Rapid Tech Development Key to AftermarketThu, 09/01/2016 - 13:47
Q: How important is the aftermarket segment for Pioneer, especially in Mexico?
A: Pioneer has two divisions in the automotive segment, OEM and the aftermarket. The latter is crucial in Mexico since it represents approximately 15 percent of our business for the segment in the NAFTA region. This is mainly because there are few places where the aftermarket grows continuously. OEMs have increasingly developed their sound system technology, which means it is more difficult to replace their equipment. Our main target is used cars of at least 5 years old. The growth in new car sales signals a window of opportunity for us once vehicle owners begin to replace older units. Car ownership per capita is still quite low in the country and the market is unlikely to move toward premium vehicles overnight. Although Pioneer might not see a double-digit increase, we will definitely see year-on-year growth.
Q: How will the company compete with OEMs as they continue to improve their sound system technology?
A: It poses a challenge, especially in more developed markets like the US. But in Mexico sound systems are not yet integrated with air-conditioning features or other electronic components in the vehicle, so there is still an opportunity to upgrade. We also have the advantage of aftermarket expertise. Instead of taking three or four years to develop a technological update, we only need about a year. We can offer our clients superior products than OEMs directly. That gives us a huge advantage, especially considering the rapid evolution of smartphone technology. Our connectivity-centered vision appeals to our clients and we are the only aftermarket manufacturer in Mexico to feature CarPlay and Android Auto software in our units. Even before CarPlay’s introduction to the market, we had a partnership with Apple that allowed clients to connect their smartphones to our systems with a dedicated user interface. Bluetooth technology has had great market penetration as it allows wireless data transfer from any smartphone to the vehicle. As the market looks for better ways to connect vehicles and information, clients now prefer larger displays with precise touch and scrolling capabilities.
Q: What challenges do you see for competition in Mexico?
A: The biggest challenge is to remain price competitive, especially in light of the current peso to dollar exchange rate. If we raise prices excessively, clients will not be attracted to our product. Unfortunately, Mexico has not completely developed its Tier 2 and Tier 3 supply chain and there are many companies that still import most of their raw materials, so the exchange rate has a greater impact on them.
Mexico has always been known as a price-driven market but connectivity has largely changed the mindset. Trends now tilt toward sophisticated products. Previously, the only purpose of headphones was to play music but now they are a way to use smartphones safely while driving. Headphones integrated with CarPlay or Android Auto offer excellent navigation features. These are top-of-therange products for which we are working on lowering our prices as much as possible to trickle our technology down through our entire product line.
Q: What was behind Pioneer’s decision to establish a new plant here?
A: We wanted to maintain the competitiveness of our aftermarket segment but we were also keeping the development of the Mexican OEM market in mind. Our main clients in this division are Japanese OEMs and most Japanese carmakers have established operations here. Consequently, we also needed to establish ourselves locally to offer them better service.
The plant is expected to begin operations in 2017 and by 2019 we expect to employ approximately 700 people and to make 2 million headphones per year. We also have a plan to manufacture speakers but this will be a secondary phase in the project, as will navigation and amplifier products. The plant will be located in Lagos de Moreno, Jalisco to target all the Japanese OEMs in the country. It will boost the aftermarket segment in terms of logistics because we can source our products in less than a day. The region is attractive because it also boasts an enormous pool of skilled workers.