A world-changing event. A devastating market fluctuation. International implications, economic pullback amid global uncertainty from major manufacturing industries, and the inevitable economic stutter step that follows.
These were the conditions Peter Rodriguez encountered in 2001 shortly after 9/11 when he decided to work for his uncle building low-income housing in Mexico after college.
“I drove from Rhode Island to the border in a U-Haul, and a friend and I had to figure out how to get everything across; I couldn’t take the U-Haul. I bought a beat-up 1985 Chevy S10 pickup for $500. We did the permanent importation into Mexico along with the rest of my college stuff.”
Rodriguez says that everywhere he drove that battered old pickup, however, people in Mexico wanted to buy it.
“They’d offer me $2,000! So I started researching importation rules, regulations, the taxes—I figured with the 400% markup, ‘here’s an interesting opportunity.’ ”
Thus began the experiment that became Global Motors, a logistics and transportation company of mostly consumer and lower-class commercial vehicles. Rodriguez is founder and CEO.
Putting the Border Pieces Together
Mexico is the No. 1 trade partner of the United States. Today, that trade accounts for over $1 trillion per year but importing into Mexico doesn’t quite have the same prospects it used to (at least for used vehicles). Vehicles 10 years or older carry a 10% tax over MSRP, plus a 16% IVA (sales tax), as well as service taxes and fees to the customs broker. When you have a strong dollar to the market — as the US has had for several years — it becomes even harder. The exchange rate in 2001 was just under $10 pesos per dollar; in 2010 it slid to $15, and in today’s post-pandemic environment it’s even higher, topping out over $20.
Twenty years ago, that was not the case. NAFTA was being phased in and that meant light trucks 10 years or older entering Mexico from the USA would be exempt from taxes and duties.
“The conditions were right for me,” Rodriguez says. At the time, there were about 200,000 vehicles crossing the border every month.
“The first time I went to Texas to get vehicles to export, there was so much demand,” he says. “I’d grab a paper about eight in the morning, and by nine every truck would be sold. So I started going to auctions and we finally bought four trucks; I did the importation, and the customs broker did the border crossing.”
It was neither easy nor simple. Rodriguez was often stopped by the local policía; the risk of accidents and breaking down was high; and they were one of hundreds of exporters trying to make good south of the border. Customs brokers would even steal parts and radios out of the vehicles in their care.
Finally, Mexico City loomed on the horizon during those early seat-of-the-pant trips.
“We finally made it, we sold the cars, we made money. But it was a headache, and before long we started talking about a better way of doing business.”
A better way came in the form of a friend at the former TFM (now KC Southern) Railroad Company who said he could help Rodriguez transport the vehicles by rail. The plan was to use an old intermodal yard to unload the cars from the railroad in Laredo, TX, but that became a “logistical nightmare.” Instead, they loaded the vehicles in the US on Union-Pacific railways and planned to interchange with TFM in Laredo and then move the vehicles to a bonded facility in Queretaro, Mexico, a small state about 238 km northwest of Mexico City.
“I had guys from California who helped me buy cars,” Rodriguez says, “they’d go to auctions, especially into the north (Ohio and the Rust Belt); we found good clean cars in the north, we’d buy them, load them onto Union Pacific railroad, do the customs work, and distribute them throughout Mexico from there.”
It became easier over time, and the business grew. Rodriguez began working with Adesa, whose only client was Ford at the time and whom had operations in Mexico. They began railing cars to Adesa in Mexico City and then Toluca, which led to more contract work with Adesa Corporate. In addition to his own business, Rodriguez found himself doing logistic, customs, and transportation work for Adesa clients looking to export to Mexico.
Over many years, Global Motors has continued to grow and is one of five businesses Rodriguez operates. Since the turn of the millennium (and the start of his adventure), Rodriguez notes that the Mexican government hasn’t made good on its NAFTA policies regarding import and export of vehicles — a process that was supposed to get easier over time as certain thresholds were met.
“The market is still less open than more open, and the strong dollar against the peso is quite a hurdle,” Rodriguez says.
Rodriguez says there are still markets to exploit. Mexico is a volume producer of vehicles, batteries, and many other goods, and the flow of commerce is now coming north, creating a cost-saving opportunity for U.S. companies that desire to export into Mexico and who can take advantage of empty back hauls, trucking, railroad, and roll-on/roll-off (RO/RO) cargo ships that need to fill as they move empty equipment back to Mexico.
“There is a need to fill for damaged vehicles or vehicles that need work,” Rodriguez says. Mexico is still a country with plenty of cheap labor, and labor-intensive work like vehicle body and mechanical repair are ripe with opportunities for big profits. Collision vehicles can be repaired in Mexico for a fraction of the cost and then introduced back into the U.S. market.
Today, Global Motors has turned into a major broker for fleets, so Rodriguez is a familiar face with companies like Avis, National, Dollar, Thrifty, Hertz, and other rental companies, finance companies, and even banks. Mexico dealers also must endure the vehicular global supply shortage they’ve been quick to turn to used vehicle sales to protect their revenue streams. With a network of car haulers, car shops, and distribution centers, Global Motors is a leading supplier of quality used vehicles to dealerships all over Mexico. For Rodriguez, that’s where his pan is buttered.
“The demand for used vehicles will be strong long into 2023,” Rodriguez says, as automotive manufacturers, brokers, and other stakeholders look forward to increased production of new vehicles.
And as he did over 20 years ago, Rodriguez intends to seize the opportunity.
Originally posted on Automotive Fleet