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Mexico 2014 | FINANCE | VIP INTERVIEW

TBY talks to Jorge Álvarez, CEO of BNP Paribas Personal Finance Mexico, on automotive finance, the motorcycle market, and the country's financial reforms.

What is the significance of the Mexican market for BNP Paribas?

This year we will celebrate our 10th anniversary here in Mexico. We initiated our activity in a shy way a few years back. In mid-2013, we decided to change the focus of the company. Our company was solely focused on the automotive finance business, and in response we have instituted a three-year development plan with our various subsidiaries. For the personal finance sector, 80% of growth for the next three years will come from the automotive business, so the focus in Mexico is on the automotive finance segment. The automotive industry has been growing steadily since the last crisis and hopes to continue on this path, aiming to reach 1.7 million units in a few years. In 2013, we closed with over 1 million units sold. We see a trend in the automotive finance market that is growing faster than the automotive industry. In 2013, our portfolio of auto units grew by 65%.

What new products are you planning to launch in the automotive market?

We have a great product for the automotive business through which we targeted the new and used vehicle market for SMEs and consumers. As well, we are focusing on the motorcycle segment. We enjoy strong collaboration with Harley-Davidson, Bombardier, and KTM. We aim to use KTM Finance as a brand to finance its motorcycle sales. We are also talking with Polaris to launch the same finance model, and have another agreement with Suzuki. We think that the motorcycle business has to grow; currently, the number is at 350,000 to 400,000 units a year, but the potential is huge. In Argentina, 800,000 motorcycles per year are sold, yet its population is just one-third that of Mexico.

“We have an excellent platform to service the portfolio, and are comfortable with the risks we are taking in the country."

How are the company's services performing in the motorcycle market?

I was with BNP in Argentina, where we are the leaders in motorcycle financing. We provide one out of every four loans for motorcycles in Argentina, meaning we have a strong knowledge of how to handle this credit. The performance of our finance services in the motorcycle market is the best in its class in Mexico. This market has a range of financing offers available, and BNP Paribas Personal Finance (BNPP PF) has the expertise to analyze and grant the necessary credit. Today we are working with prestigious brands such as Harley Davison, KTM as KTM Finance, and we are about to launch Suzuki Financial Services Moto. The service is the same as auto, as in less than 20 minutes the customer can find out the result of a credit application, and all they need is their customer ID without any other documentation.

How do you feel about the potential of the automotive sector in Mexico?

On the finance side, it is a mature market. There is a strong presence of the finance arm of the auto companies, but there are also a number of major banks here. It is mature, but it has a lot of potential, too. We like to be small in structure and flexible enough to provide alternatives to the products in the market. We are developing branded products for each one, and can customize our tools and develop insurance products specific for each brand. Within our offer there are several brands and companies that offer services to the companies. We support brands and support these groups.

What are the advantages of belonging to an institution like BNP Paribas?

We are strong at managing portfolios, and that is the greatest advantage we have. We also have a flexible approach to each business. If we compare our offer to other brands or banks, they usually offer just one alternative solution. We allow the customer to choose from five companies and select their insurance, depending on the price of said companies. We have extensive scoring systems that give immediate responses to clients.

How does local knowledge contribute to the process of offering international products?

We have an excellent platform to service the portfolio, and are comfortable with the risks we are taking in the country. We are comfortable in the boundaries, too, and have a competitive offer for credit and for conditions on rates and down payments. In the automotive business, interpersonal relations mean a lot, and this fact is true for Mexico as it is for every other country in the world.

How many employees do you have?

We have now 188 employees that enforce the platforms and service the credits, including an in-house collections department. There are only a few products that we outsource, as we like to control the process.

What trends can you identify in automotive finance in Mexico?

Financing in Mexico is showing an uptrend; finance is growing and will be a key player in reaching the volume expected for the automotive industry. Within the market, competiveness is on the rise, with a strong presence of captive financing companies and banks fighting to increase their participation in the market. Credit will have to grow; currently, the average credit penetration for new cars is at around 50%, which is quite low for a mature market. We should be looking at 70% or 80% for finance penetration. If you combine all the factors, the potential for growth for the country and the automotive business and finance market is high; this is why we are investing.

What are your expectations for the financial reform program and how will it affect your operations?

In the short term, it seems that the implementation of the reforms is impacting car sales; cumulative figures are 0.6% higher compared to the same period last year. Dealers are cutting their sales forecasts for this year due to the uncertainty created by the tax reform package. In the case of BNPP PF, the impact will not be too high, because the dealers are using our offer to close customer deals, and our financing share among these partners is growing. The spirit of the financial reform is to make credit more available and affordable, but we will need to wait for the complementary laws to evaluate the final impact.

What is your outlook for the automotive financing sector in Mexico in the medium term?

Our outlook is that the uptrend will continue, and that the financing share will be key for the automotive industry, while the dealers will need a finance partner with better services and competitive offers. In 2013, BNPP PF grew 65% in the auto segment compared to 2012. For 2014, we are planning to grow by more than 70%. As mentioned, Mexico is a focus of development for BNPP PF, and we are in an aggressive development process that should allow us to quadruple our auto loans portfolio by 2016.

© The Business Year - May 2014