Germany’s Volkswagen AG, which has its Latin American headquarters in Miami, is challenging Japan’s Toyota Motor Corp., also with a regional office here, for a slice of a small but expanding market: light pickup trucks and vans, known in the auto business as light commercial vehicles.
“Toyota has been the owner of the light commercial vehicle market in Latin America for many years, but we are making a major effort to gain market share,” said Fernando Badia, vice president of operations at Miami-based Volkswagen Group Latin America, who heads the company’s efforts to expand its VW Commercial Vehicles brand in the region.
In this battle for market share, VW Commercial Vehicles is pitting its four-door, diesel-powered Amarok pickup truck against the ruling champion, Toyota’s Hilux pickup, which comes in several different models but is not sold in the United States. VW also sells four other light commercial vehicles in the region — the T5, Crafter, Caddy and Saveiro. In addition to the Hilux, Toyota offers the Hiace van and sport utility vehicles like Fortuner and RAV4.
Since opening its Latin America regional office in Miami in 2009, VW Commercial Vehicles has built a network of importers, dealers and service points in the region, starting with and expanding on the existing VW dealership structure, introduced its commercial line and increased sales to approximately 4.5 percent of the light commercial vehicle market in its operating area, Badia said.
“We started out with sales of 7,152 vehicles in 2009,” Badia said, “and last year we sold 17,229. In the first quarter of 2012, our light commercial vehicles sales are up 30 percent from last year. Our goal is to reach 10 percent market share by 2018.”
The strongest sales to date are in Mexico, Chile, Colombia, Uruguay and Peru. The top seller is the Amarok, which is made in Argentina.
In comparison, Toyota sold 101,000 light commercial vehicles in 2011, not including SUVs.
Even though this product line accounts for a small share of more than 5.7 million cars, trucks and other vehicles sold throughout the region last year, VW sees strong growth opportunities for its pickup trucks and vans. As Latin American economies continue to grow — even at slower rates than in recent years — new businesses are set up in urban and rural areas and millions of people join the middle class. These vehicles come in models that also appeal to consumers looking for passenger vans and family-friendly pickups.
“There are tremendous opportunities,” Badia said. In Chile and Peru, for example, mining companies need small commercial vehicles in addition to heavy trucks, he noted. Farmers, coffee growers, fishing enterprises and oil and gas operations also use these vehicles. “And small businesses are being established all over the region. Our job is to reach these new customers.”
Badia, an industrial engineer from Argentina, is responsible for 21 countries in Latin America, excluding Argentina and Brazil, which are advancing their own marketing programs along similar lines. VW Commercial Vehicles shares the Miami regional headquarters with VW brand Audi, which sells passenger cars in Latin America.
The auto sector in Mexico, Central America, South America and the Caribbean is highly competitive in all segments — passenger cars (ranging from economical to luxury), SUVs, vans, light and heavy trucks, buses — and cuts across a wide range of markets in 36 countries and territories, plus Puerto Rico. In overall vehicle sales, General Motors Co. said it captured 18.8 percent of the market in 2011, with sales of nearly 1.1 million Chevrolets, making it the market leader in overall sales. GM competes with Ford, Toyota, VW, Chrysler, Fiat, Nissan, Honda, Hyundai, Kia and Chinese imports.
VW Commercial Vehicles introduced its first products in Mexico in 2007, but its broader Latin America effort didn’t begin until the regional office was set up in Miami two years later.
Badia traveled through the region, meeting the businesspeople who imported Volkswagen passenger cars and who ran the distributorships. Showing them VW’s line of new commercial vehicles, Badia had to persuade existing dealers to expand their showrooms and repair services to accommodate the new product line, add new dealerships or find additional investors who would establish new dealerships.
“Volkswagen was perceived in the region as a metropolitan, passenger car,” Badia said. The challenges were to introduce the new vehicles, convince investors that the line would resonate with consumers and expand into rural areas, where customers are underserved, he noted.
VW Commercial Vehicles offered investors assistance in marketing and advertising, as well as other incentives, and launched a major media campaign throughout the region. It set up a 90-day trek for five Amaroks that drove from Argentina to Mexico, visiting dealerships along the way, ran the Amarok in the Dakar Rally and staged scores of publicity events. “We’ve invested over $6 million a year to promote our vehicles,” Badia said.
The efforts have paid off. Unit sales more than doubled, with Amarok leading the pack. The number of importers handling VW Commercial Vehicles has grown from three in 2009 to 22 today. Dealerships rose from 32 to 287 over the same period. An additional 36 dealers in Latin America are remodeling or adapting their facilities to begin selling Amaroks and other VW light trucks and vans, and Badia says he is planning to expand into Nicaragua and Trinidad and Tobago.
Toyota does not seem worried about the new competition. The Japanese company sold 101,000 units of light commercial vehicles in Latin America last year and 23,000 units during the first quarter of 2012, according to figures supplied by Miami-based Kei Fujita, Toyota’s senior executive coordinator for Latin America (excluding Mexico).
Hilux, Toyota’s 1-ton pickup, accounts for 90 percent of its commercial vehicle sales, Fujita said in an email, and General Motors and Nissan are the closest competitors. Fujita added that he was “not sure if [VW Commercial Vehicles] took our market share,” and said that while his company respects the competition, “We continuously improve our product and service in order to keep exceeding customers’ expectations. Through a long history, our Hilux has been perceived as the dependable and reliable vehicle.”
David Cutting, senior manager of North America Forecasts at LMC Automotive, which provides automotive production forecasts and market intelligence, said that Volkswagen has increased its share in the total pickup and van segment, but faces strong competition from other manufacturers. “The overall truck market in South America has become more competitive,” he said.
Badia does not seem concerned about the prospects for a long, uphill battle in the region.
“This will not be easy,” he said. “But the market is growing and customers find our vehicles very appealing … look what we’ve achieved so far.”