Scope of Analysis

The Impact of the Top 3 Strategic Imperatives on the Mexican Connected Truck Telematics Industry

Competitive Intensity

Why

• It is common to find trucks with more than one hardware in Mexico. Usually, trucks have devices from different telematics service providers (TSPs), each one with different solutions.
• Advanced innovations in new technologies are intensifying industry competition. Video telematics solutions, for example, are expanding quickly across the country.

Frost Perspective

• Partnerships among TSPs are key in such a competitive market. Consequently, solutions must be designed for open platforms.
• Hardware must have open systems to gather solutions from different TSPs.

Geopolitical Chaos

Why

• The reduction in fiscal incentives for diesel in 2024 impacted fuel price, which increased 6.33% year over year.
• The recent trade war between the United States and China may impact hardware production because many companies import the material from China to the US and then transport it to Mexico.

Frost Perspective

• Fuel management solutions stand out as an efficient way to control diesel consumption in the country.
• These solutions are usually part of mid-tier packages, with higher penetration in medium and large fleets.

Disruptive Technologies

Why

• Companies that prioritize safety and security and vehicle management are requesting increasingly sophisticated solutions involving AI and video cameras.
• Although still incipient in Mexico, AI technology is seeing rapid growth.

Frost Perspective

• New competitors with advanced technologies are moving into the market in Mexico.
• Mexicans are very price sensitive. Consequently, despite the fast growth of video telematics in the country, the adoption of advanced solutions will likely be higher with large fleets due to access to better pricing options.

Competitive Environment

Key Competitors

Growth Drivers

• About 57% of Mexican freight travels by roadway in the country. As most trucks are not connected, this percentage presents a potential market for telematics.
• Cargo theft and road safety incidents have been increasing in Mexico and are a constant concern for transporters. The losses could be reduced with safety and security features.
• Many fleet companies that have been telematics provider customers for a few years are improving their telematics package, making it more complete.
• As fleet owners prefer to combine applications to cover different needs, telematic providers are investing in integrating their solutions to open telematics systems. As a result, the demand for multiple hardware devices is decreasing.

Growth Restraints

• The new 25% import tax announced by the United States on Mexican goods will affect the truck industry because more than 70% of the freight transported to the US is via road.
• Some telematics providers import part of the material used in hardware production from China to the US and then export it to Mexico. With the new US tax imports applied to goods from China, telematics costs are expected to increase.
• Currently, the number of drivers in the country is decreasing, mainly due to the rising number of robberies on trade routes. Another factor limiting market growth is the decreasing number of young Mexicans choosing truck driving as a profession. With less truck drivers available, automotive industry costs become higher.
• In Mexico, man-trucks and small fleets comprised approximately 52.2% of the truck market and are highly price sensitive. When their units have telematics solutions, these are entry-level options (mainly tracking).
• Some truck drivers are resistant to telematics technology and do not fully trust the data provided by the systems. Some fleet managers lack AI knowledge, preventing them from fully benefitting from the data collected.