Mexico Automotive Summit 2018 Impact Report by Mexico Business Publishing

IMPACT REPORT

2018

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2018 Mexico’s position in the global automotive landscape remains strong. Investments continue to flow into the country while production and exports are ramping up. Yet, changes in the international trade environment are forcing the country to re-evaluate its strengths and move past its traditional status as a low-cost production hub. A new trade agreement with the US could prove an advantage for Mexico but it will also represent a new challenge for the country to grow its competitiveness.

Changes within the domestic market are also pushing local competitors to find new ways to attract clients and ensure Mexico regains the momentum that is starting to fade after two years of record-breaking sales and seven years of undisrupted growth.

Bringing together key decision-makers from the public and private sectors, Mexico Automotive Summit is the industry’s main event of the year, where leading figures gather to discuss the industry’s trends and challenges and the opportunities that are opening up. Mexico Automotive Summit provides the ultimate platform for developing new business relationships in this dynamic industry.

This event also marks the launch of Mexico Automotive Review, a compendium of detailed industry analyses and exclusive insights from over 180 industry leaders on the year’s most significant automotive developments. As 2018 was also a transition year for the federal government, Mexico Automotive Review 2018 included a special supplement on incoming President Andrés Manuel López Obrador, his projected plans for the automotive industry in Mexico and the thoughts of key leaders as a new political era approaches.

2018

Quick Look:

“Since the exit of the US from TPP, Japan led the negotiations of TPP-11 with Mexico” Yasushi Takase, Ambassador of Japan in Mexico

INCLUDING: ∙∙ Eduardo Solís, Executive President of AMIA ∙∙ Yasushi Takase, Ambassador of Japan in Mexico ∙∙ Juan Carlos Meade, Automotive Industry Director of ProMéxico ∙∙ Óscar Albin, Executive President of INA ∙∙ Enrique Enrich, Managing Director of Scania Mexico

TOP SPEAKERS

∙∙ Luis Geraldo Eboli, Director General of CIMATIC de México ∙∙ Mario Rodríguez, CEO of Arbomex ∙∙ Alexis Milo, Chief Economist for Mexico at HSBC ∙∙ Marcos Pérez, Director of Product Development at Ford de México ∙∙ Elías Massri, Director General and Chairman of the Administration Board at Giant Motors Latinoamérica

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155 COMPANIES REPRESENTED

“We need to bring the entire industry on board, otherwise it will not be possible to make electric vehicles a mass market product” Elías Massri, Director General and Chairman of the Administration Board at Giant Motors Latinoamérica

268

PARTICIPANTS

“There is no way to know if by 2025 around 10 percent of the total global vehicle fleet will be electric. There are no indications that internal combustion engine vehicles will disappear in the future” Eduardo Solís, Executive President of AMIA

PROGRAM 2018 07:30 REGISTRATION 08:30

PROTECTIONISM IN A GLOBAL SUPPLY CHAIN

Speaker:

Yasushi Takase, Ambassador of Japan in Mexico

09:15

ELEVATING THE 'MADE IN MEXICO' BRAND

Moderator:

Juan Carlos Meade, Automotive Industry Director of ProMéxico

Panelists:

Mario Rodríguez, CEO of Arbomex

Jorge Martínez, Director General of Zacua

Elias Massri, Director General and Chairman of the Administration Board at Giant Motors Latinoamérica

Óscar Albin, Executive President of INA

10:15

NETWORKING COFFEE BREAK

10:45

TECHNOLOGY TRENDS IMPACTING VEHICLE DEVELOPMENT

Moderator:

Ricardo Haneine, Partner and CEO at A.T. Kearney

Panelists:

Marcos Pérez, Director of Product Development at Ford de México

Luis Geraldo Eboli, Director General of CIMATIC de México

Mónica Aceves, Strategy and Innovation Manager, R&D Center Mexico of Continental Automotive

Enrique Enrich, Managing Director of Scania Mexico

11:45

MEXICO'S ECONOMIC OUTLOOK

Speaker:

Alexis Milo, Chief Economist for Mexico at HSBC

12:15

NETWORKING COFFEE BREAK

12:45

INTRODUCING NEW MEMBERS TO THE LOCAL SUPPLY CHAIN

Moderator:

Daniel Hernández, Director General of the Queretaro Automotive Cluster

Panelists:

Heberto Moreno, Business Director of BASF’s Performance Materials Division in Mexico, Central America and Caribbean

Luis Fernando Mendoza, Regional Product Head of Latin America Global Trade and Receivables Finance (GTRF) at HSBC Mexico

