Innovation, Market Collaboration Recipe for Sustainable GrowthSat, 09/01/2018 - 09:52
When sales are down and high interest rates are hitting the vehicle financing market, keeping brand partners close and building a comprehensive strategy can be the difference between surviving and growing in a difficult market, says Cédric Desplats-Redier, CEO of BNP Paribas Personal Finance.
“BNP Paribas has managed to grow despite the market’s general downturn by working together with key OEMs,” says Desplats-Redier. Inflation rose in 2H17 but the brands working with BNP Paribas maintained a growth streak nonetheless. Only in 2017, Kia reached 49.2 percent growth in sales in Mexico compared to 2016, for a total of 86,713 units, and it has plans to reach the 100,000-unit mark by the end of 2018. “Kia still experiences strong growth rates, which is partly thanks to the credit options BNP Paribas offers as the operator of Kia Financing,” he says.
According to Desplats-Redier, the automotive financing market is highly competitive but uncertainty and interest rates are challenges that must be addressed. “High interest rates make credit more expensive and volatile peso-dollar exchange rates will play a key role in the sales results of 2018,” he says. The economic environment resulting from the federal elections, as well as the results of the NAFTA 2.0 negotiations are two other factors that will impact exchange rates and play a significant role in 2H18 sales results, according to Desplats-Redier. “Mexico is a price-sensitive market, so vehicle prices will be the main driver behind sales results,” he says.
To continue growing despite these challenges, BNP Paribas Personal Finance plans to harness OEMs’ sales growth while attracting car buyers with quality. At the same time, the bank looks for OEMs with consolidated dealership networks to partner with. “Our partners’ network must be wide and sensitive to the advantages of vehicle credit because we lean on distributors to market our solutions,” says Desplats-Redier.
The bank always looks to be the first or second option in its partners’ sales. To that end, it has developed a growth strategy that relies on aggressive pricing schemes, innovation and quality of service that exceeds customer expectations. “Focusing on these three areas at once will help us further penetrate the Mexican automotive market,” says Desplats-Redier. “Players that fail to consider these areas will run into difficulties.” As part of its innovation focus, BNP Paribas invested in the introduction of new products that will boost auto financing without increasing its risks due to elongated credit maturation terms. “We will launch a balloon financing scheme and we will also implement a CRM system to keep close to our clients,” Desplats-Redier adds.
Keeping in mind the importance that the Mexican market places on vehicle ownership, the bank designed a balloon solution to reduce monthly payments and leave a residual value so clients can either pay it and retain the vehicle or turn it into a down payment for a newer model. “Users of the balloon product pay only for the use of the vehicle,” says Desplats-Redier. “When budgets are tight, it makes sense to only pay for usage and balloon is the answer to this need.”
The bank expects to increase its credit portfolio by 20 percent in 2018, relying on the growth expectations of Kia and other brands. Although the bank has its sights set on market segments beyond automotive, Desplats-Redier says BNP Paribas will first take advantage of the opportunities it has already identified. “Becoming a top player in the automotive market is our priority prior to looking into new segments,” he says. That being said, BNP Paribas Personal Finance places greater importance on sustainable growth rather than on market share. Because of this, the company looks for quality clients who will not eventually fall into a nonperforming portfolio. “Rather than aiming for large sales results, we want to market our solutions among the people who can pay for them,” says Desplats-Redier.