What is in this article?:
- Mexico carriers' dilemma: 'world class' not always an advantage
- Rates, drivers, cross-border challenges
“Having two sets of rules doesn’t breed real competition."
—Stefan Kurschner, Daimler Commercial Vehicles Mexico.
Stefan Kurschner, at left, president and CEO of Daimler Commercial Vehicles Mexico, leads a panel discussion featuring (left to right) Miguel Gomez, Fletes Mexico; Ramon Medrano, Frio Express; and Alex Theissen, FEMSA Logistica.
PUERTO VALLARTA, MEXICO. While top-tier fleets in Mexico share the challenges faced by most North American carriers, they also must overcome many others—governmental, cultural, and illegal—that by comparison are afterthoughts in the U.S. and Canada. But that’s the cost of doing business for trucking companies who look to play a leading role in the global supply chain, fleet executives explained during a Daimler Commercial Vehicles Mexico market update here.
Broadly, the panelists each emphasized their safety programs, a focus on productivity while keeping a close eye on costs, the benefits of investing in the best available equipment and technology, and the need to have good people to deliver the best possible service.
But the details behind the PowerPoint highlights show just how complicated it can be to make good on a sales pitch here.
For starters, Mexico still lacks the infrastructure to support a modern freight network, explained Alex Theissen, director of logistics for FEMSA Logistica. It’s Mexico’s largest logistics company with the goal to become the largest in Latin America.
While trucks carry 70% of the nation’s freight, there are only 85,000 miles of paved roads—or 6 times smaller than in the US, proportional to the size of the countries—to support a population of 122 million.
“In reality, the majority of freight transportation has to be done by truck,” Theissen said, and he noted the limitations of the rail network in Mexico. “But we don’t have enough roads.”
Adding to carriers’ costs, most of the good highways are tolled, and diesel runs 40% higher than in the U.S., noted Miguel Gomez, co-founder of Fletes Mexico, one of the country’s largest for-hire carriers.
Gomez also suggested that international customers “don’t understand the quality” of Mexico’s leading fleets and the effort—and expense—it takes to be “world class.”
Fletes, for example, has invested heavily in a detailed load tracking system, along with security measures such as thorough load screenings with canine inspections, and complete background checks on critical staff.
And that’s to say nothing of the investment in new trucks. While top-of-the-line equipment is expected by international customers (and new trucks certainly stand out on Mexico’s highways, where the national fleet age is 17+ years), the improved operating efficiencies aren’t necessarily a competitive advantage.
Of particular concern to the top carriers in Mexico are the “outlaw companies” that run salvaged equipment on black market fuel with little regard for safety or security. So, for loads within Mexico, the best fleets find their margins significantly undercut.
“They buy a used, illegal truck. They buy stolen diesel. They don’t pay taxes,” Theissen said. “A top-the-line fleet here can compete with anybody in the U.S., but it’s hard to compete with that.”
(For more on the complications involving Mexico’s aging fleet, click here.)
“Having two sets of rules doesn’t breed real competition,” added panel moderator Stefan Kurschner, president and CEO of Daimler Commercial Vehicles Mexico.