Solís, Industry Leaders Talk NAFTA at Key Mexico Automotive Summit
Eduardo Solís, a leading Mexican auto executive close to the ongoing NAFTA renegotiation, told an industry audience on Thursday in Mexico City that the US is making a mistake in using outdated data to support its position during the treaty talks and that the topic of competitiveness must be on the table. He also warned that rules of origin should be off-limits.
“It is not understandable that the US is basing its strategy for the coming 20 years on figures that do not match reality,” said Solís, Executive President of the Mexican auto industry association AMIA, referring to comments made by US Secretary of Commerce Wilbur Ross. “We are talking about news or ‘fake news;’ myth and reality. This is an issue of competitiveness and Mexico enables the region to be competitive.”
Speaking at the opening of the Mexico Automotive Summit 2017 at the Sheraton María Isabel and during a subsequent panel discussion, Solís outlined the work that AMIA is doing as part of the NAFTA renegotiations, the importance of the Mexican automotive industry for both Mexico and the NAFTA region, the outlook for the rest of the year and the advantages that NAFTA has delivered to all member countries, Canada, the US and Mexico.
He added that the industry needs to understand the position of both Mexico and its trade partners. North America has experienced 27.7 percent growth thanks to NAFTA, he said. “About two-thirds of this growth took place in Mexico,” he said. “The US received about one-third and Canada a tiny part.”
Solís also suggested that competitiveness must be addressed during the negotiations. “Mexico enables the region to be competitive,” he said. “We are the main supplier of auto parts to the US, but the US is at the same time the main supplier for both Mexico and Canada.” He underlined that the US imports more vehicles – 46.6 percent – from the NAFTA region than from Japan, Germany, Korea, China and the UK combined. The US also exports 44.9 percent of all the vehicles it produces to the NAFTA region, with Canada being the top recipient. “Mexico is the first buyer of US vehicles and vice versa,” he said. “Do not touch the rules of origin; that is what makes this deal successful. Thanks to NAFTA, the US has grown with Mexico and Canada.”
In the subsequent panel discussion on Mexico’s road to automotive leadership, the AMIA executive said that ultimately, trade was not dependent on treaties. “Free trade agreements are not necessarily essential to trade with the US.” He added that, “60 percent of what Mexico exports to the US for the automotive sector does not depend on NAFTA but on the WTO regulations.”
Solís was joined on the panel by leading automotive figures Mario Chacón, Head of Investment Promotion Unit for Global Businesses at ProMéxico; Verónica Orendain, Director General of Heavy and High Technology Industries at the Ministry of Economy; and Juan Carlos Pérez Rocha, Country Head of Large Corporate for HSBC Mexico.
The panelists suggested the key requirements for becoming a global leader in the sector were to increase competitiveness through talent, technology and supply chain development.
Still, while NAFTA renegotiations hover like a cloud over Mexico’s automotive industry, the impact from the talks has been minimal. “2017 has been a very positive year in terms of investments for the automotive sector,” said Chacón.
Moreover, investment has not stopped. “Local and foreign groups have made great investments in many Mexican industrial sectors, mainly in the automotive sector,” said Pérez. He said that companies worldwide have a positive opinion of Mexico’s manufacturing practices and labor. “Foreign companies have successfully found excellent professionals when coming into the country, so they invest heavily in their training to ensure that they have all the necessary qualifications.”
Solís added that Mexico’s numerous trade deals have put it in a good position regardless of what happens with NAFTA. “Mexico’s free trade agreements have been fundamental for its economic growth. We should remain positive as this broad network puts us in an advantageous position,” he concluded.
Challenges and Opportunities in a New NAFTA Landscape
US Secretary of Commerce Wilbur Ross is making a mistake by citingdata from 2011 in the ongoing NAFTA renegotiations, said Eduardo Solís in Mexico City on Wednesday. “It is not understandable that the US is basing its strategy for the coming 20 years on figures that do not match reality,” said Solís, Executive President of the Mexican auto industry association AMIA. “We are talking about news or ‘fake news,’ what is a myth and what is a reality. This is an issue of competitiveness and Mexico enables the region to be competitive.”
