José Pescador
Director General
Fast Autopartes
/
Insight

Safety Standard for Components Needed

Fri, 09/01/2017 - 11:03

Almost 25 million vehicles were being used in Mexico in 2006 and only 10 brands focused on brake components to service these units. In 2017, there are almost 35 million vehicles on the roads and the number of brake parts suppliers is now over 120. Having become an extremely competitive sector saturated with local and international brands and providers, the Director General of Fast Autopartes, José Pescador, sees price as the foremost driver in the country.

“There is an oversupply in the market and it has become increasingly difficult to offer a quality product at a competitive price,” says Pescador. “The most common enquiry for distributors is the cost of a Tsuru brake pad.” The Tsuru is the perfect embodiment of how the aftermarket works, according to Pescador. For many years, this Nissan model has been the low-cost standard in Mexico and a strong contender despite safety deficiencies, according to Stephan Brodziak, Air Quality and Vehicle Safety Coordinator of El Poder del Consumidor. Similarly, Pescador among several executives specializing in the aftermarket, says that many spare components enter the market without having to comply with any safety standards, which puts quality and more expensive components at a disadvantage

Despite the market conditions, Fast Autopartes has searched for ways to remain competitive while offering high quality and safety standards. Although the company sources its products from Mexico, China and Europe, it follows the R90 European norm for all its brake parts. This regulation establishes a limit of up to plus or minus 15 percent quality standard compared to original equipment components.

To reinforce industry standards, Fast Autopartes has bet on training programs as a direct promotion technique to its clients. The company created the Dynamik Brake Center initiative to certify mechanics as professionals in its products and collaborated with Michelin to broaden the scope of the program. Pescador still sees standards as a pressing need for the industry. “Chambers of commerce need to promote the creation or adoption of a quality norm,” he says. “Our training efforts have paid off but the market remains price-driven.”

Fortunately, Fast Autopartes has found a way to compete against low-cost and low-value brands. Pescador says these competitors are tied to large volumes and narrow margins. Given the exchange rate volatility between the peso and the dollar, low-cost players have to adjust their prices continuously to maintain stability. Distributors like Fast Autopartes only change their prices once or twice a year at most. Fast Autopartes has countered rising dollar prices by tweaking its agreements with Asian manufacturers. By changing component pricing to yuan instead of dollars, Pescador has offset costs related to the dollar-peso exchange rate. “We also price our European imports in euros and depending on demand, certain components cost the same whether we source them from Europe or China.”

Although the company depends on some international supply, it also strengthened its local offering to counter the added cost in imports. Fast Autopartes started a new relationship with Bosch’s national brake plants and even though it is not looking for a new partner, it is open for business with any local manufacturer that is interested. “Establishing relationships with local manufacturers and building a strong e-commerce network is behind our company’s prowess.”

E-commerce is the final stepping stone in Pescador’s development plan. The company lists components in MercadoLibre and invests in technology integration in an effort to bypass wholesalers and other distributors. Building on four large distribution centers in Monterrey, Guadalajara, Mexico City and Queretaro, Pescador’s goal is to create microcenters across the country, approaching local distributors. “We want to become providers to smaller players so they can have access to our entire product portfolio,” he says. “We can finance the products through a payment plan, giving the distributor access to our digital platform.” He sees a digital strategy as a door to new opportunities. “The brand that creates the best digital platform will be the one that controls the market,” he says. Fast Autopartes has a 2.5 percent market share in Mexico and Pescador says developing the company’s traditional business model as well as its digital presence and establishing new alliances with national manufacturers could take it to a 3 to 4 percent share.