Carlos López de Nava
Director General of Grupo Alden
Grupo Alden
View from the Top

Betting on the Right Partners to Ensure Growth

Sat, 09/01/2018 - 09:30

Q: How are brands and dealerships dealing with contracting sales since the second half of 2017?
A: Despite the sales contraction, the industry is still not offering many discounts or rebates. We are 9.4 percent below the results from 2017 but not all brands are behaving the same way. The strongest drops in sales have been for GM, Nissan and Volkswagen. Kia and Hyundai keep growing, while Toyota, Honda and Mazda remain stable. Not everyone is underperforming but it is natural for the whole market to drop when leading brands such as Nissan and GM fall. If we end the year with a 15 percent drop in sales compared to 2017, most distributors would be content considering the good results from 2016 and 2017. Furthermore, groups that have no brands that are struggling will see business as usual.
The real problem this year were the elections. If the peso devaluates, there will be considerable impact for distributors that import most of their vehicles. The costs for OEMs to bring their production to Mexico will increase and dealerships will have to share that cost difference. In that scenario, either prices go up again or discounts and rebates start to appear to kickstart the industry but in the end, the market could close the year 20 percent below 2017’s results. Still, my forecast is that the industry will end 15 percent below the sales results from 2017 and if that happens, we will be fine.
Q: How did the presidential elections impact sales in the automotive industry?
A: Future vehicle owners were divided into two groups; the ones that bought out of fear of what might happen after the elections and those that wanted to wait and see who won. On the bright side, many clients chose the first option and, to boost confidence among potential buyers, some brands offered their clients unemployment insurance to protect them for a few months should they lose their jobs because of the elections.
Dealership visits have fallen in the past months and although we understood why clients were weary to invest right now, we did not ask them directly why. Sales people are not very good at diagnosing customer behavior but we should make this a habit to better understand how to handle these market fluctuations.
Q: What role does brand performance play in your decisions to invest or divest from certain dealerships?
A: It is definitely an investment indicator. Kia and Hyundai combined, for example, have had months with sales of 11,000-12,000 units, which could make them the third or fourth-most important group in the country. Therefore, it is only natural that distributors want to invest in these brands.
Some OEMs do not see a bright future in Mexico because they are struggling to make a profit with each car they sell. As a consequence, struggling brands are no longer looking for distributors in the meantime because that would lead to splitting lower earnings among more partners.
Q: What impact do you think Ford’s decision to leave the compact vehicle segment will have on its position in Mexico?
A: Ford wants to reduce its presence in the market to have fewer distributors with better profits. Instead of offering its full sedan, SUV and pickup lineup, the brand wants dealerships to sell fewer but better-paying models to improve margins. I think it is a smart move and the objective I think is to have better dealerships and better businesses in accordance with the times.
Q: How has Grupo Alden advanced on the Chinese brand front?
A: Many dealerships are already betting on these models and we expect to enter this business before the end of 2018, although we are still considering who to partner with. After previous attempts to conquer the Mexican market by some Chinese brands, other companies are trying to convey that their vehicles are safe and of good quality. Clients are gradually trusting these companies and it helps that they have the support of large distribution groups.