Speaking at the opening of the Mexico Automotive Summit 2017 at the Sheraton María Isabel, Solís outlined the work that AMIA is doing as part of the NAFTA renegotiations, the importance of the Mexican automotive industry for both Mexico and the NAFTA region, the future for the rest of the year of the industry and the advantages that NAFTA has delivered to all member countries, Canada, the US and Mexico.
“Before NAFTA, Mexico accounted for 7 percent of the North American vehicle production with 1.8 million units,” Solís said. “In 2016, Mexico produced 20 percent of all vehicles and 3.6 million vehicles.” He underlined that the industry contributed 3.3 percent of Mexico’s total GDP and 18.3 percent of the country’s manufacturing GDP. Mexico, he said, is the seventh-largest manufacturer of vehicles globally and has been for the last three years. The industry is also a top generator of foreign reserves. Mexico is the fourth-largest light-vehicle exporter, fifth-largest automotive exporter and the top supplier to the US. “Mexican manufacturing plants are renowned for being the most productive and competitive,” he said.
After a difficult start to the year, the Mexican automotive industry is recovering. “Mexico has a very significant growth outlook for the rest of 2017,” Solís said. “AMIA estimates growth of 3.8 percent in the production of light vehicles and a total 5 million vehicles produced in 2017.”
Regarding NAFTA, Solís said the industry needs to understand the position of both Mexico and its trade partners. North America has experienced 27.7 percent growth thanks to NAFTA, he said. “About two-thirds of this growth took place in Mexico,” he said. “The US received about one-third and Canada a tiny part.”
He added that the topic of competitiveness must be addressed during the negotiations. “Mexico enables the region to be competitive,” he said. “We are the main supplier of auto parts to the US, but the US is at the same time the main supplier for both Mexico and Canada.” He underlined that the US imports more vehicles – 46.6 percent – from the NAFTA region than from Japan, Germany, Korea, China and the UK together. On the other hand, the US also imports 44.9 percent of all the vehicles it produces to the NAFTA region, with Canada being the top recipient. “Mexico is the first buyer of US vehicles and vice versa,” he said. “Do not touch the rules of origin; that is what makes this deal successful. Thanks to NAFTA, the US has grown with Mexico and Canada.”
Mexico’s Road Towards Automotive Industry Leadership
The Mexican automotive industry is not put off by an unstable political climate but, rather, the country is focusing only on growth and competitiveness, panelists at the Mexico Automotive Summit 2017 said on Thursday in Mexico City. They suggested the key requirements for becoming a global leader in the sector were to increase competitiveness through talent, technology and supply chain development.
While NAFTA renegotiations hover like a cloud over Mexico’s automotive industry, the impact from the talks has been minimal. “2017 has been a very positive year in terms of investments for the automotive sector,” said Mario Chacón, Head of the Investment Promotion Unit for Global Businesses at ProMéxico. Chacón praised the growth of the automotive sector’s manufacturing capabilities but he also said that future growth depended on the joint efforts of all players. He explained that it is necessary to bring together the main automotive clusters in Nuevo Leon, Guanajuato, Queretaro and Chihuahua and the many companies spread throughout Mexico. The goal, Chacón said, is to increase competitiveness in the face of uncertainty.
Eduardo Solís, Executive President of AMIA, added that the country should not worry too much about threats made by the country’s northern neighbor. “Sixty percent of what Mexico exports to the US for the automotive sector does not depend on NAFTA but on the WTO regulations,” he said. Solís explained that free trade agreements have been essential but the country does not depend only on one. “Mexico’s free trade agreements have been fundamental for its economic growth. We should remain positive as this broad network puts us in an advantageous position.”
Moreover, investment has not stopped. “Local and foreign groups have made great investments in many Mexican industrial sectors, mainly in the automotive sector,” said Juan Carlos Pérez Rocha, Country Head of Large Corporate for HSBC Mexico. He said that companies worldwide have a positive opinion of Mexico’s manufacturing practices and labor. “Foreign companies have successfully found excellent professionals when coming into the country, thus they invest heavily in their training to ensure that they have all the necessary qualifications,” said Perez. However, this also poses its own challenges.
