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October 21, 2014
Monday, January 13, 2014

Impact of new tax rates on premium brands

By Carlos A. Pefaur
Herald Staff
The recently approved tax hikes that levy a rate of 30 percent for cars starting at 170,000 pesos and 50 percent for those above the 210,000-peso mark (dealership values) chiefly affect the premium segment as well as the medium segment’s top range.

In order to get an idea of how the modifications will reverberate across the premium segment, the Herald spoke with BMW Group Argentina CEO Alejandro Echegaray, who said that “it will take the first few months to adapt. We will see how the market reacts, but sales will surely decrease.”

Echegaray is nonetheless optimistic, considering that the “good news in all of this is that competition will be far more balanced. As a consequence, we will all have to be more efficient in what we do. We will also have more balanced contact with the authorities, so we will be able to plan our production better, as well as the models we may want to commercialize under the new price brackets.”

This will “mean we will have to change certain car profiles, in order to have a competitive price in the sector.”

Asked if any of the BMW Group’s three branches will remain out of the reach of the new taxes (BMW cars, Mini and Motorrad motorcycles), Echegaray responds negatively, confirming that “unfortunately none of the products of the three brands will be unaffected by the range of internal taxes. We fall within the range because we are a premium brand, which will be the most affected for the public.”

Echegaray was also asked if BMW would consider decreasing equipment and engine levels so that a product can remain in the lower tax category. “What we want is for the car’s price not to increase so much. We will try to have more accessible products despite the tax. If we didn’t, cars would go up a lot in price, and we would lose a large share of the market,” he said.

“We are also trying to bring less equipped cars, but they will have the basic requirements that people expect in a top-of-the-range car like BMW or Mini.”

Despite such tactics, he confirms that the German automaker is “still confident in the country. The volume of the Argentine market is very interesting: 955,023 vehicles sold. Brands such as BMW seek markets with such potential. I believe there are and will be opportunities, and you have to know how to take advantage of them. There must be much focus on post-sale service and customer service.”

Echegaray recognizes that the new tax rates will drag into the used car market, as they will accompany the rise in new car prices.

The BMW Group Argentina has 300 BMW vehicles on the way, 90 Minis and 100 motorcycles.

Today, in Argentina there are 25,000 BMWs and Minis and 3,000 motorcycles. These quantities make post-sale services an interesting opportunity for dealers, Echegaray says.

“We have 10 BMW dealerships, with two additional sales locations. For Mini we have seven dealerships and BMW Motorrad has eight.”

The group CEO concludes by affirming that 2013 was “one of the best years for the BMW Group in Argentina for the three brands, with 4007 BMW cards sold, 736 Minis and close to 2,000 motorcycle units. This is a very good result for the brand after two very difficult years.”

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