PUERTO VALLARTA, Mexico — In Mexico, a new breed of trucking company is emerging. These fleets are highly sophisticated, safety-conscious, environmentally aware and driver-oriented. But they’re also in the minority, making it difficult to compete in what is still a largely unregulated industry – where hours-of-service regulations go widely ignored and unenforced.
Daimler Trucks North America (DTNA) recently brought together three leading Mexican fleets for a roundtable discussion with members of the Mexican, US and Canadian trucking press. They spoke of the difficult operating environment faced in Mexico and of their shared desire to advance the industry.
An uneven playing field
Canadian carriers have complained at times of an uneven playing field, but it’s laser beam-level when compared to the regulatory landscape in Mexico, where the average truck age is 17.9 years and often fuelled with stolen diesel.
“They compete illegally, they buy a used illegal truck, they buy stolen diesel and they don’t pay taxes,” Alex Theissen of FEMSA Logistica said of a sizable element of the Mexican trucking industry. “Top of the line fleets can compete with anybody in the US, but competing with that is a different story. Competing with somebody who doesn’t pay taxes, doesn’t pay drivers a competitive salary, buys stolen diesel, has no hours-of-service criteria and no safety and doesn’t pay social security is a lot different.”
FEMSA has taken a different approach altogether, focusing on safety and technology and regularly renewing its equipment. The company has won a national safety award 10 years in a row and in 2014 had an accident rate of just 0.156 per million kilometres travelled.
Fletes Mexico is another progressive Mexican fleet.
“Road safety has been one of the pillars that has given us growth,” said Miguel Gomez, whose family founded the company in 1988. It is also quick to embrace technology, including asset-tracking systems that provide insight into a truck’s location every five minutes, or even more frequently if it’s carrying a high-value load. Fletes Mexico replaces its tractors every 3.5 years.
“We have all the new state-of-the-art technology that is in the market today,” Gomez said. “We are working with our colleagues to bring the best technologies we can have to Mexico.”
The age of the Mexican fleet is one of the biggest issues facing the industry today, fleet panelists agreed. In addition to an average age of 17.9 years, the Mexican fleet also consists of more than 173,000 trucks that have been on the road for 21 years or more. These trucks are often unsafe and environmentally unfriendly.
The Mexican government has developed fleet renewal programs in an effort to get older trucks off the road, but with little success. Stefan Kurschner, president and CEO of Daimler Commercial Vehicles Mexico, said a new scrapping program underway today was designed to remove 6,000 older commercial vehicles from the road, but as of today, only 536 trucks have been scrapped.
“This is an indication there is a program in place but it’s just not working,” Kurschner said.
Gomez agreed, “The scrapping scheme is not working.”
Another issue preventing carriers from updating their fleets – and one Canadian carriers can relate to – is that the peso has weakened substantially relative to the US dollar, making new trucks more expensive to purchase. But because trucks sold today in Mexico are required to meet only EPA04 emissions targets, they’re less expensive to buy than those sold in the US and Canada.
The driver scenario
Mexican drivers make about one-fifth what a US professional driver earns, but their cost of living is much lower, so it’s enough to earn a decent living, fleet panelists explained.
“Our drivers can send their kids to college,” said Ramon Medrano, president of Frio Express, Mexico’s largest refrigerated goods transporter which, along with its partners, ships Mexican-grown produce all the way up to Canada.
Still, a shortage of drivers persists, much as it does in the US and Canada, and despite offering above-average pay, the industry still has trouble attracting youth. And drivers there are not well regarded within society.
Finding safety-conscious and professional drivers is difficult. Medrano said his company facilitates a psychological assessment with prospective drivers before they’re hired.
One of the biggest problems, said Gomez, is that there’s no government agency that tracks the safety performance of truck drivers.
“Right now, we do not have a record of what a driver has done (in the past),” Gomez said, adding safety-conscious carriers must phone past employers and painstakingly assemble their own driver profiles before making a hiring decision.
Mexico’s infrastructure is also a hindrance to an efficient trucking industry. In the US, there are about 2.66 million miles of paved roads, but in Mexico the paved road network is just 84,480 miles, according to FEMSA’s Theissen. It’s even worse in some Latin American countries where his fleet operates, such as Colombia, where there are just 10,140 miles of paved roads.
There are also fewer rail providers (just three in Mexico compared to nine in the US), so close to 80% of freight must move by road. The roads get punished because Mexico allows heavy gross vehicle weights (GVWs) of up to 166,000 lbs at highway speeds of 70 mph.
While all three Mexican fleets on the panel have trailer interchange agreements with US-domiciled trucking companies, none of them seemed enthusiastic about making deliveries into the US. Medrano said finding loads to US cities is easy, but finding backhauls is considerably more difficult, so the existing agreements work well in the absence of a complete overhaul of cabotage regulations.
“We’ve had the trailer interchange program for the last 20 years and I’m very happy with it,” Medrano said. “Not being able to do cabotage in the US takes all the interest out of it for us. Unless there are changes there, we will continue doing trailer interchange.”
Theissen pointed out opening up the US/Mexico border doesn’t make sense today, since US-based trucks won’t even be able to find in Mexico the ultra-low-sulfur diesel fuel required by current-generation emissions systems. Instead, Theissen said the focus should be on improving processes at the border, so the exchange of trailers between US and Mexican fleets can be conducted more efficiently.
For more info on how Daimler is growing its presence in the Mexican market, click here.
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