Reacting, Adapting to Free-Market ModelFri, 09/01/2017 - 11:46
Q: How could financial uncertainty affect automotive financing in Mexico?
A: Automotive financing will continue growing, though this growth will decelerate. The main driving force the internal market experienced in past years was due to import restrictions on used cars from the US. This means that to a point, we are seeing the Mexican market’s real potential for new vehicle sales reflected in numbers. Because of the current exchange rate, car prices will likely go up starting with one or two of the biggest OEMs and the rest will follow. Overall sales will be impacted within the first months of the year but the market will adjust by the second half of 2017. Decelerated growth will also lead to an increase in used car sales.
We need to take gasoline into consideration. People are angry about the rising prices but eventually they will get used to this free-market model. Following a period of adjustment, consumers will rationally analyze their purchases more closely and start considering factors such as engine efficiency and gas mileage. OEMs will push to portray vehicle efficiency and reasonable total costs of ownership. Rising prices will also be positive for hybrid cars as demand will surpass the current supply. I expect three markets to grow, namely sedan vehicles, hatchbacks and SUVs. The demand we have seen so far for these segments will continue growing, particularly for small crossover SUVs.
Q: What does the distribution network need to do to adapt its sales model to car-sharing?
A: We need to provide the necessary information for analytics. Final users no longer go to dealerships to get information, which means brands need to work on their online reputation and adapt their products to new markets, including units economically designed for car-sharing services.
Q: What would more traditional OEMs need to do to remain competitive in terms of sales?
A: There are two main methods that OEMs could employ. The first is to analyze product offering to reach an accessible market, as not every brand has vehicles for every demographic. OEMs need also analyze dealership structure, size, equipment and potential customers to define a modern dealership structure. After that, they must train people in brand services and customer experience. If the aftersales department does not offer appropriate service, people are going to find out through social media and sales may be affected. OEMs struggle to renew their reputation and keep using certain bad practices, which ends up affecting their sales. Meanwhile, new OEMs have a clean slate with regard to service and reputation, which can work to their advantage
In terms of new brands like BAIC that are just entering the market, they should provide incentives and a well-organized communication strategy that highlights their customer service. These companies must provide good guarantees and maintenance contracts. Mexico is a highly price elastic market so Chinese OEMs can find a market niche here.
Q: What is the main opportunity in dealerships’ service?
A: The problems dealerships have in maintenance services relate to the reception of a vehicle. It is common for service consultants to just file orders without advising clients on the vehicle’s problems. Drivers take their cars to be repaired but they break down again on leaving the agency because the customer service team could not offer an adequate assessment of the car’s condition. A significant percentage of client dissatisfaction comes from vehicle failures that were not even detected when the car was first received.
Follow-up is another important opportunity area, as well as keeping promises made. Dealerships need to comply with dates and times of delivery as well as explaining the work done on the vehicle. Another potential improvement area for some OEMs is related to appointments. In Mexico, we are used to taking our vehicles for service whenever we feel like it, which means that repair centers end up saturated. It is important to implement an appointment system through which clients can easily make appointments.