Extended Warranties: High Potential Market in MexicoBy Alejandro Enríquez | Tue, 03/23/2021 - 10:28
Q: GarantiPlus is a market leader in extended warranties in Spain. What led the company to expand into the Mexican market?
A: GarantiPlus Mexico is the merger of two holding companies, one made up of Mexican entrepreneurs and the other encompassing Spanish companies. In 2015, when we started to do market research in Mexico, we realized that there was a great opportunity in the extended warranties market. We analyzed the company’s business model in Spain and we introduced it to Mexico in 2016. At that time, all warranties in the market were restricted to time and mileage, meaning that all companies offered warranties of one year or 15,000-20,000km. In Spain, the model considers unlimited mileage, so we decided to take this opportunity in Mexico.
We were inspired to come to Mexico given the opportunity to take the limits off warranties, providing customers with more benefits and taking advantage of the growth opportunities in the Americas. When we arrived in the market, we went door-to-door, visiting distributors and companies to offer our product. Unlike our competitors, our initial core business was not to enter expansive alliances with OEMs or associations but to provide in-house training courses and advise dealers on how to offer the end customer extended warranties for their used vehicles. This is the main reason why this is the main sector in our portfolio.
Q: How are you tailoring your products to the specific needs of the Mexican market?
A: Removing the mileage limit on warranty contracts is one way, allowing customers to enjoy their warranty for much longer. Before this solution, many customers were invalidating their warranty in less than three years. In Spain, all used vehicles must be sold with a warranty, even between private individuals. In Mexico, this is at the discretion of the person selling the car.
We have focused a great deal of effort on making the authorities and the market aware of the importance and benefits of extended warranties. We have also held talks with a number of politicians to promote an initiative to make warranties mandatory for used-vehicle sales, even between private individuals.
Q: GarantiPlus offers a unique coverage portfolio for extended warranties. What are the benefits these programs provide to customers?
A: We are a dynamic and flexible company. We are the only player in the sector that not only provides warranties for new and used vehicles, but also for tires, heavy vehicles, motorbikes and household appliances, among others. We are diversified. In the particular case of the automotive industry, we are helping certain tire dealers and distributors to add a warranty fee to the final price of the product. Anyone who buys a faulty tire would be able to replace it at the same price and with the same conditions.
These kinds of initiatives have increased customer satisfaction. We enjoy great acceptance in the recreational vehicle division, whether jet skis or quad bikes. Clients are looking to extend their warranty from two to three years. This has been fantastic for us because we believe this market will continue to grow. There is no other supplier as comprehensive as GarantiPlus in the market and this allows us to cover more customers and sectors.
Q: How can both individuals (B2C) and businesses (B2B) take advantage of GarantiPlus’ broad warranty offering?
A: We are still focused on B2B sales but we are transitioning to other markets. Since we joined the market in 2016, we have been focusing on dealerships, OEMs and financial institutions. However, we will start planning strategies to reach the end consumer directly. Our expectation is that by 2Q21, we will launch a technology-based initiative that will allow us to reach them so anyone can buy or offer an extended warranty for their vehicle. We will start with vehicles and then we will think about extending to motorbikes.
Q: Dealership groups were forced to innovate to cope with the adverse economic effects of the pandemic last year. How does GarantiPlus support these players?
A: In the B2B market, the advantage that a dealer, OEM or automotive association can get from having an extended warranty program is the tailoring we can offer them. We do not care about our name being on the front of the product, but that our customers can offer clients more warranty benefits even if they sell these under their name.
For end-users who purchase our product through a third party, earlier this year GarantiPlus Mexico added to the extended warranty product a life insurance policy that no one else in Mexico is offering. This includes compensation for death from any cause, even taking into account pre-existing conditions, and death due to COVID-19. In addition, users can receive roadside assistance. In the coming months, we will be adding more value to this product.
Q: Even before the pandemic, new light-vehicle sales were in decline while used-vehicle sales were rising. How are these trends influencing your business strategy?
A: The pandemic impacted us in two ways. Our sales model focused on face-to-face visits and when we sent everyone home and the Mexican market contracted, sales dropped drastically. However, even though sales of new vehicles fell, we benefited from the rise in used-vehicle sales. The dealer has realized that the car is not the source of all profits. Vehicles have to be sold with additional features such as insurance, a satellite locator, maintenance services and warranties.
In the used-vehicle market, the interest in warranties has grown a great deal. People now know that such a car can fail at any time and they are demanding warranties beyond the 90 days required by law. This has helped us to improve our market penetration.
Q: The pandemic led to an e-commerce boom. How is this trend influencing your business strategy?
A: Last year, our strategy focused on strengthening our online platform. We launched a second version to be able to connect through an API or web service to any other platform that wants to offer our services. We already provide support and warranty services to some small websites. We are in talks with Mercado Libre to be able to offer our warranty services to them and other sites that deal with vehicles.
We are also developing new products, two of which we are about to launch. These will allow automotive websites to be the intermediary between the dealer and the customer. We believe that by investing in technology and developing new products, we can help all players involved in buying and selling used vehicles digitally.
Q: How do you plan to make GarantiPlus a benchmark in the Mexican extended warranty market in 2021?
A: One of our main objectives this year is to become the most innovative warranty company in the market. We have already made a difference by introducing a product that did not exist in Mexico years ago. We offer tailor-made products and now we are introducing other solutions, like our life insurance policy. All these factors will be key to achieving our goals. In the medium term, our interest is to continue growing throughout the continent. In March, we will start operations in Chile and we will continue expanding in other countries in the region. Our main objective at GarantiPlus is to ensure the mobility of our clients so they can face any contingency with our help.
GarantiPlus specializes in the development and management of extended warranty services. The company has more than 15 years of experience in the automotive sector and more than 400 points of sale in Mexico.