Argenis Bauza, Head of Supply Chain Latin America Hub, KPMG in Mexico

Manuel Guevara, General Manager Queretaro - El Marqués Plant at Brose México

Alejandro Veraza, Managing Country Director of TI Automotive

13:30

NETWORKING LUNCH

15:00

GROWTH OF CLUSTERS AND INVESTMENT ATTRACTION

Moderator:

Manuel Nieblas, Partner and Manufacturing Industry Leader at Deloitte Mexico

Panelists:

Manuel Montoya, Director of the Automotive Cluster of Nuevo Leon

Alexandro Burgueño, Director General of the Jalisco Automotive Cluster

Héctor Soto, Managing Director of the Automotive Cluster of San Luis Potosi

Jaime González, Director of the Automotive Cluster of the Central Region Puebla-Tlaxcala

16:00

DIGITAL TRANSFORMATION AND THE B2G CONCEPT (INDUSTRY 4.0)

Speaker:

Luis Geraldo Eboli, Director General of CIMATIC de México

16:15

IS MEXICO’S AUTO INDUSTRY READY TO FACE CHANGES IN SUPPLY AND DEMAND?

Speaker:

Eduardo Solís, Executive President of AMIA

16:45

NETWORKING COCKTAIL

KEY SPEAKER

FREE TRADE, OPEN MARKETS TRUMP PROTECTIONISM: JAPAN AMBASSADOR More trade partnerships are needed, not less, Yasushi Takase, Ambassador of Japan in Mexico, said in his opening presentation at Mexico Automotive Summit 2018, alluding to the current trade rhetoric between the US and China. “It is very unfortunate that several countries adopt protectionist tendencies and leaders talk about easy-to-win trade wars,” Takase told the audience at the Hotel Sheraton Maria Isabel in Mexico City. He pointed out that Japan would like to enter more partnerships with other countries that share the ideal of free trade.

YASUSHI TAKASE Ambassador of Japan in Mexico

Takase underlined that his country’s aging population poses a series of challenges

Yasushi Takase graduated from

that trade can help overcome. “Our population and labor force are shrinking,

University of Tokyo Law School and

which could harm our potential growth rates in the future,” he said. “Productivity

the Diplomatic School in Madrid.

will take a hit and our growth will diminish.” He said that to increase productivity,

He has been with Japan’s Ministry

Japan needs to be open and more connected with its economic partners.

of Foreign Affairs since 1982, with postings to Japan’s Representation

The ambassador pointed out that Mexico not only is Japan’s second-oldest

before the UN and Geneva. Takase

economic partner but also has become a key partner for Japan in the process

was also the General Consul at Japan’s

of promoting free trade in the world. He said that both countries have gone the

General Consulate in Rio de Janeiro. He

distance during the negotiations and implementation of the CPTPP (TPP-11).

negotiated the Economic Partnership

“Since the exit of the US from TPP, Japan led the negotiations of TPP-11 with

Agreement between Japan and Mexico

Mexico,” said Takase.

between 2001 and 2003 and became Ambassador of Japan in Mexico in

He added that TPP started as an agreement between Brunei, Chile, Singapore

2017.

and New Zealand with the eventual entrance of the US, Australia, Peru, Vietnam and other countries. Only later did Japan join to total 12 members. But when the US withdrew from the agreement in January 2017, responsibility for a final deal fell on the shoulders of Japan and Mexico. “We needed to continue working hard toward reaching an agreement,” Takase said. “The Japanese Minister of Economy came to Mexico in January and talked with his Mexican counterpart Ildefonso Guajardo and both countries agreed to collaborate together toward the signing of the agreement.” Mexico played a key role in persuading Canada to join TPP-11 despite the US leaving the agreement, he added.

Takase said the key goals that Japan pursues when negotiating deals such as TPP-11 include establishing new, high-standard trade rules that promote a more dynamic economy in the region. He says that while a TPP with the US as a member would comprise 40 percent of the world’s GDP, 30 percent of the global trade volume and a total market of 800 million people, TPP-11 is still attractive. Takase pointed out that this agreement comprises 13 percent of the world’s GDP, 15 percent of the global trade volume and a market of 500 million people. TPP11, which was in the process of being ratified, not only eliminated tariffs close to 100 percent in terms of trade-value and item-basis, Takase said.

"Mexico, Japan and Singapore have gone ahead and this agreement could enter force next year” Yasushi Takase, Ambassador of Japan in Mexico

“We also established high-quality rules on trade and investment to suit the needs of the 21st century in areas such as investment, services, intellectual property and e-commerce.” Once six of the 12 signatory countries ratify the agreement, it will be enforced. “Mexico, Japan and Singapore have gone ahead and this agreement could enter force next year,” he concluded.

