologies. HEVs have become popular within certain market segments. In addition, the hike in gasoline prices has made HEVs ideal for urban mobility and customers have noticed the benefits and savings these vehicles offer within large cities.

Q: What role does financing play in new vehicle sales?

A: Financing has always played a key role in new vehicle sales, representing about 70 percent of total sales. When the pandemic hit, we had cars but people became cautious and avoided acquiring loans because the outbreak put their jobs and the country’s economy at risk. Now that people are more willing to finance, there are fewer vehicles.

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Surman represents many different brands and we align to the different financing programs each one offers. We also have our own financial arm, Time2Lease, which promotes leasing among certain customer segments.

Conference

OEM of Tomorrow | 91

Highlights

Digitization, Customer Experience Reshaping Vehicle Sales Guillermo Rosales Excecutive President | AMDA

Roberto Villalobos Country Manager | OLX Autos

Daniel Esponda Founder and CEO | Odetta

Jaime Pedraza CEO | Automotive Solutions

D

igitization, technology and mobility trends, in addition to new consumer demands, are shaping vehicle sales toward a more customer-oriented, online experience. Meanwhile, second-hand vehicle sales continue to grow and digitize in

the Mexican landscape. “The world has become omnichannel.

The convergence of the physical world with the digital world is a reality. In the second-hand vehicle market, 67 percent of customers who bought a car first saw it online and confirmed the decision when they saw it in person,” says Roberto Villalobos, Country Manager, OLX Autos.

“The (automotive) industry has existed for over 100 years, and only in this new millennium has it started to change substantially.

Now, investments are changing considerably. The centralized one-stop-shop automotive distribution model is increasingly at risk. We see fewer dealerships and tighter margins,” says Daniel Esponda, Founder and CEO, Odetta.

The unending challenges that the automotive industry has faced since the pandemic, from semiconductor shortages to logistics and supply chain constraints, has resulted in historic lows in vehicle production across the world, reducing new vehicle sales dramatically over the past two years. As the sector continues to face the consequences of the pandemic, some fear that entire segments or players may disappear due to disruption and innovation, says Guillermo Rosales, Excecutive President, AMDA. However, other players will see the situation as an opportunity to innovate and take advantage of the new circumstances and technologies, he adds.

“Mobility-as-a-service and direct sales have become a threat to the traditional automotive market. OEMs and dealerships must work together on a robust customer experience strategy.

Clients must be served in an excellent, efficient way,” says Jaime Pedraza, CEO, Automotive Solutions.

Global OEMs have started a transformation from automakers to mobility and technology providers. This shift from hardware sellers to solution providers has led OEMs to focus on technology and in-vehicle and cabin experience, while offering additional over-the-air updates and exploring new business models. In the near future, “OEMs’ collaborations with dealerships will remain crucial. Vehicles will be associated with much more than taking

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people from point A to point B. In the future market, clients will be able to buy an entire package of software from their car brand, in addition to several other services,” says Pedraza.

VIEW TOP OEM of Tomorrow | 92

from the

Q: What factors are contributing to the growth of the extended warranty market?

A: During the past few years, the warranty market has grown significantly, boosted by the COVID-19 pandemic, and the shortage of chips and new-car inventory. Customer perception of this market is also changing, which is generating great opportunities for many companies.

As the used car market grows, our product becomes more relevant. Consumers are becoming increasingly conscious of the importance of warranties in protecting their vehicles. Besides, when buying a new vehicle, customers are skipping official maintenance services because of their high costs, forcing warranty companies to look for new business models with new products and new coverages Q: Most consumers of extended vehicle warranties are young people, who are also attracted to the car-as-aservice model. How has this shift impacted your business?

A: This shift in preferences limited our reach in the B2C market, so we are focusing on B2B. We offer lessors products with added value that can make their business models profitable and do not impact their clients’ finances. This allows young people to rent a vehicle or use mobility platforms at a low cost.

