An air of optimism for the industry in the new normal

An air of optimism for the industry in the new normal

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After consulting our guests about the effect the pandemic has had on their businesses and how they have adapted to move forward, Nestor Hernandez, commercial director of CENTRIC Solutions de México, S.A. de C.V., started out being pretty clear on what to expect: "The problem of pandemics will not be exclusive to Covid. Recently there was the H1N1 and I do not rule out that more will come”, he stated. "And we're going to have to keep our distance and have safer environments but keep in touch. Virtual contact, which was not accustomed to these levels before the pandemic, has become part of our life in the last 5 months," complemented the commercial director of this CNC machinery and engineering solutions provider.

For Preben Hansen, President of Platinum Tooling, supplier of tool clamping systems, live tools and angular heads, among others, the negative effect of the pandemic was reflected in the decrease in its sales by about 10% compared to the same period last year. "We rely heavily on the sale of machine tools, because we sell accessories for this type of equipment. When there is no sale of machines our business falls out." To which he added: "Fortunately, although companies haven't been buying machines, they've been looking for ways to do more with the equipment they currently have. And this has been a big part of our business for the last 4 or 5 months.  We can provide products that help our customers do more with their current machine tools. That is why we weren't hit so hard," Hansen concluded.

The declaration of the automotive industry as an essential decision for the reactivation of projects of an economic line that generates more than 800 thousand jobs in Mexico only in the auto parts sector. The weeks of shutdown were the time used for all the actors to adapt their production processes, implementing the required biosecurity measures and adapting spaces to restart activities. Alejandro Chavelas, CEO of Fives Grinding Mexico, specialists in technical service, reconstruction and marketing of high-precision grinding machines of the Fives Group, said:

"In early June, we resumed operations at our plant following all the safety and industrial hygiene protocols recommended by the health sector. Similarly, our service engineers resumed technical support at some of our customers' plants, following the protocols established by them".

The reduction in the sale of machine tools can be explained by the reduction in the demand for vehicles and auto parts by the main customers of the Mexican industry: The United States.According to the latest data from the INA (National Autoparts Industry Association of Mexico) as of September 7th, 2020, an annual auto parts production of USD$76,421 Million by 2020 is projected, or 22% less than the previous year. The sale of light vehicles in the United States is projected between 14.5 and a maximum of 16.5 million units. Less than 16.8 million sold in 2019.

Use of digital tools: More than a trend, it became a necessity

"Regardless of these bad years we have had for the way we manage the economy in Mexico, the pandemic accelerated certain decisions. There are many companies that have analyzed how profitable the home office is, how productivity has increased compared to face-to-face work. Reducing costs in companies. Not having such large facilities, using the infrastructure of employees' homes," Néstor Hernandez said.

This pandemic has awakened the use of technologies available for communication like never before." We have used digital platforms to track business issues, technical support and even training/webinars," commented Alejandro Chavelas. To which he adds an interesting anecdote on the import of machinery to Mexico, which clearly demonstrates the trend of these times: "Acompany of the group is in the process of supplying two grinding machines designed and manufactured in Italy. As customers cannot send their technicians to do face-to-face validation in Italy, due to the current restriction of transatlantic travel, evaluation and monitoring have been done through digital platforms, with cameras and video conferences. This has prequalified and released the machines so that they can be shipped and installed in Mexico," Chavelas added.

The president of Platinum Tooling says that "this business has traditionally been handled from person to person. Through visits, phone calls are offered products." However, "there has been the possibility to display the products in other ways: via Zoom or Teams; this worked pretty well. If I can get a dealer who has 20 vendors to be with all their equipment listening to me for half an hour, it's great. That did not happen before Covid," he said.

"This will surely be part of the future and will not go back to being the old way. Even when we can see people again, I think this is good and we're going to keep doing it," Hansen concluded.

For Nestor Hernandez, "being on the road wasting time, when now in these 5 months we have seen how efficient communication with customers can be, When we didn't even suspect we could do it like this before, it clearly marks the benefit that has emerged from the difficulties of this pandemic." He had video conferencing with the machine manufacturer, with the designer of the clamping device, with our engineer who is designing the process and the customer.

For this type of meeting to be held in person, you would have a quantity of resources that no one is willing to spend ”, added the CENTRIC representative. "This remote collaborative work thing is bringing higher quality of life, we are more efficient, without distractions. I like what we are seeing, and productivity can be unsuspeachedly improved if this normality leads to not necessarily all of us working in the plant. You go to the plant when you need it, the day you have to do a physical review, not at the rest," he concluded.

