GPI Brazilian Market Overview - 'VALUE DRIVEN' November 11-12, 2014 - Group 1 Automotive
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‘VALUE DRIVEN’
GPI Brazilian Market Overview
November 11-12, 2014
Copyright © 2014 Group 1 Automotive, Inc. All rights reserved.
www.group1auto.com
Forward Looking Statement
This presentation contains "forward-looking statements“ within the meaning of the Private Securities Litigation
Reform Act of 1995, which are statements related to future, not past, events and are based on our current
expectations and assumptions regarding our business, the economy and other future conditions. While
management believes that these forward-looking statements are reasonable as and when made, there can be
no assurance that future developments affecting us will be those that we anticipate. In this context, the
forward-looking statements often include statements regarding our goals, plans, projections and guidance
regarding our financial position, results of operations, market position, pending and potential future
acquisitions and business strategy, and often contain words such as “expects,” “anticipates,” “intends,”
“plans,” “believes,” “seeks,” “should,” “foresee,” “may” or “will” and similar expressions. Any such forward-
looking statements are not assurances of future performance and involve risks and uncertainties that may
cause actual results to differ materially from those set forth in the statements. These risks and uncertainties
include, among other things, (a) general economic and business conditions, (b) the level of manufacturer
incentives, (c) the future regulatory environment, (d) our ability to obtain an inventory of desirable new and
used vehicles, (e) our relationship with our automobile manufacturers and the willingness of manufacturers to
approve future acquisitions, (f) our cost of financing and the availability of credit for consumers, (g) our ability
to complete acquisitions and dispositions and the risks associated therewith, (h) foreign exchange controls
and currency fluctuations, and (i) our ability to retain key personnel. For additional information regarding
known material factors that could cause our actual results to differ from our projected results, please see our
filings with SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K. Readers are cautioned not to place undue reliance on forward-looking statements,
which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-
looking statements after the date they are made, whether as a result of new information, future events or
otherwise.
www.group1auto.com 2
Brazil – Overview
Number of States: 27 – GPI operates in 3
States (Sao Paulo, Parana, and Mato
Grosso do Sul)
8th Largest Economy
2013 GDP: US$2.4 trillion
Real GDP Growth
2012: 0.9%
2013: 2.3%
5-year projected CAGR: 4.1%
BRAZIL
6th Largest Population
July 2014 Estimate: 203 million
2014 Estimated Growth: 0.8%
2030 Estimated: 220 million Mato
Grosso do
Sul Sao
Fast Growing Middle Class Paulo
Parana
4th Largest Auto Market
2013 Units sold: 3.8 million
5-year CAGR: 6.2%
2014E Unit growth: 2.6% – 3.6%
Source: CIA World Factbook, IHS, ANFAVEA, and the U.N. Population Fund
www.group1auto.com 9
Brazil Economic Outlook
Brazil GDP Evolution Vehicle Ownership in Brazil
(US$ in billions) (Cars per 1,000 Inhabitants)
2011 2012
$9,000 900 798 801
$6,000
$4,685 600
281 291 300 317
$3,000 $2,305 300
$1,345 178 190
69 81
$0 0
2000 2011 2030 China Brazil Mexico Russia U.S.
World
Ranking
#9 #7 #6
World GDP
2011 USA
2030 USA
21%
19% India
7%
Others Brazil
45% 6%
China
China Japan
14%
30% 6%
Russia
Japan 5%
6% Germany
4%
Brazil India Others
3% Russia Germany 6% 21%
3% 4%
Source: ANFAVEA and CIA World Factbook, PWC
www.group1auto.com 10
Brazil – Household Evolution
Potentially 10 million new customers by 2015
Middle class income earnings have been expanded by roughly 40 million Brazilians over the last decade
Households with Spending Power > EUR 11,000 per year
(Households in millions)
40.0
30.0 32.1
20.0 22.5
10.0
10.7
7.0
0.0
2001 2005 2010 2015E
Total
Households 45.5 52.9 57.3 64.6
Source: Roland Berger / Automotive Market Outlook
www.group1auto.com 11
Brazil – New Vehicle Unit Sales
New Vehicle
Unit Sales (millions)
6.0
5.0
5.0
4.5
4.0
3.4 3.4
3.0
2.0
1.7
1.0
0.0
2015E*
2014E*
2017E
2020E
1971
2001
2014E
2017E
2020E
1959
1962
1965
1968
1974
1977
1980
1983
1986
1989
1992
1995
1998
2004
2007
2010
2013
1990: Opening of the free trade
Source: ANFAVEA (1957 – 2012) and IHS (2013-2020)
*GPI forecast 2014E & 2015E
www.group1auto.com 12
Brazilian Automotive Brands
Historically
Dominant
Brands All Brands Currently in the Market GPI Brands
Main Players
1950–1980
Source: ANFAVEA (1957 – 2012) and IHS (2013-2020)
www.group1auto.com 13
Brazil – Auto Industry Dynamics
Traditional Big Four(1) brands have lost share over the last decade.