ELEVATING THE MADE IN MEXICO BRAND The widespread arrival of electric vehicles is imminent and the Mexican automotive industry and society must be ready to participate, panelists said at Mexico Automotive Summit 2018 as they reflected on the challenges and opportunities for the industry to adapt to new technologies and a new mobility industry. “In the same way that people would not trade their smartphone for their previous phone, consumers need to try 100-percent electric vehicles to understand what they offer and why they might prefer them over internal combustion engine vehicles,” said Óscar Albin, Executive President of INA, during the discussion at the Hotel Sheraton Maria Isabel in Mexico City. “Change is generated by consumers.” Albin was joined by Juan Carlos Meade, Automotive Industry Director of ProMexico; Mario Rodríguez, CEO of Arbomex; Jorge Martínez, Director General of Zacua and

Elías Massri, Director General and Chairman of the Administration Board at Giant Motors Latinoamérica. Martínez said the government plays a key role in generating changes in preferences through incentive schemes. Yet “despite a few initiatives aimed at increasing the number of hybrid and electric vehicles, the government has been rather timid and has not created a full package of incentives that includes tax deductions for both, companies and individuals.” Zacua is Mexico’s first

100-percent electric light-vehicle manufacturer. Massri added that individuals also play a key role in spurring change from traditional vehicles to vehicles powered solely by electric energy. “There is no better vehicle than the one that fits the needs of the country where it is being sold. For electric vehicles to take hold in the Mexican market, they need to be price-competitive with internal combustion engine cars or they will never reach the sales volumes of traditional vehicles.” Massri also acknowledged that making electric vehicles

affordable for the entire Mexican market would be a team effort between OEMs, car dealerships and financial institutions. “We need to bring the entire industry on board, otherwise it will not be possible to make electric vehicles a mass market product.” For all the advantages electric vehicles provide, Meade said that an industry transformation was bound to alter the Mexican automotive industry. “An electric vehicle has three times fewer parts than an internal combustion engine vehicle. As Mexico is the fifth-largest producer of auto parts, the production of electric vehicles is inevitably going to modify the Mexican value chain.” Although change is inevitable, Rodríguez said that Mexican companies must make the necessary changes to adapt and continue being relevant players. “The change to electric vehicles is something that we are working on, which is why we are betting on three main pillars: vertical integration to take advantage of our existing technology and develop new solutions, agreements with research and development centers and talent development.” While Rodriguez acknowledged that camshafts might become irrelevant in an age driven by electric vehicles, he noted that the company is doing its part to venture into new areas of specialization that the industry will need such as 3D printing, batteries and graphene. Albin acknowledged the change in production and that it would pose a challenge for some manufacturers, but he said that new technologies also offered opportunities for the country. “Although electric cars have fewer parts, they have three times more harnesses and Mexico is an important manufacturer of harnesses.” Despite the opportunity, Albin also warned that the US could pose a challenge for Mexico to achieve this transformation. “NAFTA does not produce the vehicles that the world wants, it produces that vehicles that NAFTA wants, and

right now NAFTA does not want electric vehicles. That is why the challenge is to lure new consumers in the US to electric vehicles.” Still, Albin said that the US reluctance to use electric vehicles does not mean that Mexico cannot make the change on its own, “Ford announced that its Mexico plant in Cuautitlan Izcalli will only produce electric vehicles for the rest of the world. This is a first step for Mexico to become a producer of vehicles for the world and not only for NAFTA.”

KEY SPEAKER ARTIFICIAL INTELLIGENCE: THE FUTURE OF THE AUTOMOTIVE SECTOR The fourth industrial revolution is here. While it has yet to fully permeate the automotive sector, it has already forced evolution, agreed panelists at Mexico Automotive Summit 2018 at Hotel Sheraton Maria Isabel in Mexico City. Participants discussing the “Technology Trends Impacting Vehicle Development” looked to determine the most disruptive trends coming to the automotive sector, while addressing the main challenges Mexico is facing to ensure full penetration of these technologies.

ENRIQUE ENRICH Managing Director of Scania Mexico

“The main trends concerning the automotive sector are self-driving, connectivity

Enrique Enrich is an economist

between internal and external systems to the car, electrification and shared mobility,”

graduated from the University of Sao

said Ricardo Haneine, Partner at A.T. Kearney. “These four trends are also changing

Paolo, Brazil, with a graduate degree

mobility and urban markets.”

from that same institution. He has worked for the Scania Group for over 20

During the panel, speakers said these trends were already a reality in many

years occupying different positions in

manufacturing sectors and agreed they have become key to company strategies.

Brazil, Sweden, Uruguay and Colombia.