Clear trend makes preparation for the manufacture of parts for electric cars

About 2.1 million electric vehicles (EVs) were sold worldwide in 2019. This translates into a 2.6% market share, according to figures from IEA (International Energy Agency). China (with 4.9%) and Europe (with 3.5%) reached new records in VE participation in 2019. These sales represent a globally 6% increase over the previous year.

These figures contrast with those reported during the most recent joint press conference between AMDA, AMIA and the ANI in Mexico, where according to the Deputy Director General of the Mexican Association of Automotive Distributors (AMDA), Guillermo Rosales, only about 300 EVs out of the total of 1,700,000 units marketed in 2019 were sold there. This means a 0.018% share.

Already by adding the rest of the vehicles with some type of electrical component that supports the power generation of the internal combustion engine, i.e. hybrids and mild-hybrid among others, you reach a figure close to 2% of the units sold, the manager reported. As for the U.S. EV market, which today also does not reach a 2% sales share, it is being driven by states like California, with amounts of up to 8% of vehicle units sold last year.

On one hand, this shows that the numbers are still small relative to the total combustion propulsion vehicles, but also that there is a large market to win and cover if the figures expected by campaigns such as the EV30@30 are to be met, according to which a 30% share for EEs of all types (except two-wheeled) is to be achieved by 2030.

The EV30 Campaign 30 was launched at the Eighth Clean Energy Ministerial in 2017. The participating countries are Canada, China, Finland, France, India, Japan, Mexico, the Netherlands, Norway, Sweden, and the United Kingdom.

Fuente: IEA (International Energy Agency).

Therefore, in search of preparing for an imminent future several Tier 1 or Tier 2 suppliers are already starting to make parts for electric drives in Mexico. Although technologies are beginning to develop around the world, it is already starting to be produced primarily for the U.S. market.

This was confirmed by Nestor Hernandez, who stated that "most of the projects we are currently managing are for electric cars." Alejandro Chavelas, of Fives Grinding Mexico, also said they already have some applications in development for electric cars. "When we talk about diversification in the Fives Group, we're also talking about engine electrification." To which he added: "In the group there are projects in the development of grinding machines for electric power train components. The Fives Group continues to invest in innovation and R&D following market trends," he said.

However, it is a fact that internal combustion engines will not disappear overnight. The dominance of electric cars will still take a decade or two to appear in our region. "There is still al ack of much recharge infrastructure. Additionally, the production costs of electric vehicles are still very high," Chavelas said. "One of the fives Group's strategies is to continue to innovate in its high-precision grinding technologies for internalcombustion engine components, such ascrankshafts, camshafts, cranks, etc. and, on the other hand, to continue the development of new technologies for electric motors."

To complement, CENTRIC's Hernandez stated that "investments come. They are projects by 2021, but you already see a light at the end of the tunnel. It's no longer as much of an investment for internal combustion engines and what we already know. They are investments for the future with brands such as Tesla and VW, which, for example, will manufacture an all-electric or GM van that is taking out new electric vehicles. All vehicles that are coming out in the portfolios have some electrical mobility component."

Reshoring and relocating plants for the machine tool business

Regarding the current discussion on the repatriation of production plants, which are now in countries such as China, Nestor Hernandez commented that this would be good for the three American countries, citing a clear example: "The central bank of Japan is supporting the brands in its country that are producing in China, so that there are resources to move plants to America." CENTRIC's commercial director added that the new T-MEC rules will no longer be able to move products from China to Mexico. "A lot of transferred machines are coming in that limits sales capacity here in Mexico." Hernandez sees this, anyway, as a great possibility for Mexican engineering. 

"Instead of selling the machines to assemble the plants, they are coming. But they're asking us to talk about receiving the machines, connecting them, doing monitoring instrumentation, and these are great opportunities for us.”

For Engineer Chavelas of Fives Grinding Mexico, the free trade agreement was modernized with the T-MEC. "For Mexico, being a manufacturing country, with an established supply chain, it is an opportunity to continue developing. Surelyother programs, and other OEMs, will arrive." To which he complemented: "I don't see a drastic change with the T-MEC. On the contrary, this continues to strengthen the trust in Mexico,  the installed capacity that is there, the supply chain. It is an opportunity to further integrate the region. Now with higher percentages of regional content there will be more opportunities for more investment in the region, to produce more engine components in Mexico," the manager concluded.

Preben Hansen of Platinum Tooling, from his American point of view, believes that as a region "we have to be competitive. In North America we also need to increase competitiveness with respect to the global market.”

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