Guillermo Prieto
Chairman of AMDA
View from the Top

Opportunities and Promising Markets

Sat, 09/01/2018 - 11:58

Q: What can OEMs and dealerships do to prevent an ongoing contraction in the domestic market?
A: OEMs must ensure availability of supply to meet the market’s demand. Meanwhile, dealership groups must be very careful in their business management to maximize profitability. However, the market should strive for a more level playing field in terms of car sales. On the one hand, distributors play under very strict rules and regulations from both governments at all levels and OEMs. On the other hand, there is still an informal market of imported used vehicles that operates with no legal standards whatsoever.
These cars have been a cancer for the national industry that we have worked to exterminate. In 2006, imports equated to 140 percent of the total new vehicle sales in the country but by the end of 2017, this ratio dropped to 8 percent. We do not ask, however, for the border to be closed. We merely want this control to be maintained so we do not become the dumpster for US vehicles that are no longer permitted to circulate in that country.
Q: How important is the used-vehicle segment in the current domestic market environment?
A: Thanks to the warranties established by OEMs of up to seven years in some cases, the used-vehicle market has become critical for the development of the domestic market. Vehicles that are two, three or even four years old are still in optimal conditions and under warranty terms, which means they represent an opportunity for dealers to develop more business. Moreover, boosting used-vehicle sales also opens a new market for financing companies that can take advantage of the same vehicle more than once. Certain banks and captive financing arms are already exploring this niche but there is still a challenge due to the lack of reliable statistics regarding the vehicle park.
Most used vehicle transactions are done between individuals, so companies must find a way to encourage people to sell their cars back to the dealership. Creating a purchase and repurchase cycle would lead to companies having a profit both in the sale of a new vehicle and in the repurchase and distribution of the used unit.
Q: How have different brands fared in this decelerating market?
A: We have seen a clear decrement in sales of American brands. Between 2016 and 2017, Asian brands grew their market share by 1 percent on average, with some brands growing in sales volume by 17, 30 and even 50 percent. European brands, on the other hand, lost 2.6 percent of their market share, while American companies fell 14 percent, which represents a loss in sales of 71,500 units.
Q: How attractive have hybrid and other green units become for the Mexican consumer?
A: Green vehicles have become a hot topic globally and Mexico is no exception. However, these units still represent a very small percentage of the total sales in the country. Between January and December 2017, only 10,512 hybrid and electric units were sold in Mexico, although this represented an increase of 27.3 percent compared to the numbers from 2016. Only 257 of these units were full-electric and of the total 10,512 units, 44 percent were sold in Mexico City. Comparing the results from 2018 with 2017, 2,227 green vehicles were sold between January and February 2018, up from the 1,286 sold in the same period in 2017 and representing an increase of 73 percent. Having said that, only 28 full-electric vehicles were sold between January and February 2018, while in 2017 that number was 60. Overall, we see a definite trend to embrace new technologies in the Mexican market but these should be more affordable to have success in the country. At the same time, the government should continue working on incentives that boost sales of these vehicles, such as toll discounts and tax breaks. The current administration is unlikely to implement something new in this regard but we want it to be a priority for the next government.