Young Buyers Transforming Traditional TrendsThu, 09/01/2016 - 10:27
Q: Which factors have led to the impressive growth in Mexico's domestic market?
A: Not only is the population growing but our vehicle park offers the perfect opportunity for renovation, following the stagnation resulting from 2008’s economic crisis. Contrary to popular belief, employment conditions also are improving. This is leading to a substantial growth of the middle and upper-middle class segments. Demographic shifts combined with the market’s current low inflation are the reasons behind the recovery of the population’s general income. In terms of supply, all brands are now working on improving their sales and aftersales services, focusing on the quality of their products and remaining client-oriented.
Financing has also played a crucial role in developing the domestic market, having grown 22.8 percent at the end of 2015. Credit is becoming available at historically favorable rates, with increasingly attractive terms. Furthermore, financing opens up the market to potential clients that want to participate in more expensive segments with better conditions. The entry restriction for imported vehicles has been equally effective at incentivizing the domestic market, particularly in the northern-border regions. Overall, the market for imported used vehicles saw a decrease of more than 60 percent in 2015, and for the first time in a decade we closed the year with less than 200,000 imported units.
Q: How is the younger demographic influencing trends in the Mexican automotive market?
A: This population segment adds an aspirational factor to the automotive market. Young buyers are transforming the trends upon which sales were traditionally based, focusing on healthier lifestyles and more diversified activities, leading to an upsurge in the SUV segment. What has truly promoted sales of these vehicles is their availability in the market at much more affordable prices. The cheapest cars within the subcompact segment cost between MX$100,000 (US$5,130) and MX$145,000 (US$7,430). Prices in the compact car segment range from MX$150,000 (US$7,690) to MX$270,000 (US$13,840). Most SUVs, however, compete with higher-end vehicles like the Honda Accord or the Toyota Camry, although several SUV models can compete directly with the compact segment, including the Renault Duster, the Honda HR-V and the Ford Ecosport. This allows SUV manufacturers to target a younger and more diverse audience. Four or five years ago, the SUV segment represented 14- 15 percent of the market,but it is now reaching a 20 percent share. Mexico’s increasing preference for SUV models contrasts with a greater number of people with the means to acquire more luxurious vehicles from brands like Audi, BMW, Infiniti, Acura and MercedesBenz. These companies also had to adapt their portfolio to the Mexican market offering smaller vehicles with the features that distinguish their brand.
Q: What impact will new players have in an already competitive market?
A: According to our latest estimations, individual sales per dealership are just above 600 annual units, which are practically the same figures as 10 years ago. As more brands enter the country, more dealerships appear while OEMs that are already here begin to expand their operations. For the first time in our history we are seeing favorable conditions on both the supply and demand sides of the market.
Q: How do you expect the hybrid and electric markets to grow?
A: Environmentally friendly vehicles are still a long-term vision for the Mexican market. The average retail price for vehicles bought in Mexico is MX$250,000 (US$12,820), which is far below the cost of most hybrid and electric models in the market. The available technology still poses a price difference of almost 25 percent for hybrid versions while electric models can escalate to more than MX$600,000 (US$30,770), making them niche vehicles that are not yet suitable for a mass consumption market. Even with higher purchasing power and different incentives for green technologies, these vehicles represent only 3 percent of total sales in the US market. In Mexico it is below 0.5 percent and there are no applicable incentives. Therefore, these cars will continue to be aspirational products while the emerging market sectors will be dominated by more efficient gasoline engines.