Crossing Borders

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(No Transcript)
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Crossing Borders

• New International Hot Spots for FI

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Objectives

• Brazil Basics
• Economic Overview
• Industry Landscape
• Government and the Automotive Industry
• The Dealers
• Opportunities
• QA

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Who Am I?

• 16 Years Retail Automotive Experience
• The Providence Group
• JMA
• The McDavid Group COO/GM
• Began Opening Brazilian Market in 2010
• Eu Estou Aprendendo Portugues
• (Im Learning Portuguese)

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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

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Brazils Economy

• Brazil is the 6th largest economy International
  Monetary Fund
• Brazils 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

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Brazils 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

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OEMs (Brands)

• 38 Brands in
• Brazil
• The Big Four
• FIAT
• Ford
• GM
• VW

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OEMs

• Chinese Brand Presence
• Chana
• Chery
• JAC
• Lifan
• Korean Brands
• Hyundai
• KIA
• SsangYong
• Other Notable Brands
• Citroën
• Troller

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OEMs

• 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

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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

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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

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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

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August Trends
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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

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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

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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)

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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

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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
  FI products

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The Dealers
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The Dealers
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The Dealers
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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

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The Dealers
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The Dealers
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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

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The Dealers FI

• FI Departments
• Dealers get large profit from Finance charges
• Dealers intermingle car insurance with FI
• Many Dealers do not have FI Departments
• Bank reps in the dealership
• FI is more focus on the F and less on the I
• Accessories
• Large Profit center for dealers
• In some dealers hinders FI sales
• Not focused on retention

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Opportunities In Brazil

• Auto Auctions
• FI Training
• FI Consulting
• Insurance Administration Support Training
• DMS integration
• 7 DMS companies have 90 market
• No integration into other systems
• Web Design
• Social Media

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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

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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-bra
  zil.htmlixzz265nxXnEW

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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

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QA