The trucking sector in Latin America is seeing how environmental and safety regulations are gradually being adopted in different countries. In this article, we gather the opinion of three experts from various leading companies: Eduardo Herrera (vice president of Mack Export Trucks), Kenworth Mexicana and Octavio Gonzalez Rivera (director of Marketing & Global Export Strategy of International). This is your testimony.
It is believed that the sector in Latin America has been experiencing hard times for the past two years.
“A combination of economic and political factors has caused the demand for trucks to fall. The region, with few exceptions such as Mexico, continues to be highly dependent on raw materials as the main driver of its economic growth. ”
With lower demand for oil and copper, Herrera explains that Mack’s markets have been affected in Venezuela, Colombia, Ecuador and Chile. “A stronger dollar has also had a negative impact on local currencies with respect to the cost of trucks, especially in those sectors that do not have natural forms of defense against currency fluctuations. Therefore, lower revenues have negatively affected infrastructure projects. ”
The Present Situation of the Trucking Industry
The countries that have seen a minor impact are, explains Herrera, Mexico, “a country that stands out in terms of diversification of its economy and therefore less dependent on fluctuations in raw material prices. We have also seen more activity recently in Central America despite the impacts of a more depressed economy. ” Today, Peru is the most stable market for Mack in South America. “We have been able to make it profitable by increasing our market penetration in that country.”
For Octavio Gonzalez, the recession cycle in the trucking industry began in 2013 and in 2016 it reached its lowest level register. “Sales of trucks and trucks with a capacity of more than 11 tons in 2009 in Latin America (not counting Brazil, Mexico, Argentina and Paraguay) fell to almost 22,000 units. Then the market recovered quickly and reached 48,000 units in 2012. Since then we have seen a downward trend and 2016 ended with an estimate of 18,000 units. ” For Gonzalez, the countries that have performed better in recent years are Central America and Peru, while the Chilean market remains without rises. An example of this situation is the dramatic market declines in Ecuador, Colombia and Venezuela.
In this analysis, Gonzalez explains that the region has been affected by “what we call a perfect storm with global circumstances in China and downward markets in Brazil and Argentina”, together with the lowest prices in oil and raw materials.
Gonzalez believes that the revival of the truck market will begin in 2017 with new infrastructure projects in the region that will require a renewal of the fleets, all of them helped by trade agreements and the stabilization of the various economies.
Kenworth’s Mexican division agrees that investors are waiting for better times and are investing the least in private developments because dollar fluctuations are increasing equipment prices between 25 and 30%. “Investments in government infrastructure have been affected, which has affected the renewal of equipment.” Kenworth explains that “as the engine of the Colombian economy will be the development of infrastructure in the next two to three years, we have been able to introduce the DAF vocational truck with great success.”
A vital aspect of this sector analysis is the progress of the used truck segment in the region. Gonzalez believes that while acquiring used trucks is a trend in all countries, we must bear in mind that many governments have established specific laws to avoid this practice. Therefore, used truck dealers need specialized personnel to avoid any unnecessary risk.
For Herrera, we cannot generalize when it comes to used trucks in Latin America because the supply is limited by country regulations and the natural sources of used trucks. “Most countries in South America do not allow the import of used trucks and limit them based on their age.”
Herrera explains that in Central America and the Caribbean the legislation is more flexible but the supply is limited by issues of emission regulations. “While the United States has been the natural supplier of used trucks, most of those from that country have EPA 2007 or EPA 2010 technologies that are not appropriate for those markets due to the quality of fuel in Central America and the Caribbean. We have seen an increase in sales of new trucks in sectors such as tractors that have traditionally been supplied with used trucks.” That’s UPS uses temporary truck drivers to over this issue.
On the other hand, he adds, there are countries like Colombia, Venezuela and Ecuador where there is a significant amount of stopped trucks with relatively low mileage that are helping to cover part of the existing demand.
A varied Market
One aspect to consider is the characteristics of Latin American markets in terms of truck demand. Herrera believes that without a doubt the emission legislation is the main difference where Latin America has been taking significant steps to respond to climate change.
“Countries like Brazil, Mexico, Peru, Chile and Colombia have made a significant commitment to reduce diesel emissions. Other countries are also implementing changes in their policy to reduce diesel fuel emissions by adopting clean fuels, strict emission standards for new vehicles and complementary programs to reduce emissions in existing vehicles. ”
A big difference, Kenworth explains, is greater use of automatic-automated transmissions in the region compared to North America due to the lack of operators. “Additionally, 60% of the transport companies in Chile, Ecuador and Peru use trucks of the advanced cab type or cab on the engine (cab-over-engine, in English), where the European model of specifications is preferred. Another difference is that higher load capacities are required in the mining and forestry sectors in Chile and Peru. ”
Octavio Gonzalez finds the main difference between the different markets in which International trucks are built in many cases with reinforced specifications on engines, axles, brakes and other components. “Some are adapted to the roads and load requirements of each specific country.”
Telemetry and the Internet of Things are setting trends in Latin America and the rest of the world. For Herrera, regarding telemetry, there are two dominant areas in Latin America: fleet management and remote registration diagnosis. The first has been available for almost twenty years while the remote diagnosis is relatively new. Also, Cargo Competition Increases in the Global Market.
These functions, Herrera explains, can be managed by an internal fleet management department or an external provider. “GuardDog Connect offers a real-time process that flows from a vehicle connected to a Mack Uptime center, and then to the leading personnel in the truck operating company, to the dealer and finally to the driver.”
In Latin America, he explains, telemetry is a reality that is a little more delayed than in North America. “We hope that being a global market, they will soon catch up. Customers are requiring these services more and more. In fact, Mack Trucks is going to launch its telemetry services later this year and will be based on what is available in North America. ”
Gonzalez explains that International offers the telemetry solution called Follow Me and a professional support team, with the tools installed from the factory “together with custom software for applications to develop business plans that increase productivity.”
In our region, explains Herrera, the transport sector is the main producer of carbon emissions generated by man. “Brazil, Chile, Colombia and Mexico represent more than 65% of heavy truck purchases in the region. These markets have taken steps to reduce diesel emissions through new emission policies with satisfactory results. We need to take advantage of the synergies between North American, European and Latin American markets to use common technologies and achieve greater economies of scale, including the use of technologies from common suppliers and manufacturers, to achieve cleaner fuel and the adoption of emission levels equivalent to those accepted. in the United States (EPA10 and GHG2017) and Europe (Euro IV, V) in their engines ”.
This same perspective is shared by Rivera. “Brazil adopted the Euro 5 emission regulations in 2012 and Colombia began the transition in 2015 to Euro 4, then Chile to Euro 5 and EPA07. Mexico is expected to apply Euro 6 and EPA10 in 2018, while Peru would start moving towards Euro 4 in 2018. ”
Obviously, he adds, the change in emissions depends on the availability of low-sulfur diesel fuel in each country. “We believe that the rest of the countries in the region will soon announce changes in their regulations.” This was the regional vision of three experts from the Latin American trucking sector.
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