Israel Escutia

We recently allied with ClikAuto and its 3 divisions, both in its marketplace for used vehicles, as well as ClikAuto Finance that offers digital credit and finally in its mobility model in which

CEO | GarantiPLUS México

users pay per day, hour, week or year. We are creating the warranty programs for used-vehicle platform OLX Autos. Last year, we allied with Mercado Libre so that it could provide a free warranty for used vehicles. In all these examples our products are in accordance with business needs and invite young people

A Changing Market Needs Adaptive Protection and a Strong Team

to obtain a used car or rent a mobility model.

Q: As vehicle technology evolves with the adoption of EVs and autonomous technologies, how will warranties change?

A: We have products for both electric and hybrid vehicles.

We are enthusiastic about this business because the Mexican market is assimilating electromobility and investing in its infrastructure. We can develop products to protect both vehicles and electric chargers. While electric failures are more expensive than mechanical failures, the data we have collected throughout the years allows us to offer competitive prices to our commercial partners and benefits to end customers. We are prepared for the upcoming electromobility boom in Latin America and Mexico.

Q: In early 2022, GarantiPLUS reportedly sold most of its policies in the Bajio region. What made your service popular in this location?

A: This was achieved thanks to our sales team. Across the country, we have a mature team with specialized knowledge

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of our product. We are always training our teams and our collaborators so they can be happy with their work, which translates to our commercial partners. Our salesforce is continuously growing and we are recruiting talent to satisfy the needs of the Mexican market.

VIEW TOP OEM of Tomorrow | 93

from the

Q: What does the tagline “Drive your ambition” mean and how does Mitsubishi Motors adapt it to Mexico?

A: “Drive your ambition” is part of the revitalization of Mitsubishi Motors. It helps give the brand a global identity, encompassing Mitsubishi’s present and its history as pioneers in electrified and plug-in hybrid technologies, offroad and 4X4s. In Mexico, the brand is well developed among clients, who identify with the tagline. It is all about where you want to take your performance and ambition. It is all about driving your emotion, motivating yourself and climbing as high as you aim to. The marketing strategy ensures a uniform message at the municipal, state and national levels.

Q: How does Mitsubishi Motors de México ensure it delivers a customer-centric approach?

A: A client and a brand cannot be disassociated. Several brands say that they put the customer at the center of their operations but in reality, that does not happen. Mitsubishi Motors, however, has a true client-centric approach that is evident during the sale process and with its aftersales services.

With aftersales services, clients can feel the brand’s strength and that it is taking care of them. Clients are at the center of our operations, regardless if they give us the privilege of

Jorge Vallejo

providing them with a vehicle for the first time in their lives or are already loyal to the brand.

Q: What are the main strengths of Mitsubishi

President and CEO | Mitsubishi Motors de México

Motors de México’s aftersales service?

A: For Mitsubishi Motors, aftersales service impacts future sales. As part of the Consolidation Together 2022 plan, we launched a complete reengineering of our aftermarket

Building Loyalty Through Exceptional Aftersales Services

segment, with a new structure for the operations team but also including training for dealerships to improve their overall times, their service levels and delivery times. The client wants an agile, dynamic and efficient service at fair prices.

Loyalty is built through the accompaniment of the client throughout the vehicle’s lifespan. Car specs are important but true loyalty is generated several years after the sale.

Q: How is Mitsubishi Motors addressing climate change and competing in the electrified vehicles market?

A: In Mexico, we are behind several countries in terms of electrification and the necessary infrastructure. The PHEV technology we offer in Outlander is an important step in the transition toward 100 percent electromobility. Globally, we are leaders in this technology, with over 300,000 sold units in more than 60 countries. This allows us to combine our electromobility strategies because PHEV tech is crucial for emerging countries.

Later this year, Mitsubishi Motors Corporation will unveil a 100

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percent electric Kei car. By 2030, 50 percent of our product portfolio will be made up of electrified cars, in addition to a 50-percent reduction in emissions at the corporate level.

Mitsubishi Motors has global, regional and local strategies focused on decarbonization and electrification.

VIEW TOP OEM of Tomorrow | 94

from the

Q: How have Mexican market trends changed in recent years and how does Renault adapt its portfolio to local demand?

