Around the world, the story is the same: Prices on commodities of all kinds are skyrocketing, everything from wheat and oil to corn, precious metals, and even base metals. Mexico maybe isn’t the first place in Latin America you would look to profit on a boom in metals and mining, but Volvo Trucks Mexico general director José Martínez says the boom has indeed reached Mexico, and it’s presenting some interesting opportunities for his company.
“In Mexico we’re just starting [with the commodities boom], although it’s been going on for a while in places like China,” he said. “Right now there’s a pretty strong mining boom going on in Mexico. Our clients need very durable and powerful products.”
And durable products Volvo Trucks Mexico has. Obviously the company still focuses mainly on its strong line-up of semitractor trailers, but with lots of new heavy mining projects expanding or getting underway, demand is increasing for the company’s Volvo and Mack-brand construction vehicles.
Volvo Trucks Mexico entered the Mexican market in 1994. It currently operates with about 80 employees out of 35 sales and service points throughout Mexico. The company focuses on its line-up of semi-trucks. Martínez said the company has maintained a market share with these products of between 5-7 percent during the last five years.
In addition to its long-haul trucks and delivery trucks, Volvo Trucks Mexico has a line of what it calls “vocational” equipment like cement trucks, dump trucks and other vehicles used in construction. In 2008, it began distributing Mack Trucks in Mexico and has been pushing forward with this new product ever since. Martínez said the company maintains a market share of about 20 percent with its vocational products.
All the trucks distributed by Volvo Trucks Mexico are built in factories located in the United States – the Volvos in a plant in North Carolina and the Macks in a plant in Pennsylvania. As of this year, Martínez said the company has about 13,000 of its vehicles operating in Mexico.
TOUGH TIMES FADING
The Mexican market has been mixed for Volvo and for all heavy industry in recent years. The 2009 economic crisis hit everyone, and for Volvo Trucks Mexico it hit their vocational line of business due to a sharp drop-off in construction caused by the general bust. Mexico has been slower than most Latin American countries to recover.
Of course, the aforementioned mining boom has been great for business. Martínez said this year the company is coming out with an 8×4 Mack dump truck that it expects to be a big seller with the mining industry. But the construction industry has traditionally been another important area of sales for Volvo, and Martínez said that sector has yet to bounce back in any sort of meaningful way, nothing that the industry is still very much “repressed.”
Yet there is light on the horizon. The general macro economy picked up significantly going into the start of this year, and Martínez said he’s expecting to see even more of a recovery in 2012. At the moment, big builders like Holcim and Cemex are not yet operating at full capacity. Once they do, they’ll need more repairs and replacement vehicles, and may even start expanding their fleets, Martínez said, all of which would be good for Volvo Trucks.
“The economic situation in Mexico looks good,” Martínez said. “There’s investment, movement, people are shopping, companies are investing and growing.”
In order to take advantage of the coming recovery of the construction sector, as well as the general upswing in the Mexican economy as a whole, Volvo Trucks Mexico is looking at approaching the market with a three-pronged strategy over the next two years. First of all, Martínez emphasized that the company’s products already have some of the best specifications in the market in terms of quality, safety and power, factors that will be important as the company looks to expand.
Second, the company will be seeking to find ways to lower the prices on its products to make them more economically competitive. With more vehicles out on the street, Martínez said the third prong of the company’s strategy is to expand its sales and service team to give customers the best after-sale coverage in the industry.
“The idea is to offer a product and after-sale service that is the most competitive possible, compared with the competition, and obviously the best quality,” Martínez said.
The goal of this push is to expand the company’s market share beyond the level where it has stabilized over the last five years. Martínez said the company is aiming to expand its market share to 10 percent within two years.
All in all, Martínez is bullish on the Mexican market in general and Volvo Trucks Mexico’s prospects in particular. With the trucking and heavy equipment markets expected to expand by about 25 percent this year and 20 percent next year, things will soon be back to pre-crisis levels, and Volvo Trucks Mexico will keep on rolling.