Marcos Pérez, Director of Product Development at Ford de México, added that

Enrich is currently Managing Director

“Ford is investing US$11 billion in electrification and by 2019-2020, 90 percent of

of Scania México and is responsible for

our vehicles will be connected to the cloud.” Scania too is betting on the revolution. It

the service of a fleet of approximately

has about 3,500 connected vehicles in Mexico collecting 550,000km of information

6,500 Scania vehicles in circulation,

per hour to develop new products and optimize existing ones, explained Enrique

half of them under a maintenance

Enrich, Managing Director of Scania Mexico.

contract with the OEM.

Industry 4.0 technologies are influencing much more than car manufacturing; they also have a significant influence on market and mobility trends. “In the automotive sector it is necessary to think about mobility systems, as disruptors such as Uber and Apple are gaining strength as competitors. Individuals are becoming less willing to buy a car and instead prefer to hire a service such as Uber to take them to their destination,” said Mónica Aceves, Strategy and Innovation Manager,

“In the automotive sector it is necessary to think about mobility systems, as disruptors such as Uber and Apple are gaining strength as competitors. Individuals are becoming less willing to buy a car and instead prefer to hire a service such as Uber to take them to their destination” Mónica Aceves, Strategy and Innovation Manager, R&D Center Mexico of Continental Automotive

R&D Center Mexico of Continental Automotive. Manufacturing companies are increasingly investing in what comes next. “In the automotive industry, manufacturing plants have been automated for many years. The question now is what to do with all this data, which is where artificial intelligence comes in,” said Luis Geraldo Eboli, Director General of CIMATIC de México. Pérez agreed, explaining that Ford already has many groups working on artificial intelligence with surprising results. He illustrated this with a problem regarding a change in gear shifts that the company had been working on for a long time but that a young group of programmers managed to solve in 30 minutes using artificial intelligence. Another way in which artificial intelligence can influence

all of Mexico is road safety, added Enrich. “Another important trend that is disrupting the market is autonomy, which will lead to fewer accidents and much safer roads,” he said. The main challenge, however, is the proper introduction of these technologies. Mexico has strong manufacturing capabilities, explained Haneine, but the country has a weak institutional framework and not enough human capital to properly adopt these new technologies. All panelists agreed that the key to fully permit the penetration of industry 4.0 into the country is to have sufficient human capital. Pérez explained that there is not enough human capital in Mexico to implement these technologies and as a result it is an area that is increasingly valued by OEMs. “The

capability to learn is the most important characteristic we look for in our new hires,” he said. Moreover, time is a concern. “It took Mexico about 100 years to fully adapt to the mechanical engine but we do not have 100 years to make the subsequent shift. The industry is increasingly demanding these technologies,” said Aceves. Her solution was for the industry to invest in talent by allying with academia.

KEY SPEAKER

Panel members agreed that investing in the development of human capital for the incorporation of advanced technology, such as artificial intelligence, will be key to the development of the country and of individual companies. Pérez urged the audience to invest in this area, saying: “If you have engineering areas and you have not incorporated artificial intelligence into them, you are late to the party.”

MEXICAN ECONOMY ON STABLE FOOTING: ALEXIS MILO

ALEXIS MILO

Despite the uncertainty generated by the change in government and by NAFTA’s

Chief Economist for Mexico at HSBC

renegotiation, investors and the market remain very optimistic, Alexis Milo, Chief

Alexis Milo was appointed HSBC’s

Economist for Mexico at HSBC, told Mexico Automotive Summit 2018 at the Mexico

Chief Economist for Mexico in May

City Hotel Sheraton Maria Isabel.

2016. Before joining HSBC, Milo was Chief Economist at an international

“The macroeconomic foundations of the country remain stable, which leads us to

bank in Mexico. He has held various

think that the economy will maintain the rhythm it has experienced in past years,

positions in the Mexican government,

with moderate growth based on exports, industrial activity and private consumption,”

including Commissioner at the Federal

Milo said, adding that HSBC expects the economy to experience growth rates below

Telecommunications Commission

3 percent for 2018 and 2019.

and Chief Adviser to the President. Milo was also Director of Public Debt

Milo said the combination of NAFTA’s renegotiation, which is the most important

Management and Director of Fiscal

structural change Mexico’s free-trade dynamic has experienced in the past years,

Policy at the Ministry of Finance. He

and the change of government with the promise to generate a substantial change in

has a BA in economics from ITAM

Mexico’s political direction, were the two main elements that added to the uncertainty

and both a Master’s and a Ph.D. in

that characterized 2017 and part of 2018.

economics from Yale University.

