Local Partner Solidifies Position in Customization

More than 50 car brands compete in the Mexican market, each of which produces several models to cater to different market segments. Although standard models are the bulk of new vehicle sales, special and limited editions have found a niche in which to compete regardless of the vehicle’s price or make. Buyers can choose from an array of options, ranging from a racy limited-edition VUHL 05RR to one of the 1,000 special-edition Tsurus that Nissan released to commemorate the end of this model’s production. To help automakers develop special units, Air Design is a valuable local partner.

Miguel Avalos, Director General of Air Design, says the company evolved with an industrial focus, mainly targeting the automotive industry. Unlike other companies in the supply chain, Air Design stands out as a player with a strong design and engineering process. Finding its niche in the special-edition market, it realized that the best way to compete was by offering in-house product development and manufacturing. “We conceptualize our designs digitally and once we move onto the prototyping phase, automation also plays an important role. Coupled with our ability to design and manufacture molds in-house, we can offer a well-rounded solution to clients,” he says.

The major obstacle for Air Design was establishing enough credibility to participate in the market. The team became experts in design of special-edition components and now Air Design participates as a Tier 1 supplier. “We evolved from a very artisanal process to incorporating digital and technological advantages,” he says. “Keeping up with the latest trends in the market helps us offer attractive and revolutionary options to clients. Integrating styling and advanced material concepts, we achieve best-practice quality installing equipment in the most effective way.”

The company detects a potential threat from players like Magna and Faurecia that are venturing into special-edition component development. But Avalos remains confident, citing Air Design’s time-effective development process. “We can develop an entire customization kit for a vehicle in less than 10 weeks thanks to our fast prototyping process and our in-house development of molds and tooling components. Other companies are subject to long timeframes to follow the vehicle’s design process.” What gives Air Design the upper hand in the market is being able to give a second wind to products in a mature stage of their lifecycle. Limited or special editions are normally released two years after the model hits the market and that is the window of opportunity that Air Design targets.

A clear perspective of how the market is moving can help companies to remain ahead of the game. “Sedan and hatchback models are already well-equipped in standard versions. Furthermore, there has been a gradual change in the clients’ preferences,” says Avalos. Drivers began to move from subcompact cars to large trucks and SUVs as stronger economies increased purchasing power. Particularly in the US and Canada, Avalos sees an opportunity in the large truck and pickup segment. “The best-selling model in the US is the Ford F-150 pickup with approximately 800,000 units in 2016, followed by the Chevrolet Silverado. Only in 2017, the market is expecting sales of 10 million pickups in the US, fueled by low gas prices,” he says.

Analyzing these trends, the company saw an opportunity of between US$5,000 and US$20,000 in accessories for every unit. According to Avalos, only in the US, the market for vehicle customization is approximately US$60 billion. Deducing from this number, the size of Mexico’s vehicle park and the US$18 billion worth of aftermarket components, Avalos sees a US$5 billion potential market for special edition accessories in Mexico. “We can definitely see an increase in demand for special-edition vehicles and more experience in dealerships, which now offer more equipped units to the clients,” he says.

Dealership profitability fuels the growth of the special component market. Margins in the automotive industry are generally low and in Mexico, they are barely above 1 percent. The situation is worsened by the weak position of the peso against the dollar. As companies try to maintain stable prices for vehicles, revenue margins are reduced. Avalos believes that the opportunity for distributors lies in aftersales services and customization alternatives. “Only in this latter segment, profit levels are between 30 and 50 percent,” Avalos says.