“The growing investment in the automotive sector will translate into a growing need for human capital,” said Veronica Orendain, Director General of Heavy and High Technology Industries at the Ministry of Economy. She said the Ministry of Economy had identified knowledge gaps and among the largest is the lack of qualified technicians with full knowledge of manufacturing practices. “The challenge is to bring together the industry and academia to generate successful study programs.” Solís agreed with the need to train even higher qualified professionals to remain competitive. “Universities should focus on the technologies that are coming in the next 10 years, such as artificial intelligence, Industry 4.0, Big Data and the Internet of Things.”
Another challenge, Orendain continued, is supply chain development. “The Ministry of Economy has developed specific support tools to bring new technologies to companies in the supply chain, mainly Tier 2 and 3 companies. We are also supporting the linkage of research and technology centers.”
Solís said that AMIA aims to ensure fair practices and to promote ethical behavior among companies and states, and added that Special Economic Zones (ZEEs) were gaining in importance. “Special Economic Zones are becoming increasingly important as they are attracting investment to areas that need it through the elimination of several taxes to promote economic growth. Reduced taxes make these regions much more attractive.” However, he also warned that it is important for companies to have a clear view of the target area, which could be short of the necessary suppliers.
All panelists agreed that Mexico can continue growing its automotive sector, which is already in an excellent position. “Mexico is now a manufacturing hub that increasingly incorporates advanced manufacturing technologies,” said Chacón.
Mexican Economy Strong Despite NAFTA Uncertainty
With Canada, Mexico and the US in the middle of some of the most important trade talks of the century, there is a great deal of economic uncertainty in Mexico at the moment, Alexis Milo, Chief Economist for Mexico at HSBC, said during the Mexico Automotive Summit 2017 at the Sheraton Maria Isabel Hotel in Mexico City on Thursday.
Since Mexico’s manufacturing and automotive industries depend a great deal on US trade, Milo said that, at the moment, “there are more questions than answers.”
Discussing the country’s economic outlook and scenarios for the Mexican automotive industry, he said that there was a significant drop in confidence caused by the results of the US elections at the end of 2016. Still, there are many encouraging indicators for the Mexican economy. “In 2Q17, there was a lot of optimism due to the limitations of the Trump Effect,” he said. “In fact, 2Q17 and 3Q17 were characterized by the strong entrance of capital to Mexico.”
As exports have risen, Mexico’s trade balance has recovered and the country’s deficit has decreased. In the last two years, the most important manufacturing exports were seen in the automotive sector. Milo said that contained inflation expectations mean no more interest rate hikes and that fiscal policies to consolidate public finances means the debt-to-GDP ratio is expected to drop to 28 percent by the end of 2017.
Although wage remittances have dropped this year, Milo said this was largely expected since December 2016 was a record month for remittances from the US to Mexico. But unemployment rates in the country have dropped, from 4 percent in July 2016 to 3.4 percent in July 2017.
He added that a renegotiation of the treaty could bring a great deal of benefits to Mexico, and provided a comparison with the Chinese manufacturing industry. “Manufacturing salaries in China are double that in Mexico, meaning in terms of human capital, Mexico is much more attractive for investment,” he said. But many of the manufacturing sectors in China are vertically integrated, which gives the country a greater advantage. “If Mexico were to follow this model, there would be much higher production levels.”
The NAFTA renegotiations revolve around three main topics: new industries that were not included in the original treaty; labor conditions, wages and competitiveness; and rules of origin and local content.
And even though the threat of a NAFTA cancellation provoked a negative effect in exchange rates, over the long term Milo expects interest rates to remain stable. Moreover, more than 60 percent of Mexican government bonds are invested internationally, therefore diversifying risk.