However, international markets, investors and consumers seem to have shaken off that perspective and appear to have widespread optimism and enthusiasm regarding the future. “In July 2018, after the election, consumer confidence experienced a 15 percent bump, which is the largest increase in confidence we had ever seen,” Milo said. Manufacturer’s confidence also increased in very high percentages. Milo said the increase in confidence combined with lower inflation rates and a slight recovery in the purchasing power of Mexicans is good news since it spurs private consumption. “Private consumption has been an anchor of the Mexican economy since 2014. In 2018, it has gained more traction than we expected.” Aside from private consumption, Milo said that other elements will impact the economy’s behavior such as exports, manufacturing activity and level of investment. “The depreciation of the Mexican peso has been a

“The depreciation of the Mexican peso has been a boost for exports, making them more competitive. As a consequence, the commercial deficit that the US president complained so much about has increased” Alexis Milo, Chief Economist for Mexico at HSBC

boost for exports, making them more competitive. As a consequence, the commercial deficit that the US president complained so much about has increased,” Milo said. An increase in exports can also lead to a sustained expansion of manufacturing activity, which Milo said had been lagging, especially in the construction sector. “We have seen consistent growth in the construction sector. However, public investment in infrastructure is at low levels.” Milo added that the expectation is that the incoming administration will change this. Another important element to consider is investment,

which Milo said has also been at minimum levels. Nevertheless, HSBC remains confident that as long as investment maintains the levels reached in 2017, it will be sufficient for the Mexican economy to maintain its current growth levels. Despite solid macroeconomic foundations, the new government has a challenge to tackle even before it takes office: the budget for 2019. “The first test for the new administration will be to put together an economic package that maintains fiscal balance.” Even though Milo said that the elements that have generated optimism are not very clear, the Mexican economy continues to evolve favorably. “It is hard to understand

the root of this optimism. Maybe it is the renewed perspective of the US-Mexico relationship or the fact that markets do not see a radical change in Mexico’s fiscal policy in the short term. Either way, more than a forecast, today, markets are saying that Mexico’s economy is evolving favorably.”

CHALLENGES AND OPPORTUNITIES FOR SMALL MEXICAN SUPPLIERS

KEY SPEAKER

The fact that a greater regional content will be required under new USMCA regulations opens opportunities for both Mexican Tier 2 suppliers and foreign Tier 1s in the country, Daniel Hernández, Director General of the Queretaro Automotive Cluster, said at Mexico Automotive Summit 2018 said at the Hotel Sheraton Maria Isabel in Mexico City. “With stricter rules of origin, the auto parts sector offers new opportunities for Tier 1s to bring more Tier 2s into the supply chain,” said Hernández. He underlined that around 70 percent of all Tier 2 companies in Queretaro are Mexican compared to

DANIEL HERNÁNDEZ

only a handful of Mexican Tier 1 suppliers. “This is the segment where companies

Director General of the Queretaro

have the greatest opportunity for growth and to learn more about the industry.”

Automotive Cluster Daniel Hernández has worked in the

Adding more Mexican companies to supplier bases can have a positive impact on a

private sector for metal-mechanic and

company’s performance but there are a series of challenges that suppliers face to

automotive companies in the areas of

add value to their clients’ operations, panelists discussing “Introducing New Members

procurement and supplier development

to the Local Supply Chain” agreed.

and in the public sector at the Office of Strategic Sectors for the Government

Alejandro Veraza, Managing Country Director of TI Automotive, said that while

of Queretaro. During this time, he

Mexican suppliers will face challenges brought by the US-Mexico deal, the moment

was in charge of projects oriented to

had come for Mexico to prove the quality of its human talent. “Automation is

the development of aerospace and

sometimes needed due to safety or production needs,” he said. “But we need to

automotive suppliers, international

take advantage of the human talent that we have and develop it.” He added that

cooperation schemes to develop

Mexican talent, from operators to managers, offer not only innovation but also stand

automotive suppliers and the design

out for their sense of responsibility.

and publication of technological trend studies for the automotive industry.

“Compared to German or US workers, Mexicans still have a great hunger for growth,” said Manuel Guevara, General Manager of Brose México’s Queretaro – El Marqués Plant. Brose is a good example of German capital finding success by trusting in Mexico, he said, pointing out that the company went from seven to 65 assembly facilities in the last 15 years and that the Mexico supply chain

“Mexican companies need to have a B2B mentality to solve business problems easily” Argenis Bauza, Head of Supply Chain LatAm Hub, KPMG in Mexico

was key in this process. “Having local suppliers is vital for the healthy growth of the automotive industry,” Guevara said. “If we do not support our suppliers, we will disappear over time when the need for technology is there and we are not ready.” According to Argenis Bauza, Head of Supply Chain LatAm Hub, KPMG in Mexico, OEMs and Tier 1s will

