PUERTO VALLARTA, MEX. The Mexican Class 4 to 8 truck market is having a good year and is expected to finish 2015 with sales of 30,000 units, according to Stefan Kurschner, president and CEO of Daimler Commercial Vehicles Mexico. For Class 8, which is already at 20,000 trucks through November, that’s 5% to 6% growth over 2014, he said.
But given the size of the economy and population of Mexico, and that 83% of all goods here move by truck “that’s still way too small for a functioning truck market,” Kurschner said. A “normal” truck market should be about 50,000 to 60,000 units in his estimation.
One problem is Mexico’s slow economic growth. In 2015 GDP has expanded in line with the U.S. economy at about 2.5%, which is fine for a developed country, but much too slow for a developing nation, Kurschner told FLEET OWNER. “It should be in the 4% to 6% range,” he said. Much of that slow growth can be attributed to low oil prices, which drive a large share of the Mexican economy.
A second brake on the truck market is the failure of a government initiative to scrap older trucks. The goal was to take 6,000 of the oldest off the road, but in two years the program has only removed 536, he said. The average age of the country’s Class 8 fleet is 17.9 years and some 173,000 trucks are over 21 years old.
“The scrapping scheme is simply not working,” said Miguel Gomez, co-founder of Fletes Mexico, one of the country’s largest for-hire carriers.
But probably the largest single factor depressing truck sales is the illegal importation of used trucks. Sometimes called “chocolate trucks” by Mexican fleet operators, these can be vehicles from the U.S. imported as scrap but put back on the road, sometimes with mismatched cabs and chassis. Estimates for these illegal imports are as high as 30,000 units a year, which added to the official new truck sales numbers would bring the total up to that “normal” 60,000-unit mark, Kurschner said.
“That kind of informal economy makes it hard for professional fleets that invest in their equipment, operations and people to compete,” he said. While the top Mexican fleets today may operate on 3.5 to 4-year trade cycles, “they don’t have a functioning secondary market for those trucks,” he pointed out. “How can you renew [the national fleet] without a secondary market for their late model used trucks?”
“Top line fleets [in Mexico] can compete on cost with U.S. carriers just fine, but competing with fleets running illegal trucks, using black market diesel and ignoring hour-of-service is a completely different story,” added Alex Theissen, director of logistics for FEMSA Logistica, an asset-based carrier and 3PL with major customers like Coca-Cola through out Latin America.
Despite the obstacles, top Mexican fleets like, Fletes Mexico, FEMSA and Frio Express have invested heavily in new equipment “The import/export business is the fastest growing sector in Mexico, and they want in,” says Kurschner. That means putting trucks on the road that deliver the lowest cost of ownership through fuel economy and low maintenance while supporting international customer expectations for service with reliability, he pointed out.
“We learned early on from our U.S. carrier partners and invested heavily in technology and safety,” said Ramon Medrano, president of Frio Express, a major refrigerated carrier providing service throughout North America. “The focus has to be on safety and efficiency, on providing reliable service to succeed in this business.”
More on the challenges faced by fleets in Mexico is here.