According to Milo, Mexico’s role in the US trade deficit is highly exaggerated, and renegotiation or cancellation of NAFTA would actually provide little benefit to the US. “Only 8 percent of the US trade deficit is related with Mexico. The deficit with Japan and China is much larger,” he said. “Mexico could disappear and the US would not solve its
Developing an R&D Future
Moderator: Juan Pizano, Global Trade Advisory Services Partner at Deloitte Consulting Group
Panelist: Alejandro Rojo, Director of the Research Center for Automotive Mechatronics at ITESM Toluca
Panelist: Salvador Lecona, Deputy Director of the Graduate Program at CIDESI
Panelist: Jorge Vázquez, Director of the Innovation, Research and Development Center for Continental Automotive México
Panelist: Jorge Barrero, Partner and Lawyer at Santamarina + Steta
As automation and Industry 4.0 practices are increasingly incorporated in the manufacture of automotive products worldwide, Mexico needs to not only shine as a production hub but must also start engaging in R&D activities, panelists agreed at the Mexico Automotive Summit 2017 on Thursday in Mexico City.
Juan Pizano, Global Trade Advisory Services Partner at Deloitte Consulting Group, moderated the panel discussing the challenges and opportunities of engaging in engineering and design activities for the automotive industry. “The development of the automotive industry does not stop,” he said. “Fiction is taking the place of reality and products such as autonomous vehicles, security mechanisms for cars and pedestrians and some new manufacturing technologies could not have been imagined 10 years ago.” Pizano said that Mexico cannot fall behind in this ongoing global process.
One of the challenges that Alejandro Rojo, Director of the Research Center for Automotive Mechatronics at ITESM Toluca, identified is the lack of a solid series of interactions in the triple helix. “There is no virtuous relationship between academic institutions, industry and government to meet the needs of the industry,” he said. “Although there are some regions where interactions between academic institutions and the industry are evident, linkage between them in other regions is completely absent.” Dual education, Rojo said, is fundamental for the future of manufacturing because students need to learn by doing to cater to the new needs of an evolving automotive industry. “Promoting linkage between research centers and companies must take place so that people acquire the know-how on how to do things and academic institutions develop a technological base.”
On the other hand, Salvador Lecona, Deputy Director of the Graduate Program of CIDESI, suggested that academic institutions are going to great lengths to train students who meet the needs of the industry. “We are changing study plans and incorporating IoT, Industry 4.0 and Big Data concepts to the curricula,” he said. “But this is an ongoing process that does not provide immediate results.” He said that CIDESI is optimistic about the current level of linkage between academic institutions and the automotive industry, but that a key challenge to overcome is the image that the industry has of universities. “Automotive companies see academic institutions more as a supplier rather than as a partner,” he said. “This prevents companies from taking advantage of all the value that academic institutions can offer.” He pointed out that global trends are pushing for an evolution toward knowledge and skills that do not yet exist, but that Mexico can make Industry 4.0 and innovation its point of differentiation.
On behalf of the industry, Jorge Vázquez, Director of the Innovation, Research and Development Center for Continental Automotive Mexico, said the majority of automotive companies in Mexico are focused on manufacturing and too little is being done in terms of products and services for design and development activities. “Academic institutions do research based on the needs of the industry,” he said. “In other countries it is the industry that applies the knowledge and technology developed first by universities.” He said that Mexican institutions should be doing more instead of watching as the ongoing change occurs. “If academic institutions do not start showing some leadership, we will have to continue hauling it around,” he said. Innovation has more to do with the openness of directives toward it than with the quality of human engineering capital. “Innovation cannot just happen in a company where executives do not shelter it,” Vázquez said.
On Mexico’s ability to adaptation to the ongoing changes in the automotive industry and the development of engineering and design centers, Jorge Barrero, Partner and Lawyer at Santamarina + Steta, said the country needs to change the way it thinks about which activities are carried out here. “We are proud of ‘Made in Mexico,’ but we need to be proud of ‘Conceived in Mexico.’”
Barrero explained that as a general rule, engineering and design activities do not take place in Mexico but are imported. “Those who invest the most in R&D are foreign companies,” he said. “Domestic companies only do so marginally and usually employ CONACyT funds to this end.” According to Barrero, the country has lagged in education and it is the moment for a great leap because “innovation does not happen spontaneously, it must be sheltered.” Barrero pointed out that a well-thought policy that provides stimuli to support R&D in Mexico is strongly needed to engage in the new dynamics of the global industry.