generally ask for four things from small, local players: quality, solid processes, technology and human resources that can support clients. “Mexican companies need to have a B2B mentality to solve business problems easily,” says Bauza. “We need to prepare to take advantage of the new NAFTA.” He added that Mexican suppliers “need to be more intelligent and adapt to the new business environment resulting from the trade deal to truly leverage it.” While there are many ways for a Tier 1 or OEM to support suppliers, including with financing, “supplier development is a two-way street for growth,” he said. In terms of financing, Luis Fernando Mendoza, Regional Product Head of Latin America Global Trade & Receivables Finance (GTRF) at HSBC Mexico, said new financial products such as factoring have had a significant impact on the integration of local suppliers into the automotive value chain. “Factoring both for clients and suppliers is the new trend in the Mexican automotive industry,” he said. “Globally, financing for the supply chain has grown the fastest in Mexico.” Mendoza added that around 27,000 companies were already using the company’s factoring solutions but that there was still a great deal of room for growth in the segment. Heberto Moreno, Business Director of BASF’s Performance Materials Division in Mexico, Central America and Caribbean, said that despite the challenges that lie ahead, the evolution of the automotive industry is backed by support industries such as coatings. “Many companies started small and evolved as the automotive industry grew and now, Mexican suppliers can more effectively integrate,” he said. Moreno added that the future of the Mexican automotive industry is in engaging in design operations in Mexico. Among the companies already investing in this area is Brose, which recently set up an engineering center within a university in Queretaro. Guevara said this enables the company to capture the ideas and talent that young people can offer. “Mexico needs to take the next step from only engaging in manufacturing to also creating technology,” he said.

CLUSTERS PLAY KEY ROLE IN AUTOMOTIVE ECONOMICS Although the US, Japan, Canada and Korea represent 50 percent of the foreign direct investment in the Mexican industry, automotive clusters help catalyze the remaining economic inflow, panelists discussing “Growth of Clusters and Investment Attraction” said during Mexico Automotive Summit 2018 in Mexico City. Some of these clusters have achieved major success due to their proximity to the US border, but states such as Aguascalientes, State of Mexico, Puebla, Tlaxcala and Jalisco also stand as significant players, the panelists agreed. “We provide information to the government about where are the missing links in the value chain, so efforts can be focused on looking for providers, identify commodities that the capabilities of another cluster can cover and if that is not possible, seek

opportunities abroad,” said Jaime González, Director of the Automotive Cluster of

KEY SPEAKER

the Central Region Puebla - Tlaxcala. In addition to González, the panel at the Hotel Sheraton María Isabel included Manuel Nieblas, Partner and Manufacturing Industry Leader at Deloitte Mexico; Manuel Montoya, Director of the Automotive Cluster of Nuevo Leon; Alexandro Burgueño, Director General of the Jalisco Automotive Cluster; and Héctor Soto, Managing Director of the Automotive Cluster of San Luis Potosi. González emphasized the role these organizations play in consolidating the automotive industry through mutual cooperation. “State governments have the

ALEXANDRO BURGUEÑO

responsibility of boosting internal investment but the cluster acts as the entity that

Director General of the Jalisco

enables industry, government and universities. These elements have to interact

Automotive Cluster

systematically as they thrive for the same objective,” he said. In recent years,

Alexandro Burgueño has occupied

many clusters have started to collaborate on different projects and schemes. “We

several commercial and operational

designed an initiative that started five years ago in Guanajuato and every cluster

management positions in various

joined it. We developed a survey to identify relevant information about human

industries but the automotive industry

capital difficulties in every state with the objective of addressing this situation

is among his key areas of professional

strategically,” said Burgueño. Panelists also mentioned the importance of identifying

development. Burgueño worked for

through shared information the main capabilities and strengths of every state. To

eight years as Key Account Manager

incentivize local content, their priority is to find value chain solutions between

at Johnson Controls and catered to

clusters. Cluster leaders also hold regular meetings to share success stories, best

clients such as Volkswagen and Nissan.

practices and lessons learned.

He has also worked as a business

Regarding trade, the panelists concluded that the increase of regional content

them increase sales and profits while

strategy consultant for SMEs to help represents a challenge for Mexico as it will put pressure on manufacturing segments.

reducing costs. An ITESM graduate,

“The clusters, AMIA and INA need to organize and communicate very clear ground

he also holds an MBA in business

rules. Among the three countries (in NAFTA), Mexico is the most competitive and

administration from IPADE.

we should see this as an opportunity to boost the industry.” González said. Another important area is the development of an R&D industry in Mexico, panelists agreed. The real challenge, said Soto, is to establish mutual cooperation between companies. “Part of our job is to generate confidence between competitors, as they have to understand that sharing information is crucial for them as well. We have the knowledge and by establishing a connection between our partners, the industry is enriched and projects are finished faster,” Soto added.

