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The Brazilian automotive industry has seen many fluctuations in recent years. In the mid-1990's, the market was buoyant, inflation was low and the currency was stable. Today it's a different story; many dealerships are experiencing difficulties and unsold cars are beginning to overcrowd showrooms across the country. So did the automotive industry make a mistake when it invested so heavily in Brazil? Absolutely not. For one, Honda - the Japanese car and motorcycle maker - is a resounding success today in this part of the world. With nearly forty years of experience on these shores, Honda has achieved nearly 90 percent of the motorcycle market share in Brazil. Even during the most serious currency devaluations in 1999, Honda's sales in this sector continued to grow. Koichi Kondo, the CEO of Honda South America, explains that it has taken a lot of hard work to establish this position. "It has taken us some time to build our business here," he said. "And even now we have to work hard to pre-empt market fluctuations. But we don't use short-term strategies in Brazil. We look at ways to be successful over the next five or ten years. The long-term potential of our markets is very, very high. "We have developed what we call 'local competence'," he continued. "We don't import many parts anymore; most are manufactured here now. This has helped us to keep the price of our two-wheeled products reasonably low. Sadly, this is something that the automotive sector has been unable to do. Prices in the that sector have increased five times more rapidly." However, though Honda's two sectors of activity in Brazil - the car and motorcycle markets - have evolved at different rates, growth has been a common factor. "In the automotive sector, customers can better absorb price increases," said Kondo. "A new car is still a luxury item in Brazil, and buyers are prepared to pay for a quality product. This is why we have taken a qualitative approach to this sector: our car production capacity is only 25,000 units per year. This is quite small. So our strategy is to create a product of the very highest quality." "In the beginning, we imported the Civic model directly from Japan," he recalled. "But today, imports are simply not necessary since the car made in Brazil is just as good or better than the cars produced in the U.S. or even in Japan." "We are able to control quality in great detail at every stage of the process here," he said. "In my opinion, the Civic produced here in Brazil is now the very best in the world. Indeed, in many ways [he laughs], it is the Rolls-Royce of Civics." Generally, the income of a potential motorcycle buyer is much lower than that of a car buyer. So the company's focus in this market is different: quality is still a primary concern, but to reach the Brazilians motorcycles must also be affordable. If they cannot be made any cheaper, then other solutions have to be found. "In Brazil, the typical motorcycle customer earns between $245 and $286 per month, so under normal circumstances he wouldn't be able to afford a new motorcycle," said Kondo. "To counter this, we have developed a unique 'consortium' system. This offers potential clients the opportunity to pay for our products over a period of up to 60 months." Today, Honda's 'consortium' has a little over 700,000 customers on its books and nearly 300,000 of these are awaiting delivery. This means that the company is guaranteed 35,000 new customers every month. Even if the economic situation changes, these sales are assured. Honda is also aware that customers in this sector need to be stimulated with fresh ideas. For this reason, the company introduces a new model every year to rekindle demand. "We can do this because our production volume is so big," explained Kondo. "In 1992 we only produced around 45,000 motorcycles. Since then, we have increased that figure to 700,000. By 2005 we hope to have reached one million units per year. "Although Brazil is still a developing country, demand for our products is relatively high," he said proudly. "When I travel around the country, it's plain to me that there is more to come. I can see great potential here. Believe me, I never had this kind of conviction in Europe or in the U.S."
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