In a dubious attempt at humor in January, the producers of the BBC TV show Top Gear, which reaches millions worldwide, used some offensive language to describe the Mastretta MXT, the first sports car made and designed in Mexico. “Cars reflect the characteristics of nations, and Mexicans are lazy, irresponsible and flatulent,” the program asserted.
Although the show caused many Mexicans to become indignant, visits to the web site of Mastretta Tecnoidea spiked, providing an enormous, unexpected benefit to the family-owned company, which has been in the transportation sector for almost 25 years. Customers have ordered half of the firm’s 2011 production in advance.
Comparable to the Lotus Elise, the British-made two-seater, the MXT has a 250-horsepower engine and reaches 100 kilometers per hour (62 miles per hour) in less than five seconds. At an average cost of $56,000, it will be on highways before the end of the year.
Universia Knowledge at Wharton spoke with Daniel Mastretta, co-founder, technical director and chief designer of the company, about the challenges of pursuing a niche market such as sports cars and the lessons the company has learned along the way.
An edited transcript of the conversation follows.
Universia Knowledge at Wharton: How did you get the idea for the company? How has the company evolved? Why did you follow the road you took: first, designing and manufacturing cars — and then "kit" cars?
Daniel Mastretta:Tecnoidea was founded in 1987, with the goal of dealing with the demand for industrial design focused on transportation in our country. Like most businesses of this sort, it emerged because of our true passion for cars. The Mastretta family, which has Italian origins, has been in Mexico for a long time. Ours is the third generation. We got into a lot of areas of manufacturing and management, and we decided to work together to innovate in these areas. Tecnoidea began by providing consulting services in industrial engineering and design for the transportation industry. Manufacturers asked us for help in making their manufacturing processes less expensive. The characteristics that the company worked on were design, engineering and the methodology of manufacturing.
In addition, this industry is very susceptible to crises, so in response to the request of certain companies and people, we began to manufacture “kit cars” as a complementary product, which naturally evolved into where we are now.
UKnowledge at Wharton: More specifically, where did you get the idea of creating a Mexican sports car? Was it a natural evolution, or was that the dream of the company’s founders for some special reason?
Mastretta:We always had a passion to design and make our own cars. After years of making prototypes and replicas, we felt we had enough skill to begin the MXT project. Ever since we were very small, we’ve had a passion for sports cars and racing.
About 15 years ago, we decided to design a new vehicle, based on our experience. There were few options, and access to technology was limited. We were choosing components from other models to adapt to new bodywork and give birth to a new car, which was the MXA, which later evolved into the MXB. Those were the first cars marketed as Tecnoidea models. With that, we decided to make a completely new platform, and only use mechanical components from other brands, like all companies do, because it is very expensive to develop components. The result was a new car called the MXT, whose technology and product are aimed at a very specific market niche, which gives us the opportunity to produce a few units while selling them at a competitive price.
For people who are interested in cars, the first thing they think about is a sports car. The luxury car segment is more attractive for those people who like to be comfortable, rather than those people who enjoy driving.
UKnowledge at Wharton: What is the condition of the Mexican automotive industry nowadays? Is it enjoying good health?
Mastretta: The big companies are healthy and growing. Mexico is a country that offers [suitable] conditions for auto production. These days, the country is the eighth-largest producer in the world. It produces more vehicles than either Italy or England. It exports 80% of its production. The domestic market has its ups and downs but it is also important.
There is no Mexican auto industry as such, really. Up until now, there hasn’t been a single brand that produces, develops and manufactures in our country. We are excellent producers; we have the best quality workmanship for making cars. After the crisis, investments from the [big multinational] brands have increased, and the market is recovering little by little. Nevertheless, there is no brand that is Mexican in itself. You can’t compete from the start with the big brands, but you can begin in small niches that enable people to begin by locating in Mexico as developers, not just as manufacturers.
UKnowledge at Wharton: When you introduced your sports car last November, your company said that you wanted to produce “a Mexican product that not only fills us with pride because of its origins but, even better, leaves our customers satisfied and happy.” How have you been affected by those who criticized your cars for their Mexican origin on Top Gear, the British TV show? Were you offended? Do you believe, on the contrary, that was a stroke of good luck?
Mastretta: The Top Gear situation did not affect us. On the contrary, it gave us a boost of publicity that we had not expected. I don’t see that as a stroke of luck. That’s just the way things turned out.
