The auto industry and the aftermarket face a number of unique challenges in Mexico, but opportunities abound for companies that can position themselves to take advantage of these trends. Analyst and consultant Evaristo Garcia of Integrate Data Facts presented an overview of the Mexican vehicle market at the National Catalog Managers Association (NCMA) Knowledge Exchange this week.
Like this story? Sign up for our enews blasts here.
The Mexican vehicle market has grown steadily, although a significant number of vehicle sales are of used imported cars rather than new vehicles. Mexican drivers keep their cars longer and drive fewer miles per year than their U.S. counterparts. Both miles driven and vehicle sales will likely continue to be slowed by increasing gasoline prices and low wages, although incomes are growing rapidly.
What Garcia characterized as the local aftermarket is worth approximately $16 billion right now.
Nissan is currently the leading supplier of new vehicles with 25 percent of the market, followed by GM (19 percent), Volkswagen (17 percent), Ford (10 percent), and Chrysler (9 percent).
Mexican vehicle owners like "cheap, reliable transportation that has good fuel economy and that you can find replacement parts for anywhere in the country," Garcia said.
Average vehicle age is 17 years, and average miles driven stands at 8,257 miles per year. GDP per head in Mexico is just $9,570 (U.S.), compared to $49,340 in the United States. While that seems egregiously low, it's actually an improvement from 2010, when GDP per head stood at under $8,000. It has actually grown 21 percent since then, and Mexico's GDP overall has risen 24 percent since 2010. As Garcia noted, the upward trend is pointing toward income levels where "people buy new cars and motorcycles and other things that they might not otherwise purchase," he said.
What factors will affect Mexican vehicle owners' spending decisions? One critical factor is the price of gasoline, which has risen sharply over the past few years as the government-owned oil monopoly steadily reduced its subsidies. Another factor is the increase in paved roads, which has slowed in recent years but has still provided a significant improvement over where the country stood 20 years ago, when pavement was scarce.
Vehicle production in Mexico is increasing, but the bulk of those vehicles are being exported. Only about half a million of the 2.5 million vehicles manufactured there actually stay in the country. The number of vehicle plants is increasing, as is the number of parts plants. So distributors and retailers that want to establish a presence in the country will not have to do a significant amount of importing to find parts.
The increased reliance on imported used vehicles will likely depress new vehicle sales, but could present enormous opportunities for U.S.-based aftermarket companies.
"The only people that know which parts go on those cars are probably sitting in this room," Garcia told the NCMA attendees. "Suppliers and repairers in Mexico probably don't have parts or a VIN decoder for imported used vehicles that were never sold [as new vehicles] in Mexico."
Major aftermarket companies in Mexico include Auto Todo/GPC, AutoZone (which has expanded to 279 stores in Mexico), local player RC, and Rolcar (an auto parts chain that also includes a pharmacy and convenience store).
In terms of high-mileage, high market share vehicles, VW, GM and Nissan are the oldest and most frequently driven cars on the road in Mexico. Ford and Chrysler vehicles have a high market share, but below-average mileage. European imports have both a low market share and low mileage, because only fairly wealthy citizens that rarely driven can afford those models.
Garcia closed by saying that the influx of used imports would present both a challenge and opportunity for companies operating in Mexico, and that the ample domestic parts availability would be a plus for the aftermarket. New vehicle production, however, was not going to be a very good indicator of the size of the repair market, noting that increasing new vehicle production in Mexico "doesn't generate vehicles in the market; they won't be there for you to service them."
