VIEW FROM THE TOP |
MEXICAN DEALERSHIPS HIT BY MARKET CONTRACTION GUILLERMO PRIETO Chairman of AMDA
Q: What factors are preventing the country from bouncing
in this sector are family-owned Mexican companies. They
back from its sales downturn?
are a key source of tax revenue and employment and
A: The sales downturn is a consequence of both internal
constantly invest in the country.
and external factors putting pressure on the Mexican vehicle market. While international geopolitical events such as
Overall, the Mexican automotive industry accounts for
USCMA’s negotiation have impacted Mexican consumer
2 million jobs, around 3 percent of Mexico’s GDP, 20
behavior, internal issues such as economic contractions and
percent of the country’s manufacturing GDP and is the
lower consumer confidence are also worthy of consideration.
main export-related currency generator with a positive
Macroeconomic factors such as inflation, exchange rate
trade balance of over US$70 billion.
volatility and high interest rates are creating uncertainty among consumers. People are becoming much more cautious
Q: What have depressed vehicle sales meant for Mexico’s
when making purchases of durable goods such as vehicles.
vehicle-financing sector? A: A drop in vehicle sales necessarily means a contraction
To reverse this situation, we need economic growth as
in the automotive financing market as approximately 66
well as more certainty regarding USMCA, which will have
percent of all car sales in Mexico are on credit. There are,
a positive impact on consumer confidence. Mexicans must
however, other factors hampering the vehicle financing
also increase their purchasing power. While inflation has
market. High interest rates make car loans more expensive,
been controlled, real salaries have lost ground. Additionally,
while overly elongated credit periods mean greater risks for
several austerity policies from the federal government have
the companies that offer them. Despite this situation, past-
had a direct impact on vehicle sales. If economic variables
due portfolios in the vehicle market are usually less than 2
improve, we could sell above projections. Segments such
percent of all loans, which has enticed commercial banks
as luxury and sports have identified a mature population
to offer more of these financing products and win ground
niche. However, the biggest potential for growth is in the
against financial branches and self-financing companies.
compact and subcompact segments. Q: How is digitalization impacting dealerships’ Q: How can the government participate in the development
business models?
of the national automotive industry?
A: The market is moving toward online vehicle sales,
A: Players in the Mexican automotive industry must be
which puts pressure on dealership groups to increase
attentive to government decisions. Automotive is already
efficiency and productivity and improve customer
an overly regulated sector in which dealerships must report
service. At the same time, vehicle ownership is no longer
to and meet regulations of Mexico’s Tax Administration
as alluring given the new mobility schemes that are
Service, the Ministry of Communications and Transport,
arising thanks to digitalization. Shared ownership and
the Federal Consumer Protection Office, the Ministry of the
the rise of ride-hailing services are changing the game
Interior, the Ministry for the Environment and the Ministry of
worldwide. In Mexico, however, the lack of competitive
Labor, among others. This means regulatory changes could
public transportation entices vehicle ownership among
pose new difficulties for the entire market.
local consumers.
AMDA is working to establish communication channels with the new federal government to raise awareness of
The Mexican Association of Automotive Dealers (AMDA) was
the importance of the automotive industry for Mexico’s
founded in 1945 and now represents the interests of around
economy. The country’s dealership sector, which AMDA
2,390 dealerships located in more than 210 cities throughout
represents, includes close to 2,300 dealerships. All players
the country
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