Jesús Smith
Director of Automotive Financing
Banorte
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Alliances to Boost Auto Loans

Thu, 09/01/2016 - 13:16

Q: How has Banorte’s participation in the auto loans sector changed in line with increased vehicle demand?

A: Although the number of brand financing companies has grown in recent years, commercial banking is as relevant as ever. Mexico’s growing market has allowed us to maintain growth rates and in 2015 Banorte had the second biggest market share among commercial banks. We reached 20 percent year on year growth in the first quarter of 2016 and we are working to keep the spotlight on our products in all car dealerships and Banorte branches. Our strategy includes establishing alliances such as that launched with Beijing Automotive Industry (BAIC). This follows a tie-up with Isuzu. They target different market segments and their processes and market approach are different. We also participated in the taxi-substitution strategy in Mexico City and we expect to keep generating more business on this front.

Competitive payment schedules, rates and down payments, as well as promptness in loan resolutions have positioned our products in the market. Banorte has developed a specialized tool that allows us to immediately approve or respond to a client’s request for loans. We are making it available to all our representatives but it has already helped consolidate our services among individuals and car dealerships.

Q: How is the BAIC alliance expected to work with the financial solutions Banorte provides?

A: Our agreement with BAIC makes Banorte its primary financial entity, although other entities might enter the equation in the long term. We still have challenges, such as BAIC being a little-known brand in Mexico. But the company is not new to the automotive industry. It manufactures and sells more than 2.5 million cars per year globally. The brand will use Grupo Picacho dealerships.

Although this strategy allows us to participate directly with the OEM rather than managing mini-alliances with the car dealerships, it also poses a new challenge since we have three different clients: the final user, the car dealership and the OEM. Banorte needs to adjust its processes and requirements for Grupo Picacho. Our financing plan will also need to be specialized to include different priorities. We expect a homogenous process between our traditional operations and our alliance operations, with clearly differentiated teams for each.

Q: What must Banorte do to widen its presence in auto financing?

A: Banorte is paying close attention to every client and car dealership. Part of our strategy is to offer our financial plans and insurance policies, workstations and sales points to distributors. Both dealerships and private individuals want integral and added value products. Providing pre-approved loans to our existing client base helps both the individual and the dealership in the carpurchasing process.

To boost our national market presence, Mexico needs to reach financing levels similar to those seen abroad. The automotive financing market has not grown as expected because of banking usage levels. The banking sector faces the challenge of widening its appeal. If we do this, we will see car loans increase.

Q: What are Banorte’s projections for this segment?

A: Our expectation is to maintain the growth we witnessed in the first five months of 2016. Automotive financing is among our most important offerings and it is designed to help families and companies own a car. The promotions we offer our alliances and the availability of people-centric products will boost demand. We have positive expectations for the car industry in Mexico.

The peso to dollar exchange rate has not had a dramatic impact on car prices. The industry is still growing and we are facing historically low interest rates, meaning there is no better time to buy a car. There are several growth possibilities we need to analyze, including leasing to private individuals. Future services are still being defined but we believe that if the auto industry grows then Mexico will grow.