A: The conditions in the country are very particular and we have adapted our offering to make Renault a real mobility solution in the Mexican market. The country’s altitude, for example, represents a challenge for car engines. We had to learn from past experiences to build an established portfolio that truly adapts to the market’s needs. Owing to this, we saw continuous growth during the past five years. Adapting our products was the right decision and, today, Renault enjoys a customer satisfaction rating of 90 percent. We are implementing a customer-centric approach and we have doubled our market share. We ended 2021 with 3.5 percent of the Mexican market and our goal is to reach 5 percent.

Q: What strategy has Renault implemented to achieve these goals?

A: We focus our strategy on three pillars: SUVs, commercial vehicles and electric vehicles (EVs). Our SUVs include the Duster, Capture, Koleos and Kwid. This last vehicle is the most popular thanks to its sporty design, security, efficiency and attractive price. During the pandemic, we saw higher demand for this product because, although mobility as-a-service was popular, the need to respect social distance encouraged customers to acquire their own vehicle. Our commercial vehicles are seeing great

Magdalena López

reception among customers. Oroch, for example, opened a new niche in the market; we are pioneers in this type of vehicle. Our Kangoo model, which has been in the market for about 10 years, was used to launch our EV offering in the commercial category.

CEO | Renault México

During the pandemic, we identified an opportunity for last-mile delivery vehicles, prompting the company to introduce the Kangoo Z.E. that now enjoys a great reputation.

We have long been committed to sensitizing the market to EVs.

Vehicles Do Not Generate Loyalty, Customer Experience Does

In 2015, we started commercializing the Twizy, which became popular among security forces in Guadalajara, Merida and Campeche. BBVA also acquired units and Coca-Cola used it in its commercial campaigns. Later, we launched the Zoe E-Tech Electric, now the most sold EV in the EU. Two months ago, we presented the Master Z.E. to increase our portfolio of electric commercial vehicles.

By virtue of this offering, Renault has been selected as one of the best options by leaders in the delivery market, such as DHL, Mercado Libre among other retailers’ brands. For these businesses, acquiring EVs starts as a branding tool but once they see the economic and other benefits offered by these vehicles, they consider them a real business solution. Renault Enterprises is in charge of managing these B2B relationships through a highly experienced team that identifies the mobility proposal that fits the client’s needs.

Q: How is Renault adapting to emerging trends and the increasing competition in the market?

A: In terms of product, the company is aligned with emerging

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trends regarding alternative energy sources. In terms of new market players, it is normal for companies to enter the country but we focus on our customers. Most OEMs offer good products but Renault’s differentiator is its customer experience; we have to guarantee a different experience that generates loyalty.

Obstacles Ahead: Uncertain Future for Auto Retailing in Mexico Daniel Esponda Founder and CEO | Odetta

Telematics Help Increase Efficiency, Profitability Fernando Ardura CBO | Traffilog Latin America

Nissan Introduces App to Enhance Communication With Users 09/12/2022

OEMs Reaffirm Their Commitment to Greener Future 04/25/2022

Toyota Ranks First in Annual OEMSupplier Relations Study 05/24/2022

Nissan Presents Innovative Technologies for Mexico, Brazil 09/20/2022

Automakers Reduce Their Plants’ Water Consumption 03/25/2022

Environment, Education, Communities: Top Priorities for GM 07/11/2022

Mercedes-Benz Buses Offers Extended Warranties 07/14/2022

Automakers to Reconsider Justin-Time Manufacturing 03/17/2022

Acronyms 3PLs

Third Party Logistics

GDP

Gross Domestic Product

ACES

Aftermarket Catalog Exchange Standard

GM

General Motors

AMAVE

INA

National Auto Parts Industry

Mexican Association of Vehicle Leasing Companies

INEGI

AMDA

National Institute of Statistics and Geography

Mexican Association of Automotive Distributors

ISO

AMIA

Intraconal Organization for Standardization

Mexican Association of the Automotive Industry

KPI

Key Performance Indicators

ANPACT

National Association of Bus Truck and Tractor Manufacturers

LVC

Labor Value Content

ARIDRA

MBN

Mexico Business News

National Association of Representatives Importers and Distributors of Auto Parts and Accessories