Despite the fact that situations are practically impossible to predict, it didn’t lead to any changes. They didn’t say much about the car despite the fact that it was the focal point of their comments. Instead, they focused on talking about the country, without making any real analysis of the car. On the contrary, since it is the automobile show that has the highest worldwide audience – about 360 million viewers around the world plus the people who view it on the Internet – this put into people’s heads the idea that Mexico is developing a car, and so more people jumped up to see what we were doing.
UKnowledge at Wharton: Has this incident had any impact on your marketing strategy? How are you going to market this car, and why are you taking that approach?
Mastretta: In itself, the incident has had no impact on our sales; it simply increased the presence of our brand in the global market. Our plan to produce 100 vehicles a year has not changed. We will do the marketing directly in Mexico, through direct contract with our customers over the Internet, and through demonstrations. Outside Mexico, we will use distributors who are specialists in niche autos.
In some respects, the MXT is very innovative. In others, it uses things that have already been around for some time but which have not been used a great deal, such as aluminum fastened to the chassis, carbon fibers, complex plastics for the bodywork — technologies that do a lot to reduce its weight. Reducing its weight gives it a significant advantage when it comes to fuel consumption, and makes it more environmentally friendly.
We pursue this approach of being more efficient by using lighter materials, and the MXT depends on its more limited weight to provide performance and a much more dynamic feeling than [might be expected] from a smaller motor. Its four-cylinder motor is barely two liters; it is quite different, and that enables us to offer very good performance thanks to the weight reduction.
Without question, there is no car on the market that is equal to the MXT, which gives it a unique character, and enables it to compete head to head with more famous brands. One of its biggest advantages is in its value-price relationship. You get very good performance in relation to the costs that you have. It is hard to get this relationship in another car. You can get better performance in another car, but at a much higher cost.
This also results from the fact that skilled labor in Mexico for the specialized development, design and production is much more affordable than labor from other countries that specialize in producing sports cars.
The production volume is defined by our installed technical capacity, above all by the fact that we are just beginning. Ideally, we are going to reach some 500 cars a year, within four or five years. Our current capacity could not exceed 200 cars, and we can’t reach that by ourselves because we haven’t fine-tuned our processes.
We already have enough orders, although we still haven’t delivered a single car to any customer. Half of this year’s production has already been at least reserved.
UKnowledge at Wharton: Are you thinking about going into foreign markets? If so, what countries offer the best opportunities, and why?
Mastretta:We are already working with distributors in the U.K. and France. We’ll begin to sell [in those countries] in the second half of 2011. For the moment, we are only selling in Mexico, but the largest market in volume terms for this kind of car is the international one. The U.K., Germany, Italy, Denmark, China and Russia are countries that have a large number of consumers for these kinds of vehicles. Italy and even Brazil are potential markets over the medium term. So far, we have had a partner in the U.K. who has helped us with getting official approval there, and they will be our official distributors there. We have an agreement with a distributor in France, and both partners may begin to market the vehicle by the end of this year.
UKnowledge at Wharton: What have been your most significant challenges as entrepreneurs? How have you overcome them? Which challenges do you expect to come up over the short, medium and long term?
Mastretta:Developing this car has been the greatest challenge; especially producing it with quality and consistency. The best way to overcome this challenge is with a good working team, and a high level of requirements for providing the very high quality that our customers take for granted.
These challenges range from having the capacity to do the entire development of the vehicle in Mexico to purchasing everything we need to achieve that goal. There are challenges that we face every day at our location, getting people who have the technical skills. Major challenges include getting engineers who are specialized in certain areas, and developing the design team.
[Other challenges include] how to set up our production line and how to make it more efficient. Also, how to reduce the weight of the car and how to find suppliers for some of the components. We’ve needed a lot of specialized people.
But we have been able to overcome each of these challenges, and nothing has stopped us. We have always been able to solve things and move forward.
UKnowledge at Wharton: What lessons have you learned from those business challenges and initiatives where you have failed?
Mastretta:We try not to trip over the same stone twice, although I can’t always achieve that goal. We try to recognize our mistakes and always be alert, so we reduce them as much as possible, since you can’t always eliminate mistakes. Also, to continue to generate new ideas that are, at the same time, profitable.
There are lots of things. You have ideas about certain processes, and when it is time to do them, you realize that they weren’t the ideal ones, and you have to take a small step backward. The process of developing bodywork uses very precise modeling technology, which turned out very well. But, ultimately, it was wrong by some millimeters because we didn’t use the right technology, and we had to go back and adapt it.
Finally, we continue to learn about the best way to do things, so that we can save time and money. We continue learning from this project, despite the fact that it is almost finished. We continue moving ahead, and we continue to learn.