Crossing Borders
New International Hot Spots for F&I
Objectives
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Brazil “Basics”
Economic Overview
Industry Landscape
Government and the Automotive Industry
The Dealers
Opportunities
Q&A
Who Am I?
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16 Years Retail Automotive Experience
The Providence Group
JM&A
The McDavid Group COO/GM
Began Opening Brazilian Market in 2010
Eu Estou Aprendendo Portugues
– (I’m Learning Portuguese)
Brazil “The Basics”
• Brazilians Speak Portuguese
• How many people in Brazil?
– A Brazillion!!
– 196,655,014
*World Bank 2011
• Brazil land mass slightly smaller than the US *geographic.org
• Capital of Brazil
– Brasilia
– Viewed from above the main city resembles an airplane
• Brazil comes from the word brazilwood
Brazil’s Economy
• Brazil is the 6th largest economy *International Monetary Fund
• Brazil’s “Dollar” R$
– Today 1 USD = 2.02 BRL (The Money Converter .com)
• GDP $2.48 Trillion**
• US GDP $15.09 Trillion**
• Fastest growing economy
– Based on GDP increase over 5% annually
**World Bank
Brazil’s Economy
• Brazil Regions
– North
• Most Area/Least Populated
– Northeast
• 28% of the Population
– Central-West
• 18.86% of the population
– Southeast
• São Paulo (Largest City in Brazil) - Most Populated
– South
• 3rd Largest Population
OEM’s (Brands)
• 38 Brands in
Brazil
• The “Big Four”
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FIAT
Ford
GM
VW
OEM’s
• Chinese Brand Presence
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Chana
Chery
JAC
Lifan
• Korean Brands
– Hyundai
– KIA
– SsangYong
• Other Notable Brands
– Citroën
– Troller
OEM’s
• Standard Warranty
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Majority have 36 month “bumper to bumper”
VW 12 months “b2b” 24 months powertrain
Kia & Hyundai 60 months “b2b”
JAC has 6 Year “b2b”
No Roadside Assistance (majority)
Claims paid very conservatively
• Customers complain about poor claims approval
Franchised and Non-Franchised
• 7,092 Franchised Dealers in Brazil*
– São Paulo 1,790 (Southeast Brazil)
– Minas Gerais 762 (Southeast Brazil)
– Paraná 593 (South Brazil)
• US – 17,540 Franchised Dealers**
• 45,600 Non-Franchised Dealers***
– 70 Auto Shopping Locations
*Fenabrave
**NADA Industry Analysis
***Fenauto
Franchised and Non-Franchised
• Supported by different national associations
– Fenabrave (www.fenabrave.com.br) Franchised
– Fenauto (www.fenauto.org.br) Non-Franchised
• Dealer Associations
– Associations are OEM
• Big Four Associations
– Fiat = ABRACAF
– Ford = ABRADIF
– GM = ABRAC
– VW = ASSOBRAV
Franchised
• 46% of the Franchised dealers are small
– Sell on average 40 units per month
• 23% are considered large dealers
– Sell more than 120 units per month
• Big Four
– Fiat/Ford/GM/VW
• 30% Dealer Body are considered large dealers
– Toyota/Nissan/Honda/Hyundai
• Majority fall in Small category
*J.D. Powers/Megadealer
August Trends
August Trends
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Fiat – 98,212 Units (45.8% over Aug. 2011)
VW – 88,765 Units (37% over Aug. 2011)
GM – 75,864 Units (35.6% over Aug. 2011)
Ford – 31,078 Units (10.7% over Aug. 2011)
Renault – 27,903 Units (58.3% over Aug. 2011)
Honda – 17,086 Units (119.9% over Aug. 2011)
Toyota – 10,119 Units (36.8% over Aug. 2011)
Nissan – 10,045 Units (86.2% over Aug. 2011)
Peugeot – 8,719 Units (11.7% over Aug. 2011)
Hyundai – 8,651 Units (-14.7% over Aug. 2011)
*Quatro Rodas
August Trends
• Record Month in August
– 405,518 Units *Fenabrave
• 31.7% Year over Year Increase
• 15.4% Month over Month Increase
• Previous Record 361,197 Units (December 2010)
• Increase led by Government Incentives
Government (Taxes and Fees)
• Taxa and Impostos
– Taxa = Fees
– Impostos = Taxes
• Different Types of Taxes
– 6 Taxes can affect vehicle pricing
– 4 Taxes are at time of sale
• PIS – Social Integration Program; 1.65% (federal)
• IPI – Tax on industrial products; range varies according to
engine capacity (7%-25%) (federal)
• COFINS – Social Security Financing; 7% (federal)
• ICMS – Tax on goods and services; 12% (state)
Government (Taxes and Fees)
• IPI Tax
– Controlled by Government
– Adjusted similar to our interest rates by the fed
– It has both positive and negative consequences
• Used car dealers can suffer when Franchised dealers profit
by a change
• II Tax
– Import Tax; 35% (federal)
– Any Manufacturer not building in Brazil pays this
• Hyundai until recently
Insurance Governance
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Susep (The Superintendence of Private Insurance)
Under the Ministry of Finance
Created by Decree-Law #73/66
Dealer must employ/outsource to a broker so sell VSC
Agencies can become brokers to sell VSC and other F&I
products
The Dealers
The Dealers
The Dealers
The Dealers
• Average Sales Person Sells 12-18 units
– 50% of the staff as is US
• All stores have greeters
– Sales Persons at desks working phones and internet
• Great Processes
– Sales
– Service
– Body Shop*
The Dealers
The Dealers
The Dealers
• Franchised dealers have no floor plan for used
vehicles
– Very Risky
• Dealers focus on turning used cars every 15-17
days
• In Metro areas like São Paulo dealers operate on
about 1/3 the land of dealers in the US
The Dealers F&I
• F&I Departments
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Dealers get large profit from Finance charges
Dealers intermingle car insurance with F&I
Many Dealers do not have F&I Departments
Bank reps in the dealership
F&I is more focus on the “F” and less on the “I”
• Accessories
– Large Profit center for dealers
– In some dealers hinders F&I sales
– Not focused on retention
Opportunities In Brazil
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Auto Auctions
F&I Training
F&I Consulting
Insurance Administration Support & Training
DMS integration
– 7 DMS companies have 90% market
– No integration into other systems
• Web Design
• Social Media
Observations/Recommendations
• Perform Recon of the Culture and Environment
• Best way to enter Brazil is with a “Partner”
• Huge Opportunity/Huge Risk
– Big Profits
– Big Costs
– Using a known source is best of both
eHow Money
Tips & Warnings
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Nearly any path to a new business in Brazil will go through Sao
Paulo to start or if not Sao Paulo then Rio de Janeiro.
Brazilian partners are important, or if not partners then local
managers.
Learning some functional Portuguese is an important gesture.
You will need to have patience in all factors of the process
Never speak Spanish to Brazilians
Always assure customs officials that you will be taking computers or
other technology out of the country when you leave.
The food and drink of Brazil is wonderful and exotic, but too much
will add to your waistline and a rapid pace.
How to Start a Business in Brazil | eHow.com http://www.ehow.com/how_2306611_start-business-brazil.html#ixzz265nxXnEW
Quick Recap
• Brazil 6th Largest Economy
• Brazil 4th Largest Car Market
– On Pace to become the 3rd Largest by 2016* or sooner
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Brazil fastest growing economy
Complicated Government & Laws
“Guided” is the quickest and most cost effect
New Opportunities for Process and Products
*Global Automotive Executive Survey 2012
Q&A