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GM Mexico's Garza Examines Mexican Fleet Market

October 2016, by Mike Antich - Also by this author

Photo of Garza courtesy of GM Mexico.
Photo of Garza courtesy of GM Mexico.

The fleet market in Mexico has been very robust. In 2015, fleet sales grew to 20% of all auto sales in Mexico, and, in the first quarter of 2016, it has grown 4.1%. NAFTA and nine other free trade agreements have triggered a surge in international investment to build new factories to export or sell vehicles in the local market. 

To learn more about the fleet market in Mexico, Automotive Fleet recently interviewed Francisco Garza, GM Mexico vice president, vehicles sales, service, and marketing (VSSM) for Mexico, Central America, and Carribean countries, who has held this position since 2011. Below are excerpts from the interview:

AF: What is the current state of the retail and fleet automotive markets in Mexico?

Garza: As of March (January-March), retail industry has grown 15.3% and fleet industry growth was 4.1%, versus 2015. Total industry growth during Q1 was 13.7% versus 2015.

AF: Where do you foresee future growth occurring in the Mexican automotive market?

Garza: We are sure that with the results that we’ve been having and the strategies we’re implementing, we will continue having our customers’ loyalty. We will seek to conquer new customers with our next generations and special editions such as Spark Cargo, Spark NG, Cruze NG, Camaro NG, Suburban Heavy Duty, Tahoe Police, etc.

AF: What vehicle segments are exhibiting the greatest growth in Mexico and why?

Garza: The highest growth has been seen in low-end segments such as small and medium pickups, small and medium SUVs, and small and compact cars. Decrease of used-vehicle imports from the U.S., as well as a higher credit availability in the domestic market (auto loans), are the main drivers for this growth.

AF: What impact has the depreciation of the peso against the U.S. dollar had on GM’s business in Mexico?

Garza: The weakness of the currency has two factors: on the one hand, the price of vehicles in the market and, on the other hand, the value of exports. It is not an easy question, nor does it have a concrete answer. There has to be a balance. We have significant pressure due to the prices of vehicles with the latest technology in the domestic market, but we have been able to manage it in our portfolio. We have Mexican products, others come from Korea, South America, North America, so we end up having a favorable equation, although with many challenges for this year.

There is certainly additional pressure in the exchange rate for the vehicles we market in the country. We are adjusting to what the market can offer in terms of pricing and expect to keep a balance just as we have in the past years.

Photo of GM Mexico's headquarters courtesy of GM.
Photo of GM Mexico's headquarters courtesy of GM.

AF: How many retail dealers do you have in Mexico?

Garza: There are 165 total —126 Chevrolet and 39 Buick-GMC-Cadillac — and 61 Fleet Certified Dealers.

AF: What initiatives has GM Mexico launched to better assist its franchised dealer body?

Garza: We have a number of initiatives, such as:

  • BDC (Business Development Center) strategy for sales and service: This is a strategy for attaining improved levels of conversion rates for both sales and service
  • Certified Pre-Owned Vehicles: This initiative is helping dealers to develop further new car business by developing a sound practice of trade-ins. 
  • SSO (Service Smarts OnLine): This service (along with DART, both provided by Urban Science) gives dealers high-quality information that allows them to better take advantage of the opportunities that are present in each dealer’s PMA, both in new car sales as well as in after sales/service.

AF: Mexico is a major oil exporting country. What impact has lower oil prices had on the domestic fleet market in Mexico?

Garza: As mentioned before, the fleet market has not grown as fast as the retail industry, although the real impact to the domestic fleet market is the opening of credits.

AF: What percentage of GM Mexico’s production is exported? If the U.S. is your largest export market, what are your second and third largest export markets, and which vehicles do you export to them?

Garza: Exports represent 69.1% of total production. Canada is the second largest export market for Mexico, and we export Silverado, Sierra, and Trax to them. The third most important market is Argentina, and we only export Trax to them.

AF: With the dramatic growth in the automotive production footprint in Mexico, how is Mexico’s infrastructure, in particular, ports, rail, and haul away companies, coping with this increase in volume?

Garza: Mexico is a country that has attracted investment, in part, because of its geographic location, which is strategic in terms of infrastructure, both ports and railways are key in logistics and distribution.

Due to the size of the industry, we are facing some challenges such as lack of specialized equipment (auto transporters) to meet the growing demand and, on the other hand, challenges in the field of security in railways. However, we know that our suppliers are working on improvements.

AF: The fleet market is currently very strong in Mexico. What is GM Mexico doing to further increase its volume of fleet sales?

Garza: We are expanding the Fleet Services Program to increase coverage in the Dealer Network and we are re-launching the Small-Medium Business Program. Finally, we are aiming to improve performance in the Supplier and Business Partners Program as well.

AF: How do GM dealers in Mexico support the corporation’s fleet sales initiatives?

Garza: GM launched the very first fleet program in Mexico back in 2010 with a very strong set of benefits for our customers, which includes the only fleet certified dealer network in the market. Dealers are a key factor to success in fleet sales, and we do have the best and most professional dealer network

Editor's note: This article first appeared online in the Q3 Global Fleet Market Conditions supplement published in October of 2016.

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