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Crossing Borders

Crossing Borders. New International Hot Spots for F&I. Objectives. Brazil “ Basics ” Economic Overview Industry Landscape Government and the Automotive Industry The Dealers Opportunities Q&A. Who Am I?. 16 Years Retail Automotive Experience The Providence Group JM&A

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Crossing Borders

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  1. Crossing Borders New International Hot Spots for F&I

  2. Objectives • Brazil “Basics” • Economic Overview • Industry Landscape • Government and the Automotive Industry • The Dealers • Opportunities • Q&A

  3. Who Am I? • 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)

  4. 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

  5. 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

  6. 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

  7. OEM’s (Brands) • 38 Brands in Brazil • The “Big Four” • FIAT • Ford • GM • VW

  8. OEM’s • Chinese Brand Presence • Chana • Chery • JAC • Lifan • Korean Brands • Hyundai • KIA • SsangYong • Other Notable Brands • Citroën • Troller

  9. OEM’s • Standard Warranty • 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

  10. 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

  11. 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

  12. 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

  13. August Trends

  14. August Trends • 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

  15. 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

  16. 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)

  17. 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

  18. Insurance Governance • Insurance Governance • 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

  19. The Dealers

  20. The Dealers

  21. The Dealers

  22. 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*

  23. The Dealers

  24. The Dealers

  25. 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

  26. The Dealers F&I • F&I Departments • 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

  27. Opportunities In Brazil • 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

  28. 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

  29. eHow Money Tips & Warnings • 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

  30. Quick Recap • Brazil 6th Largest Economy • Brazil 4th Largest Car Market • On Pace to become the 3rd Largest by 2016* or sooner • 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

  31. Q&A

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