Pushing Cost-Benefit Ratio in Price Sensitive Market

“Dayco Products knows the importance of developing markets such as Mexico. We started operations in this country 15 years ago, but right now we are at our prime. In fact, I would say we are really starting to do business,” says Roberto García Roldán, Director of Dayco Products Mexico (Dayco). The company is the market leader in Mexico for tensioners and pulleys and is in second place for automotive belts. “We are the best option considering a cost-benefit ratio. Our company has excellent products, being an OE supplier for several light and heavy-duty brands, such as Mercedes-Benz, BMW, and Chrysler. In Mexico, we are also an OE supplier for Chrysler, Nissan, and GM,” says García Roldán. However, the company is still reliant on imports from plants in the US, Europe, and South America to sell its products in Mexico. To better manage its coverage, globally and regionally, the company is divided into two key businesses: aftermarket and OE. The company has acquired Metavation, an American manufacturer with a plant for crankshaft damper pulleys located in San Luis Potosi, for its Dayco Products OE Division. García Roldán says this acquisition was a way to leverage the company’s presence and growth in the automotive market in Mexico. “It is our first acquisition in Mexico and is intended to help us get started in the OE business,” says García Roldán.

The Mexican aftermarket has traditionally been dominated by Asian products and García Roldán acknowledges that it is difficult to compete with such products, given the price-sensitive nature of the market. “The aftermarket segment in Mexico is not as large as the one in the US, although the import patterns are very similar. Traditionally, aftermarket companies had agreements with OEMs to sell parts only through their car dealers for a couple of years. Dayco already covers plenty of such brands, since only a few OEMs remain outside Mexico.” However, a problem has now arisen as it has become more complicated for a company like Dayco to cover all brands in the domestic market. In some parts of Mexico, ‘chocolate’ cars provide really good clients for aftermarket services because these cars need repairs and new parts. “The ‘chocolate’ business is good for all the aftermarket companies, but not for car dealers. The problem with ‘chocolate’ cars is found in the application, as owners often opt for cheaper parts which will only last for a few months,” says García Roldán. Dayco will relocate its aftermarket operations to a brand new facility in the State of Mexico that will allow for increased productivity and the integration of warehousing and distribution operations. The company has the ambition of covering the whole of Mexico, selling its products in every state. It is therefore looking for distributors with outstanding selling practices.

García Roldán states that the relationship with distributors in Mexico can be difficult as there seems to be a natural resistance against new ways to sell. For example, distributors’ profiles vary from state to state and customers in Guerrero and Chiapas demand traditional counter service, which the company must maintain in these markets. However, in more sophisticated places like Guadalajara and Monterrey, Dayco has distributors with electronic catalogues. Dayco is trying to focus on passing on better information about products to improve its electronic tools, including apps, websites, and printed catalogs, which people in Mexico still request. “Maybe in ten years, these customers will be aligned with electronic tools, but they are not at the moment,” comments García Roldán. The company is also developing applications to improve its communication with customers. One of these marketing tools consists of an application for smartphones, and Dayco is currently working on rolling out a version for the Mexican market.

Dayco is a supplier for AutoZone in the US, the second largest retailer of aftermarket automotive parts and accessories in this country. García Roldán explains that his company only supplies to AutoZone in the US as it works under different conditions in Mexico. However, efforts are being made to work in a similar way in Mexico and foster collaboration between both companies. “AutoZone Mexico is independent from its US parent company in terms of decision-making. The idea is to align the strategy for the US with its Mexican operations. This way we can sell the same brand to reduce costs and participate in the local market with AutoZone. We can take advantage of production in the US in order to supply in Mexico,” says García Roldán. He adds that Dayco wants to sell AutoZone’s brand instead of its own, as it is better for its distribution network and for local production. Cataloguing will remain a key part of Dayco’s sales strategy toward AutoZone as product categories in Mexico are different from the US. García Roldán’s company has all the applications for the Mexican market and great coverage of chocolate cars in the US, covering 99% of this market.