Sales and the Aftermarket: An Ongoing Transformation
Moderator: Amelie Mossberg, Commercial Director of Motors Classifieds for MercadoLibre México
Panelist: Oscar Albin, Executive President of INA
Panelist: Gerardo Varela, General Manager of ZF Services
Panelist: Ricardo Bustamante, CEO and Founder of SICOP
Panelist: Federico de Noriega, Partner at Hogan Lovells BSTL
Some think of technology as a disruptor, others as an opportunity. Panelists at Mexico Automotive Summit 2017 discussed the risks of a booming e-commerce to the automotive aftermarket, and the opportunities this trend offers to those willing to face those risks head on.
“Technology is disrupting the market, which must now adapt to new customers and business models,” said Amelie Mossberg, Commercial Director of Motors Classifieds for MercadoLibre México, during the event held at the Hotel Sheraton Maria Isabel in Mexico City on Thursday. It is hard to argue that technology is changing Mexican lives and the habits of Mexicans themselves. In 2017, there were 77 million internet users in Mexico, Mossberg said. Of those 18.3 million bought something online. E-commerce itself has grown by 685 percent in comparison to 2010 to a total value of US$22 billion. This has a strong impact on all economic areas. “Retail sales at stores have fallen by 70 percent while Amazon grew by 18,000 percent during the past few years,” said Ricardo Bustamante, CEO and Founder of SICOP.
These trends have also impacted the automotive sector. “Three years ago, 3 percent of leads for car sales were online, now 75 percent are online leads,” said Bustamante. Furthermore, “nine out of 10 Mexicans who want to buy a car look for it first online,” added Mossberg. There are many opportunities to continue growing, especially if the sector obtains the support of international regulations. “The online market should move freely. Mexico is a strong supplier and consumer of auto parts from the US. Under existing NAFTA regulations, taxes for parts under US$50 are limited, but the price at which these discounts are available is proposed to rise up to US$700,” said Oscar Albin, Executive President of INA.
“Neither brands nor executives are prepared for this change,” added Bustamante. Gerardo Varela, General Manager of ZF Services agreed, saying that a growing risk of e-commerce is “the disappearance of regular sales channels as brands are now investing in webpages and online marketing.” Retailers who do not generate an online presence risk going bankrupt. “Many companies have disappeared after the introduction of technology. To avoid this, sales intermediaries must develop strategies to offer added value to clients,” said Federico de Noriega, Partner at Hogan Lovells BSTL. But the increase of online retailers brings challenges of its own. “Once the online market is open, local retailers will have to compete with their foreign counterparts in the US and Europe,” said Valera.
Creating an online presence is not easy. “When a brand decides to generate a marketing strategy it has to work alongside the distribution network to avoid competition between them, as an online search might put them against each other. Sometimes, brands will launch a promotion without notifying distributors, who end up rejecting the idea because they were unaware of it,” said Bustamante. It is also necessary for both brands and distributors to integrate information with that from internet search services to permit the generation of a much more complex dataset. The advantage, Bustamante explained, is that digital marketing is much easier to measure than regular marketing. “The brands that are becoming successful are those that have managed to integrate their online strategy in their sales offices.”
There is significant room for opportunity, said Varela. “Globally, US$21 billion of the automotive market is commercialized online and by 2022 this number is expected to reach US$50 billion.” Companies also are facing a challenge that will push them toward digitalization: younger generations.
“For older generations cars were an aspiration, for younger generations cars are a problem. They only want mobility. Furthermore, home office users will have fewer mobility needs, which will translate to less need for fuel, oil and wheels,” said Albin. Younger generations, which now represent 63 percent of the Mexican population, according to Mossberg, have a very different presence than their elders. For instance, they prefer the internet to other media channels, including television, press and radio, making a successful online strategy an unquestionable need. “Younger people want mobility solutions; more than a car, they want a way to move from point A to B. The main challenge for manufacturers is to understand how they think,” said de Noriega.
