How automobile supplier relationships work in Latin America - Claudio Ferreira

Among the most successful car brands in Latin America in terms of direct fleet sales are Volkswagen, Fiat, Renault, Toyota, Nissan and General Motors (mainly Chevrolet), but how should they treat their relationship with rent-a-car agencies, corporate fleet leasing companies, and fleet operators of large multinationals?

This is just one of the questions addressed in my interview with local corporate car sales specialist Claudio Ferreira, a 26-year veteran in B2B and B2C sales and business development who has worked for companies such as Volvo, Renault, Peugeot, General Motors, Nissan, Toyota, and Volkswagen.

Join Global Fleet in this one-on-one as we get a taste of what’s happening in the region, mainly in the two largest markets of Brazil and Mexico.

Fleet LatAm editor Daniel Bland and Claudio Ferreira (source: Global Fleet)

First of all, what kind of discounts can a car rental or leasing company, or even a large multinational fleet purchaser, get in Latin America?

Ferreira: In Brazil, large-scale purchases usually entail discounts of 25-32 percent, maybe even 35 percent. As for payment, purchasers are given 60, 90, or 120 days to pay, depending on the volume of cars purchased and the car brand. Keep in mind that cars are delivered on a monthly basis over a stipulated period of time (e.g. 3,000 cars a month).

With larger volumes (e.g. 15,000+), the buyer has more bargaining power of course. With lower volumes (e.g. 250 cars), the discount is less, and payment is usually immediate. Contract terms are probably similar in other countries but most of my contracting experience is here in Brazil.

As a final note, remember that discount is not everything. You need to negotiate other terms such as deadlines, aftersales details, and servicing issues.

Should automakers in Latin America focus on selling to rental car agencies or corporate leasing companies?

Ferreira: First of all, let’s look at the difference between the two.  For an OEM, a car rental agency usually renews their vehicles once a year. Regarding corporate leasing, renewal usually takes place every three years for an executive (benefit) car and every two years for an operational (work) car.

So, when dealership (retail) performance is low, pushing for more sales to the rent-a-car market should make more sense than pushing the corporate lease market as it impacts the retail market more.  

We are not only talking about a shorter product life cycle which needs quicker replacements but larger volumes when closing deals. These are billion-dollar contracts with thousands of cars. This, however, needs to be well-managed as having large rent-a-car volumes could create a negative impact on the brand.

Of course, corporate leasing is still an important market and it has been growing in many countries, especially here in Latin America.

Do strategies differ among brands?

Ferreira: In Brazil, Japanese brands are not really open to giving significant discounts for fleet purchases and this is the same for most premium car brands. Volvo has had some success in the country, but profitability has been low. Audi is also quite aggressive in the B2B market.

In Mexico, the scenario is a bit different as Nissan [a Japanese brand] is doing quite well there. In terms of premium brands, BMW and Audi are also very well structured and aggressive when it comes to fleet sales for corporate leasing. Mercedes seems to be a close second.
 
In general, car brands do develop a business strategy “DNA” which is followed across borders but there could be some differences depending on the country.

Considering the 2020 pandemic, how does this change things?

Ferreira: Well, vehicle production is low this year. As such, less focus is being put on giving large discounts to third party vehicle suppliers and more focus on higher per-unit profit sales like retail.

And what about the strategy of leasing companies in Mexico? How does it differ from Brazil?

Ferreira: Unlike Brazil where local companies are the largest players [Localiza, Unidas, Movida], mainly multinationals control the market in Mexico [Element-Arval, ALD Automotive, Leaseplan].

Moreover, operations in Mexico are more streamline as there is less red tape. Mexico also has the benefit of the value-added tax (VAT), income tax reimbursements, and other fiscal benefits for corporations. You don’t need as much capital in Mexico.

In Brazil, Localiza and Unidas are planning to merge. What do you think about this and do you believe antitrust regulator Cade will approve their plan?

Ferreira: This is a very intelligent move on their part as they are combining the country’s rent-a-car leader (Localiza) with its corporate leasing leader (Unidas). Moreover, they have the intermediary product of subscription service which includes supplying Uber, a market of some 800,000 drivers nation-wide.

In my opinion, I see the group eying mobility-as-a-service (MaaS) and it will likely push these types of services in Brazil and even in other Latin American countries. Localiza has recently contracted a team of mobile-app developers so keep an eye out.

As for Cade, I think it will approve the merger as long as the two maintain separate structure between Rent-a-car and Corporate Leasing. Let's wait and see.