NAFTA

North American Free Trade Agreement

BEV

NOM

National Mexican Norm

Battery Electric Vehicles

CASE

OEM

Original Equipment Manufacturer

Connected Autonomous Shared and Electric

PEMEX

Mexican Petroleum Company

CLAUT

Nuevo Leon Automotive Cluster

PHEV

Plug-in Hybrid and Electric Vehicles

CLAUGTO

Guanajuato Automotive Cluster

PIES

CLAUZ

Product Information Exchange Standard

Automotive Cluster PueblaTlaxcala Region

R&D

Research and development

CONACYT

National Council for Science and Technology

ROI

Return of Investment

EPA

RVC

Regional Value Content

United States Environmental Protection Agency

SME

Small and Medium-Sized Enterprise

ERP

Enterprise Resource Planning

SUV

Sport Utility Vehicle

EV

Electric Vehicles

USMCA

FCA

United States-MexicoCanada Agreement

Fiat Chrysler Automobiles

FDI

VAT

Value Added Tax

Foreign Direct Investment

Advertising Index Mexico Business Communities FORVIA

Alian Plastics

40

Logicalis 57

5

Mexico Automotive Review

2

22

Mexico Business Events

75

Index Alian Plastics

46, 47

Mercedes-Benz Buses

AMGNV 33, 34

Pirelli 70

AMIA

Qualcomm 61, 63

8

37

ANPACT 34, 35

Queretaro Automotive Cluster

BCG

R&D in Mexico

9

Bridgestone

Renault

54

72

66

CLAUT 14, 84

Scania

Continental

SPARX Logistics

Daimler

46, 69

16, 34, 62

30

Stratasys

45

Estafeta 17

Tec de Monterrey

Hyundai 29

Timken

48

INA

Toyota

26

12, 53

15

44

JAC 28

UPS

Jatco 52

Wieland Group 49

JATO Dynamics MasterFoam 51

65, 84

19

ZF Group

64

10, 16

Photo Credits Cover

Volvo

51

Masterfoam

4

Mercedes-Benz AG

52

JATCO

8

AMIA

53

INA

9

BCG

54

Bridgestone

10

Cluster Qro

55

Mazda

12

INA

56

Volvo

14

CLAUT

61

Qualcomm

15

SPARX Logistics

62

Daimler Trucks

16

Mexico Business

63

Mexico Business

17

Estafeta

64

ZF

18

Volkswagen

65

JATO

19

UPS

66

Renault Mexico

20

Mercedes-Benz AG

69

Continental

21

Mercedes-Benz AG

70

Pirelli

26

Toyota

72

Forvia

28

JAC

73

Mercedes-Benz AG

29

Hyundai

74

Mercedes-Benz AG

30

SCANIA

79

Mazda

33

AMGNV

81

Forvia

34

Mexico Business

82

Infiniti

35

ANPACT

83

Maserati & Rolls-Royce

37

Daimler Buses Mexico

84

Mexco Business

38

Mazda

85

BEAT

39

Mazda

89

MaaS

44

Tec de Monterrey

90

Grupo Surman

45

Stratasys

91

Mexico Business

46

Mexico Business

92

GarantiPlus

47

Alian Plastics

93

Mitsubishi

48

Timken

94

Renault Mexico

49

WIELAND

95

Mazda

50

Mexico Business

Back Cover

Mazda

Credits Senior Journalist & Industry Analyst: Antonio Gozain Journalist & Industry Analyst: Sofía Garduño Editor: Alicia Arizpe Editor: José Escobedo Senior Editor: Mario Di Simine Managing Editor: Alejandro Salas Industry Lead: Joyce Kruiter Commercial Manager: Mirjam Schipper Content Partnership Coordinator: Mariana Rodríguez Content Partnership Manager: Miguel García Junior Graphic Designer: Valeria Villanueva Junior Graphic Designer: Paulina Quiroz Senior Graphic Designer: Marcela Muñoz Ledo Design Manager: Mónica López Digital Communication & Multimedia Director: Marcos González Web Development: Omar Sánchez Collaborator: Rodrigo Andrade Director General: Jeroen Posma

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