These trends will only push the automotive market to increasingly move online, the panelists agreed. “About 400 cars are sold online per month in Mexico in 2017. We expect this number to increase by 40 percent in 2018 and we are seeing a growing number of car bookings online,” said Mossberg.
Five Keys to Success: Integration, Investment, Risk Appetite, Trust and Communication
Mexico’s automotive supply chain must be integrated, willing to take risks and invest but at the same time build confidence and dialogue with OEMs, according to a panel of experts during Mexico Automotive Summit 2017 at the Sheraton Maria Isabel hotel in Mexico City on Thursday.
Martín Rosales, President and Managing Director of Goodyear Mexico, believes the Mexican industry is at a crucial moment where it must become more integrated to become more efficient. “We are at a turning point,” he said. “We are seeing the revolution of electric and autonomous vehicles that not only need an integrated supply chain, but also integration from their conception.”
Rosales was joined on the panel by Rafael Funes, Executive Chairman of LOVIS and President of LOVIS Mexico and Alejandro Marines, Director General of GEFCO Mexico. Moderator Manuel Nieblas, Partner and Manufacturing Industry Leader at Deloitte Mexico, mirrored this sentiment. “When we measure how the industry has evolved over the years, it is clear that the traditional supply chain has to evolve too,” he said.
The supply chain is an integral gear in the automotive industry, according to Rosales. He said that all actors in the sector have a stake in the development of other players in the supply chain since all companies depend on each other. For example, if a client were to put a rush on a certain component, it would be impossible to fulfil this order without a good logistics company. “We all have a vested interest in helping other parts of the supply chain,” he said.
Marines, of logistics company GEFCO agreed with Rosales. “Logistics is extremely complicated, with a variety of factors to consider, such as security, coordination and timescales,” he said. “Logistics companies need to be fully integrated with the supply chain to avoid delays and ensure components are delivered on time.”
Funes agreed on the need for integration, but he said that a more pertinent issue is the lack of trust among companies. He said relationships across the supply chain should be built on trust, as lack of communication and confidence comes with a hefty price tag. Without trust, he said, the industry cannot evolve as there is no room for risk and innovation. “We need to imagine what nobody else has imagined and imagine what nobody has ever done,” he said. “We need to change our vision to stay ahead of the pack. For this, we need disruption, creativity and investment.”
Marines also agreed that there is a lack of trust that can jeopardize efficiency, but suggested that one solution may be to build long-term relationships. “In logistics, without trust, information and communication, mistakes happen and the job is not done well,” he said. “That changes if a supplier enters a project from the beginning and builds a good level of trust.”
Nieblas agreed that Mexican companies do not take enough risks, especially with younger generations demanding more innovation. According to Funes, in the age of Amazon, younger generations expect immediacy in everything. “Immediacy is a recurring topic in mobility and models such as Amazon’s are disruptive,” he says. “But disruption is not evolution. This means creating a whole new business based on what we know.”
Marines believes these new demands call for greater levels of investment, and companies risk being left behind if they do not anticipate these changing needs. “Now is the time to invest,” he said. “The industry is experiencing a revolution, and those who do not invest will fall behind.”
Collaborative Robots in the Industry
As new manufacturing technologies are developed, Industry 4.0 is becoming the rule across the supply chain. As Manuel Sordo, General Manager of Universal Robots, explained, Industry 4.0 is about the implementation of Artificial Intelligence, robotics, IoT, autonomous vehicles and 3d printing into industrial practices and the automation of factories. “Robots play a huge role across the supply chain,” he said.
“Processes inside companies used to involve operators a lot,” he said. “But the industry is evolving toward a situation where machines play greater roles and operators mostly monitor the process.” Sordo said robotics offers a bright future and underlined that Universal Robots’ robots are ideally designed for the automotive industry. “These robots are a tool for manufacturing personnel,” he said. “They can be adapted to the operator, receive orders from other machines and provide reports.”