EXPLORING THE LAYERS OF AUTOMATION IN THE MEXICAN AUTOMOTIVE INDUSTRY Industry 4.0 trends continue to be adopted by companies in the automotive industry, according to Luis Gerardo Eboli, Director General of CIMATIC de México, but there is a misconception of what the process of digital transformation really is. “Having machines that generate data in a production line is only a part of digitalization,” he told the audience at Mexico Automotive Summit 2018 in Mexico City. Eboli said that as a company in charge of developing software solutions, CIMATIC’s goal is to offer a different proposal aimed at developing software solutions that cater to different levels of automation with the technology available today. “Clients have a significant amount of data but need to take advantage of this information to make their operations more feasible,” he said during the event held at the Hotel Sheraton Maria Isabel. According to Eboli, the Mexican automotive industry has a history of process innovation and the adoption of new practices such as vehicle customization. It now faces the challenge of creating a supply chain that can integrate suppliers and allow them to offer greater product visibility. He added that the adoption of automation at various levels enables companies to improve their processes greatly. “Companies need a greater vision of what is going on inside and outside their walls,” he said. Eboli pointed out that the first layer of automation consists of having an ERP in place that controls areas such as stocks, transactions and the like. He said that while most companies already have such solutions, there are many processes that exist today that cannot be covered by ERPs because such processes did not exist a decade ago. This second layer

“Clients have a significant amount of data but need to take advantage of this information to make their operations more feasible” Luis Gerardo Eboli, Director General of CIMATIC de México

of automation focuses on areas such as the calculation of commissions, costs and employee KPIs. The next level of automation consists of the automation of business to government (B2G), business to business (B2B) and other forms of services, according to Eboli. He said that in these cases the company focuses on providing solutions with added-value capabilities such as asset management.

WANTED: TECHNOLOGY BREAKTHROUGH THAT MAKES ELECTRIC VEHICLES THE NEW NORMAL

KEY SPEAKER

Significant investment in research is essential to make electric vehicles a viable alternative, Eduardo Solís, Executive President of AMIA told attendees at Mexico Automotive Summit 2018 in Mexico City. While analysts suggest that electric cars are the definite future of the sector, Solís explained that nothing is set in stone as there is still significant room for improvement before these technologies can truly become a mobility solution. “There is no way to know if by 2025 around 10 percent of the total global vehicle fleet will be electric. There are no indications that internal combustion engine vehicles will

EDUARDO SOLÍS

disappear in the future,” said Solís. The transition, he added, is not as straightforward as

Executive President of AMIA

it seems. “We are not waiting for the industry to adopt electric vehicles, we are waiting for a technology breakthrough so electric vehicles can become the new normal.”

Eduardo Solís entered the Commission of Commerce and Industrial

Solís analyzed the sale of electric vehicles across the globe to point out that

Promotion in 1990 where he carried

“there is a strong association between the acquisition of these vehicles and public

out free-trade agreement nego-

policies promoting their sale.” He pointed to Norway as a successful example of

tiations with Costa Rica, Bolivia,

the penetration of these vehicles, where sales have been strongly linked to the

Colombia and Venezuela, as well as

development of policies for the acquisition of electric cars. Outside of that country,

the Uruguay Round of the WTO. Solís

annual electric vehicle sales represent between 0.5-1.5 percent of all types of vehicles,

was responsible for managing NAFTA

with Mexico being close to 0.5 percent.

and other FTAs between Mexico and Latin America between 1995 and

Electric cars have low penetration in countries that do not heavily promote them

2000 and collaborated in the NAFTA

because current battery technologies cannot compete with internal combustion

renegotiation as representative of the

engines. “Electric vehicles require a battery replacement every 10 years at a cost

automotive industry in Mexico. He

of US$10,000, which means they cannot compete on resale value with internal

studied economics at UANL and holds

combustion cars,” said Solís. For the sale of electric vehicles to grow, batteries must

a Ph.D. from Rochester University.

be less expensive, faster to charge, smaller and have more capacity, he explained.

administration from IPADE.

The only way to achieve this advancement in battery technology is through a great investment in R&D that allows the current technology to make the leap. He added that research, albeit from an unexpected source, has been essential for most modern technologies that have increased road and passenger safety. “The main findings that have permeated the automotive sector come from the aerospace industry. The reason is the extremely large military investment made in the latter.” Some examples include the automation and software already incorporated into cars to prevent collisions by allowing vehicles to communicate with one another. For the incorporation of electric vehicles as a mobility solution, a large technological jump that greatly improves battery life, capacity and cost is necessary. Luckily, Solís said, many research centers across the globe are actively looking for materials to make batteries better and cheaper.

2019 SHERATON MARIA ISABEL MEXICO CITY OCTOBER 2, 2019

high-profile speakers

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PRELIMINARY PROGRAM 2019 07:30 REGISTRATION 08:30

GROWTH IN A STABILIZING MARKET What strategies can OEMs implement to beat the current in a contracting market?

