Roadblocks Remain to Aftermarket EntryMon, 09/01/2014 - 16:25
Two aspects of the Mexican car park, its aging components and a desire for renewal, make it a prime target for aftermarket companies. Founded in the US, Dorman Products spotted this Mexican potential a decade ago. “Looking at the Mexican car park, we realized that our existing portfolio meant we could sell 60% of our products and applications within Mexico immediately,” says Victor Hugo Uribe, National Sales Manager of Dorman Products. Nevertheless, Dorman Products is still considering how to best tackle the Mexican market and formalize its presence here beyond sales. For the moment, it is identifying precise opportunities where OEMs are lacking in aftermarket capacity. This analysis leads Uribe to state that problems found in the Mexican OE aftermarket lie in price, speed, and service. “OE products are not perfect, price pressure is extreme in the current market and this can impact quality. When buying OE parts in Mexico, customers usually do not get the level of service that the aftermarket requires,” states Uribe. This is where Dorman Products plans on gaining market share, given a logistical strategy that makes its parts readily available. Uribe adds that Dorman Products is also able to match or beat the quality of OE products that it identifies as weak.
According to Uribe, the map of the aftermarket in Mexico will be transformed over the next decade. “The aftermarket here is closed and very traditional, dominated by few companies and focused on cheap parts. It is composed of a few Mexican companies with decades of experience in the market and some American giants.” As a mature company with 100 product lines and 100,000 SKUs, Dorman Products feels it has all the tools to fully enter the Mexican market. Before that happens, Uribe would prefer to see more investments being made to render the aftermarket more attractive by being more focused on technology and quality. “Traditional Mexican companies risk being wiped out if they are not able to understand the significance of new competition and new practices,” explains Uribe. One such example will be the implementation of electronic systems for ordering and tracking processes over the next three to four years. “Electronic systems can be used to monitor the sales process and track potential losses and opportunities much more closely. This should be of paramount importance to any aftermarket company,” he adds. Dorman Products’ plan for Mexico will seek to play to the company’s strengths to avoid certain difficulties associated with entering the market. The company is concentrating on its main lines and systems including parts for engines, breaks, HVAC systems, electronic components, and chassis. At first, it will also supply headlights, taillights, and door handles, as well as remanufactured electrical products. Dorman Products is looking to the Bajio region to establish its facilities, while being aware that with 80% of the cars produced in the region being exported, aftermarket growth there is restricted. Uribe estimates that it will take two years for Dorman Products to establish a firm presence in Mexico, over which time it will establish a warehouse, install category management, and adapt to the culture of Mexican distributors. “Traditional Mexican distributors go through a product range line by line, they do not really seek to invest in new products, but they know they need new lines in order to stay competitive. In their mind, they know that they can return products at the end of the year if necessary,” adds Uribe. Despite such cultural differences, Dorman Products knows supporting the retailers and mechanics it supplies is paramount. In the US, it developed its own courses to train mechanics, both directly and through video tutorials. The company also has its full catalog available online and sends out new product announcements every four months to keep retailers informed. Although Dorman is seeking to implement these strategies in Mexico, Uribe is aware of the challenging characteristics of this market. “The US market has come a long way over the last thirty years, but it has remained at a standstill in Mexico. Mechanics and retailers are still not very familiar with using websites. Physical catalogs are still used in 90% of cases,” he explains. Uribe still believes that Mexico is developing an excellent environment for the automotive industry but just has to overcome the final aftermarket roadblocks. “Fighting in a price-driven market is not attractive from a profit perspective. This is a difficult market to make money in. We have to spend a lot of time building up our brand, or trade under another brand name. A quality regulation process that restricts the importation of low-quality products would go a long way toward making this easier,” explains Uribe.