According to him, what Universal Robots is doing in terms of robotics is all about placing the control of factory automation back in the hands of operators. Machine tending, fabrication, laboratory analysis, quality inspection and assembly are only a few of the automotive industry applications of collaborative robots that Sordo enumerates. Industry 4.0 is all about automatizing factories 100 percent, he underlined, but Universal Robots’ technology is about involving Industry 4.0 without living operators aside
On the other hand, Sordo said that these collaborative robots are easy to set up, program and re-deploy and safe to work side by side with humans, which delivers several advantages within an operation. “The latest technology makes operators more efficient,” he said. “Our robots are designed to work on its own, with other robots and with humans.”
As new manufacturing technologies are developed, Industry 4.0 is becoming the rule across the supply chain. As Manuel Sordo, General Manager of Universal Robots, explained, Industry 4.0 is about the implementation of Artificial Intelligence, robotics, IoT
Is Industry 4.0 the next natural step in manufacturing practices or a threat to manufacturers themselves? The answer changes depending on who is asked, but what seems to be inevitable is the eventual implementation of these practices by global manufacturing companies, according to panelists at Mexico Automotive Summit 2017 who debated the inevitability of Industry 4.0 and what it means for companies and their labor force.
“Mexico has always been considered a low-cost, high-quality labor country,” said Alejandro Salas, Senior Industry Analyst and Journalist of Mexico Automotive Review and moderator of the panel at the Hotel Sheraton Maria Isabel in Mexico City on Thursday. In Mexico, the automotive industry represents 3.1 percent of GDP. The sector has also been praised for introducing new technologies to the country and is now spearheading the introduction of Industry 4.0 practices. “Industry 4.0 is not a revolution but a natural evolution of manufacturing practices,” said Arturo Zavala, National Sales Manager of Carl Zeiss de México. “This trend aims to connect the real world with the digital one, which can be done by measuring and quantifying real-world data. Investing in equipment that performs these measurements faster allows for a better development of more complex pieces and their evaluation.”
In Mexico, major international companies are setting the pace. “OEMS and Tier 1 companies have a high level of technology which they are bringing to Mexico. Some of their plants in the country are among the most advanced in the world,” said Zavala. Raul Meyer, Automotive Industry Partner at EY, agreed, adding that “most innovative technology is developed in Germany and other countries and then adopted by Mexico.” The reason for the implementation of these practices are the many advantages they bring to manufacturers. “Industry 4.0 allows us to create a fully integrated supply chain often with lines fully manned by robots,” said Víctor Fuentes, Director General of Mexico and Latin America at Mitsubishi Electric Automation.
However, these practices are not widespread for many reasons. “The challenge is to expand the use of these technologies to the rest of the supply chain, as companies cannot acquire this pricey equipment, which leads them to lose competitiveness,” said Zavala. Challenges are not just of an economic nature. “The main barrier of access to these technologies for SMEs is a lack of information. It is necessary to actively train the current labor force in the existing technologies,” said Manuel Sordo, General Manager, LATAM of Universal Robots.
These barriers can be overcome. “Governmental support to SMEs can greatly help companies to acquire this technology,” said Sordo. However, local companies can also be convinced to incorporate the technology on their own. “Companies that want to adopt this technology are looking for accessible costs, fast returns on investments and easy implementation in terms of information processing and programming.”
However, Fuentes warned that companies are often reluctant to incorporate these technologies due to other concerns. “Mexico needs to change its vision and be ready to take on the risks of incorporating these technologies. Company owners need to look beyond the price tag and consider how they can do more with less in the long term.”
Another concern, and not just in Mexico, is the fear that the use of these technologies will mean fewer human workers. “This is a challenge for every single country which invests in automation,” said Sordo. This fear is unwarranted, the panelists agreed. “Many feel that Industry 4.0 will lead to the disappearance of 600,000 jobs but it will also create 400,000 new, better paying ones,” added Zavala.
“As with every other type of technology there is a chance that technology will replace workers. But technology also permits the increase in productivity which might lead to the generation of more jobs,” agreed Sordo. Furthermore, he explained that while robots increase the efficiency of the manufacturing chain, they also eliminate the need to put humans in dangerous situations.
