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Colombia 2013 | INDUSTRY | B2B: LUXURY CAR DEALERS

The growth in demand for luxury cars is rising along with disposable income in Colombia, a country with a rapidly developing automotive segment.

Andrés Fuse
ANDRÉS FUSE
General Director
Autogermana
Mathias Held
MATHIAS HELD
President
Daimler

What is your outlook for the premium sector?

ANDRÉS FUSE 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. Compared to 2011, we are steady, as the premium segment continues to grow, albeit at a slower rate.

MATHIAS HELD The industry in Colombia, in terms of per capita vehicle sales, is well below the average in Latin America. If it reached per capita volumes similar to that of Brazil or other regional countries, this would mean doubling the whole volume of services per year. In 2012, the whole industry was expected to make around 300,000 vehicles, and I expect this to at least double in the next 10 years. Between 2015 and 2018, we will see 500,000-600,000 units produced per year. The premium segment will be growing above average.

What trends can you identify in the demand for automobiles?

AF 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.

MH We are identifying a market niche that is growing above the industry average because we are seeing that, on the one hand, the strength of the currency is making even luxury imports more accessible for many people in the country, and on the other hand, we have a strong reduction in financial costs and interest rates that makes the financing of these vehicles more affordable. We are also seeing a reduction in import tariffs due to the free trade agreements (FTAs) with the US and Europe, which will also lead to a reduction in prices. It makes vehicles in the luxury segment, which have always been an aspiration, more accessible.

What impact will the FTA boom have on the automotive segment?

AF We import cars from the US and Europe. 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 role do services such as financing play in the industry?

MH We are working on bringing our financial arm, Daimler Financial Services, here to hopefully start operations within the next couple years. We will be expanding our service network according to volume growth. There is a need for more dealers, workshops, and service points around the country, and we have a development plan for the next couple of years. This is not direct Daimler investment because we nominate third-party dealers.