Can you provide a general overview of Motorysa, concerning sales, revenues and business segments to have seen the most growth?
The past 12 months have been impressive, as we have more than doubled our sales. Motorysa is the exclusive distributor in Colombia of Mitsubishi—a company which once faced some difficulties, but that has now recovered its brand equity and is bringing out new models. This, combined with our local strategy, has made it possible to recover our market share, although in the Colombian market we are some way off realizing our long-term targets. This success was possible due to several factors, the first being several product launches. Secondly, depreciation of the Japanese yen meant that products could be priced more competitively. Thirdly, we have maintained our dealer network for some years, and in 2014 we made the decision to expand it. Most of our dealers are owned by Motorysa, but we also have a number of external dealers in small- to medium-sized cities, whereby we cover about 95% of the Colombian market. We have a number of subsidiaries such as the Banco Finandina, the Casa Toro dealerships, the John Deere Agricultural Machinery Distribution, Equirent—a rental company—the Hertz franchise, and several other companies in the automotive business, including financing companies like Finanzauto and a number of brokers, all related to the automotive Business. Motorysa concentrates on developing vehicle distribution in the automotive industry. Currently, we are focused on Mitsubishi, but are also developing several Daimler dealerships that will start early in 2015. There are also other brands that we will shortly develop as distributors. The automotive market is growing by around 8% per annum, and our sales are doubling. We expect to end 2014 on growth of 80% and for 2015 expect to grow by a further 50%. I think our strategy for this is well grounded, but we will need to observe developments in the general market. We expect to achieve our target as long as the market grows by 5% in 2015, which, however, is uncertain due to the direction of oil prices and the depreciation of the peso.
To what extent do free trade agreements (FTAs) assist your business?
We are highly focused on the agreement between Colombia and Japan, which is necessary for our long-term development as a brand. Our current disadvantage is that we only take advantage of our FTAs with the US, and are therefore missing out on wider opportunities. The countries we purchase from lack FTAs with Colombia. We think that Japan and Colombia could complement each other well, but that the size of the Japanese market would probably result in more opportunities for us—the Colombian economy—than for them.
Have imports affected the local assembly business?
I used to assemble buses in Colombia, and in my opinion, you only take advantage of local assembly by improving freight costs. The economies of scale and costs of assembling a vehicle in Colombia are not competitive. Three major companies used to assemble vehicles here, namely General Motors, Mazda, and Renault. Mazda closed its plant when it decided to import from an FTA in Mexico, and moreover, could not export from Colombia. The same issues affect General Motors and Renault; they are actually huge importers. These are largely political issues; recently, a study conducted by Fedesarrollo concluded that vehicle trade generated significantly greater employment and economic activity than local assembly. However, there are actually few assemblers, and the costs are uncompetitive, with parts not supplied. Logistics costs are also prohibitively high. The need to bring parts from a Colombian port erases any advantage you might have had.
How important is your commercial vehicle segment in Colombia?
Commercial vehicles such as trucks and vans once accounted for around 20% of our local sales, but the Colombian truck market has plummeted recently. Most large truck companies face problems because of the process of licensing a truck, whereby to do so another truck has to be scrapped, which is costly. The rules, severally amended, make it difficult to work smoothly. This could be one reason why logistics costs are so high; this in addition to poor infrastructure. The truck market situation is at a low point in Colombia, but I perceive a great medium-term potential in the segment. That is why we have decided to become a Mercedes Benz and Freightliner dealer. We foresee some difficult years ahead, but business seems set to skyrocket at some point given that there is a real need.
You introduced the i-MiEV electric car in 2011 as a new and sustainable vehicle, in collaboration with Condensa. How did you do this?
In 2011, we signed a collaboration agreement with the aim of testing and developing electric vehicle technology in Colombia. We were pioneers, and it is still idealistic to think of this as a sustainable business. Yet Colombia pursues the clean generation of electricity—70% of electricity generated comes via water or hydroelectric power generators—and Mitsubishi is one of the world leaders in electric vehicles, whereby we undertook a number of local trials. We started smoothly with two units, and brought 30 additional units the following year. Now we want to develop the business at a corporate level. The Colombian government has given some incentives to develop this technology, but not enough by international standards. Moreover, the price of such vehicles remains higher than other cars. We are due to present the Outlander hybrid at the Bogotá Motor Show.
© The Business Year - January 2015