Eduardo Saenz
Director General
Grupo Picacho Automotriz
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View from the Top

The Birth of an Importer-Distributor-Manufacturer Hybrid

Fri, 09/01/2017 - 16:54

Q: How has Grupo Picacho’s participation in the Mexican automotive market changed since 2016?

A: Grupo Picacho is among the top 15 Ford dealerships nationally. Picacho was the first Mazda distributor in Mexico. Excluding two of Mazda’s dealerships, which are managed by a different Grupo Picacho division, we are the fifth main Mazda distributor in the country. Among Lincoln distributors, from 2013 to 2016 we were the topselling group although in 2016 we dropped to second place. The main driver that increased Grupo Picacho’s profit was operating efficiency and the growth in Ford vehicle sales. Even though other brands like Jaguar and Land Rover were negatively impacted by dollar-peso exchange rate volatility, 2016 was the best year for Grupo Picacho.

Q: What opportunities did Grupo Picacho see in BAIC to become its distribution partner in Mexico?

A: BAIC contacted us looking for distributors and we met Francisco Fu, the PR Director of BAIC de México. The company was one of the fastest-growing players in China. Worldwide, it is among the 150 biggest companies internationally and it has a strong financing arm in Hong Kong. In just three years, BAIC went from having presence in three countries to more than 50.

The problem BAIC faced in its previous business model was finding an importer that could manage all the distribution and marketing operations in our country. Our initial efforts were aimed at showing them the true value of the Mexican market and BAIC’s development opportunities. We started negotiating our distribution agreement but my personal goal was to bring BAIC not only as a brand but as manufacturer. We showed BAIC’s executives how other companies handled their production operations in Mexico and how they could eliminate the 20 percent tariff they were paying to import their vehicles. We eventually reached an agreement and the company launched its manufacturing operations in Mexico in April 2017. Although BAIC’s initial target was the Mexican market, more ambitious plans to target Latin and South America are now in place with a strong vision toward the North American market.

Q: What were your concerns about the image of Chinese vehicles in Mexico and how did you address them?

A: I was unsure how the public would react to Chinese vehicles, particularly in the metropolitan area. But clients have moved past the previous misconception they had about these cars. We conducted blind tests and clients never guessed that these vehicles were Chinese. Interest in Chinese brands is growing considerably. Many groups and individual dealerships are now approaching us, which shows the market’s acceptance of the new BAIC brand. The real challenge we found was in facing that same mindset with potential financing partners. We struggled to find a financing branch that would trust our product.

Q: How does working with a Chinese company and your approach to their business evolution differ from other clients?

A: Chinese companies have a young, dynamic team eager to understand our market. They are accessible when analyzing how the business model must adapt to the local market. We reconfigured our operations to meet their needs and became an importer-distributor-manufacturer hybrid in this joint venture. We are making every decision in collaboration with BAIC but eventually, the brand will probably handle all manufacturing operations while we focus on distribution and marketing.

Q: What is the market potential and your development forecast for BAIC?

A: If we focus on the end-user market, our target is to hold a 3 percent market share in the compact, SUV and small SUV segments. The latter two are growing at rates of 7 and 8 percent and could represent half of the current compact market in a couple of years. The market potential is close to 20,000 units but we could reach 8,000 units per year once our portfolio and dealership network are complete in January 2018. We plan to open a new dealership every month until the end of 2017.