TBY talks to Andrés Fuse, General Director of Autogermana, on the milestones of growth, the impact of FTAs, and sector trends.
THE BUSINESS YEAR Autogermana is turning 30 years this year. What have been the milestones so far?
ANDRÉS FUSE Autogermana started in 1982 while Colombia was actually closed to the import of luxury items. We opened one small showroom and workshop in the central part of Bogotá. Then, in 1993, the government opened the economy up to the import of goods. We also opened a few facilities in the other two main cities, Medellín and Cali. Those were import milestones. Then, in 1994, Autogermana started distributing BMW motorcycles. We then started to grow in terms of service locations. By the end of the 1990s, we had opened an exclusive showroom in the northern part of the city. We kept the original location as our service facility. Starting in 2000, we began opening new facilities on the northern coast of Colombia (Barranquilla city). Then, in 2007, we also included Husqvarna, which is another motorcycle brand acquired by BMW that is based in Italy. With that, in 2008, we were the third importers in Latin America to start distributing Mini vehicles. Mini was bought in 1994 by the Rover Group. After a few years, BMW decided to divest from the Rover business, but the Mini and Rolls-Royce brands remained in its portfolio. So, by that point, we were distributing BMW, BMW Motorcycles, Husqvarna Motorcycles, and the Mini. Also, in 2008, another milestone was the opening of a showroom facility in the capital city; this remains the biggest showroom and workshop that a luxury brand has in the country at 8,000 sqm in size. It is still a benchmark in the industry. Then from 2008 until 2012, Colombia really started to grow at a fast rate. Autogermana was visionary enough to start investing in expanding its facilities and its capabilities in terms of customer service and sales. We also opened showrooms in locations such as Cúcuta, and new facilities on the northern coast, in Cartagena and Santa Marta. We started getting into mid-size cities of around 1 million inhabitants or less. In addition, over the past year, we also opened a state-of-the-art service facility on the north side of Bogotá. We are looking at where the city is growing and expanding accordingly.
BMW just launched the fifth generation of the M5. What are some of the model’s specifications?
The M5 is one of the flagships of BMW in terms of sportiness, design, and performance. It is an exclusive and very powerful car, but it is not for everybody. The car has developed very well, even surpassing our expectations as a vehicle worth more than $200,000. Whenever you get in the car and drive it, you feel the power, design, safety, and comfort that it offers. It has more horsepower than any other car in Colombia. It has had a great response from our customers in the country. As a model it is important because it has helped us to promote the BMW brand.
The automotive sector has had steady and rapid growth over the last few years. What is your outlook for the premium sector?
In recent years the automotive sector has been growing very fast. We broke records each year until 2011. Now, there is a slight slowdown in growth across the market. However, the slowdown in growth has only been about 0.2%. Nevertheless, it is at least a different pace from what we had experienced in previous years. Despite that, the premium segment has been growing above the rate of the market, and we have been increasing our penetration level. Even though, compared to 2011, we are pretty much steady as the premium segment continues to grow, albeit at a slower rate.
How is the exchange rate impacting the premium sector?
The exchange rate has been a significant factor and has had an important impact on the development of the luxury segment. There is a strong correlation between the sale of luxury cars and the exchange rate. Whenever the exchange rate goes up, imported car sales go down.
What impact will the free trade agreement (FTA) boom have on the automotive segment?
We import cars from the US and Europe. Certainly, as a result of FTAs, customers in Colombia will see a decline in the cost of cars over the medium to long term. Nevertheless, it is 100% dependent on what the exchange rate is going to be at that point in time. There will be a reduction in import tax, which is going to be progressive. In the case of the US, it is going to be 3.5% over a 10-year period. That means that on a yearly basis, the government is going to reduce import tax by 3.5%. At the end of the 10-year period, it will have dropped to 0%. Nevertheless, the exchange rate will still affect affordability. A similar system will apply to the EU, except the import tax rate is going to drop from 35% to 0% over seven years.
What trends can you identify in the demand for automobiles?
The 3 Series is the most successful model in the BMW line up, and a mirror of what happens worldwide. This year was, in a way, a bridge year as we recently launched the sixth generation of the 3 Series. In addition, the 1 Series is picking up significant volume. Due to the kind of roads in our country, SUVs have also become a desired car in our portfolio. The X3 is the most preferred in the X range. Also, a few years ago people were trying to keep a low profile here. You never knew what was going to happen in Colombia if you showed off too much. The good thing is that now having a BMW or a premium car is no longer contrary to keeping a low profile. Now, people feel much more comfortable to have a BMW or to ride a BMW motorcycle without feeling that they are showing off. They want to have a safe car and the sportiness of a BMW without the guilt of showing off in a way that could be unsafe. That has changed the dynamics of the market significantly.
What is your expected financial performance for 2012?
We are expecting growth of 10% for the BMW brand. Sales of the Mini will also grow 40%, and in the motorcycle category we will also grow above 30%.
This interview will be published in 'The Business Year: Colombia 2013'. To pre-subscribe please e-mail us at email@example.com
© The Business Year - October 2012