Under these circumstances it is necessary for the government and academia to train people to have a technological mindset so they are able to work alongside this technology. “What will be necessary are highly qualified people. With automation, manual workers will be gradually replaced by analysts who are in charge of programming and optimizing the robots,” said Zavala. This is no small challenge. “Education in Mexico is highly deficient. OEMs are unable to find qualified professionals and they have to send them overseas for a year of training. The country needs more educational institutions to begin to drive innovation,” said Meyer.
There is still a wide breach to overcome to fully incorporate these practices. Meyer expects Mexico to fully incorporate these technologies by 2040. “Industry 4.0 is more than an idea, it is a series of practices that are creating the industry of the future,” said Salas.
Putting Safety, Life Quality at The Forefront of Driving
Imagine a world free of emissions, congestion and accidents. That is what Torben Eckardt, Director General of Volvo Car Mexico, asked the audience to do at Mexico Automotive Summit 2017 at the Sheraton Maria Isabel hotel in Mexico City on Thursday. “Take this presentation as an insight into Volvo, how we are looking at the future and how we believe we can improve life quality in general, but especially in large cities like Mexico City,” he said.
The public is facing three main challenges in relation to living in urban hubs: emissions, congestion and safety. In terms of emissions, many people become sick due to high levels of pollution, Eckhardt said. One idea he suggested is expanding public transportation and using hybrid or electric systems. “Maybe you do not even have to own your own car – at any populated parking lot, you could rent a car with a smartphone app,” he said.
Of course, he said this requires a long-term financial plan but instead of using a huge amount of resources, he suggested investing in prevention, innovation, invention and improvements. As part of Volvo’s commitment to this goal, all its new releases will be electrified by 2019. Today the company already has a broad electrified range of PHEVs: the S90, V90, XC90 and XC60.
Volvo’s new family of Drive-E engines are extremely economical, with very low emissions. This means that, even when the electrical engine is not operating, these petrol engines are very clean, reducing emissions to 90g CO2 per kilometer. “By 2025, Volvo aims to have sold 1 million electric cars,” said Eckhardt. “Imagine the impact if all OEMs made their cars electric in the next few years.”
To address the congestion issue, he outlined the problem specific to Mexico City. “It is not unusual to spend three hours in traffic during the day, not counting time spent at the weekend,” he explained. “When considering a five-day work week, with 46 working weeks per year, it means everyone spends one month in a car every year. This equates to one-twelfth of a person’s life.”
Volvo wants to take the ambiguity out of driving by removing the driving component. The OEM’s autonomous vehicles have already been rolled out in Sweden, with 200 families currently using the technology, which is classified as “autonomous level three.” “Right now, we are testing autonomous level 5, which incorporates much more technology like intelligent parking, intelligent servicing and maintenance,” said Eckhardt.
The final problem Volvo is seeking to solve is that of accidents, with a zero-accident vision for 2020. In 2015, Mexico experienced 17,140 fatal road traffic accidents while Sweden experienced just 260. This is despite the fact that Sweden has twice the number of cars per 1,000 inhabitants, with 520, while Mexico has just 275.
“Road traffic accidents are at epidemic levels,” said Eckhardt. There were 1.25 million accidents globally in 2015, equating to more than 3,400 people. “This is equivalent to 8.5 Boeing 747s crashing daily,” he said. In Mexico alone, the equivalent to one jumbo jet full of passengers dies in a car accident each week.
According to Volvo’s 90-year-old philosophy, “cars are driven by people. The guiding principle behind everything we make at Volvo, therefore, is and must remain, safety,” Eckhardt added. This is why Volvo is investing in new, advanced technologies to improve quality of life and reduce accidents. Eckhardt said that Volvo’s vision is that from 2020, nobody will die in a car accident in a new Volvo.
“Imagine how fantastic Mexico City could be 10 years from now,” he concluded. “You are likely thinking “that is a crazy dream” but is it impossible? At Volvo Cars, we think it is possible.”
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