• How can brands grow their market share and attract new customers to their portfolio? • What are the main challenges for companies regarding changes in consumer preferences? • How can OEMs take advantage of new solutions such as Uber and Cabify to boost their sales in a new market segment?

• What is the future of car ownership in a shared mobility world and what are the implications for OEMs? 09:15

PANEL: GLOBAL STRATEGIES FOR LOCAL SUPPLY CHAIN DEVELOPMENT What are OEMs and Tier 1 purchasing directors looking for in local companies?

• What strategies are global players using to build their local supply chain and what is the best way for smaller companies to approach them?

• What are the main areas of opportunity where new entrants to the manufacturing chain can participate?

• How can OEMs and Tier 1 suppliers work to support smaller players regarding quality standards, production volumes or technology adoption?

• What will the geography of supply chains look like in 10 years (globalization versus regionalization)? 10:00

NETWORKING COFFEE BREAK

10:45

PANEL: COLLABORATIVE STRENGTH FOR INDUSTRIAL GROWTH How can clusters work together to boost Mexico’s position in the automotive landscape?

• What are the most pressing needs for the industry and how can clusters help companies address these?

• How can clusters build stronger integration between the industry, government and academia to solve training and recruitment issues?

• Under the new conditions established by USMCA, why should investors choose Mexico as a manufacturing destination?

• What is the impact of increasing economic nationalism in the collaboration between Mexico’s automotive clusters? 11:30

MEXICO’S ECONOMIC OUTLOOK How is Mexico’s economic outlook changing under the new administration?

• What is the outlook for the peso given USMCA and a rise in economic nationalism and what should be done to counter any negative effects?

• How will Mexico’s competitiveness as an automotive manufacturing destination fare under the new landscape and what steps should the government take to ensure competitivity?

• What is the outlook for inflation and its corresponding impact on manufacturing and sales activity in the industry? 12:00

NETWORKING COFFEE BREAK

12:45 PANEL: SALES AND AFTERMARKET CHALLENGES OF A DIVERSIFYING VEHICLE PARK Which trends are influencing the new makes and models coming to the country each year and how are distributors and aftermarket players coping with a rapidly changing market?

• How are diversification and specialization impacting the business of dealerships and aftermarket manufacturers?

• What strategies are these players using to give the used-vehicle market its proper importance, specially in the certified segment of the business?

• How can companies work together to strengthen the aftermarket and used-vehicle business in an environment of contracting new-vehicle sales?

13:30

NETWORKING LUNCH

15:00

ON THE VERGE OF USMCA, HOW IS MEXICO’S INDUSTRY DOING? What are the biggest advantages and challenges Mexico has as it enters a new agreement with its North American counterparts?

• How can companies prepare more effectively for the more stringent demands of the agreement and how could these impact potential new entrants to the manufacturing chain?

• What can Mexico do to strengthen its footing under this new deal to remain a competitive investment destination?

• How is the deal impacting growth projections for the industry in the near and medium term? 16:00

PANEL: MEXICO’S POSITION WITHIN OEM PLANS After the inauguration of a new federal government and the upcoming enforcement of a new trade agreement, how has Mexico’s position changed in the view of leading OEMs with presence in the country?

• How have manufacturing and sales strategies transformed to adapt to this new reality? • What are OEMs’ growth expectations for the country in the short and medium terms and what conditions should be met to achieve these?

• What can the AMLO administration do to boost advanced manufacturing, engineering and design operations for OEMs? 17:00

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2019 TABLE OF CONTENTS 1

STATE OF THE INDUSTRY

MARKET & INVESTMENT

NATIONAL CHAMPIONS

INFRASTRUCTURE

UNITED STATES

EUROPE

MOBILITY & TRANSPORTATION

ASIA

SAFETY & SECURITY

THE 4.0 REVOLUTION

SALES, FINANCING & INSURANCE

INNOVATION & TECHNOLOGY DISRUPTION

AFTERMARKET EVOLUTION

TRADE & LOGISTICS

THIS IS HOW WE DO IT Filtering out the most important information has become a critical success factor for business and political leaders alike. Rather than time or money, attention has become the scarcest resource. We are committed to delivering the right information to the right people in the right format. This is how we do it:

• • • • •

Cutting-edge information based on interviews with the industry’s most influential stakeholders Dedicated editorial team with an in-depth understanding of the Mexican automotive industry Editorial cooperation with the leading voices of the Mexican automotive industry Customized readership ensuring unprecedented reach among key decision-makers in Mexico and around the world Available on today’s most impactful business intelligence platforms: print, online and iPad

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