Market Share Evolution (by units sold)
Market Share
2005 2010 2017E
25%
23.7%
22.3%
20% 21.4% 21.5% 21.1%
19.4% 19.1% 18.8%
15%
15.1%
12.7%
10% 10.9%
9.4%
5%
0%
Fiat Volkswagen GM Ford
Source: IHS
(1)
Big Four brands include Chevrolet, Fiat, Ford, and VW
www.group1auto.com 14
Tax Impact / OEM Activity
Due to import and tax law changes, many OEM’s have recently built or officially committed to
build assembly plants.
GPI Brands
Nissan: Opened a plant in 2Q14 in Resende, in the state of Rio de Janeiro. Total Nissan capacity is now 200,000
per year with the new plant.
BMW / Mini: Opened a plant this month in Araquari, in the state of Santa Catarina. Capacity for the new plant is
30,000 vehicles per year.
Land Rover: Opening a plant in 2016 in Itatiaia, in the state of Rio de Janeiro. The planned capacity is 24,000
vehicles per year.
Mercedes-Benz: Opening a plant in 2016 in Iracemapolis, in the state of Sao Paulo. The planned capacity is
20,000 vehicles per year.
Toyota: Opened automobile manufacturing plant in Sorocaba, SP in 2H 2012.
Non-GPI Brands
Honda: Opening a new additional plant in 2015. Current Honda capacity built in Brazil is 120,000. The new factory
will add capacity of an additional 120,000, doubling the scale. The new plant is located in the city of Itirapina, in the
state of Sao Paulo.
Audi: Expanding a VW plant in São Jose dos Pinhais, in the state of Parana that will be completed in 2015. The
planned capacity is 20,000 vehicles per year.
Hyundai: – Plant opened in November 2012. Capacity is 150,000 units a year. Plant is located in the city of
Piracicaba, in the state of Sao Paulo.
Having local plants saves 30 percentage points of total taxes imposed on the sales price.
Source: ICCT.org, ANFAVEA and news articles
www.group1auto.com 15
Brazil – Auto Industry Dynamics
Most GPI Brands have gained share in recent years and localized production should support this trend.
Market Share Evolution (by units sold)
Market Share
25%
2005 2010 2017E 23.0%
20%
16.0%
15%
10%
8.7%
5%
4.8% 5.0% 4.6%
3.7% 3.7% 3.0%
2.9%
2.4% 2.0% 1.8%
1.0% 0.8%
0.4% 0.1% 0.3% 0.1% 0.1%0.1%
0%
(2)
Peugeot Toyota Nissan Mercedes (1)
Mercedes-Benz BMW Landrover Other
Other2
Source: IHS
(1)
2005 & 2010 Mercedes-Benz data includes Sprinter NV units sold; 2015 data excludes Sprinter
(2)
Other includes Renault, Honda, Audi and Hyundai, among others
www.group1auto.com 16Brazil – Future Consolidation
The Brazilian auto retail market is fragmented and under financial stress.
Number of Dealerships in Hands of Leading Groups (2010) Market Commentary
The auto dealerships market is
experiencing a transformation, in which
Top 15
monetized players are well-positioned for
19%
market consolidation
Alternatively, many groups are considering
Remaining a potential sale due to the following:
81% Lack of ability to fund the business in order to
adhere to OEM standards
Expensive for highly leveraged / under-
capitalized operators to properly stock new and
Total Number of Dealerships: 3,264 used inventory
Opportunity for and willingness of OEMs to
rationalize the dealership base
The groups are characterized by
geographic concentrations
Very few can be considered to have a national
presence
Main players have associated themselves with
auto assemblers as “exclusive distributors”
Source: ANFAVEA
www.group1auto.com 17Franchise Laws & Dealer Councils
Ferrari Law
Federal law governing OEMs and dealers
Law grants dealer councils and related OEMs authority to regulate their relationship
Dealers are granted an exclusive pre-defined operational area based on population density
Lifetime commercial concession contract
Dealers, via the dealer council, set the suggested consumer price
OEMs may require the dealer to sign commitments for inventory purchases of new vehicles
Dealer Council Strength
Dealer councils negotiates all aspects of the commercial relationship between OEMs and
dealers and must approve the following:
• Incentives
• Bonus programs and holdback
• Sales and service margins
• Advertising campaigns
Positions held within the Dealer Councils
Lincoln da Cunha Pereira
• President of BMW Motorcycles Dealer Council
• Vice President of Toyota Dealer Council
• Director of BMW Automobiles Dealer Council
• Member of the Board of Nissan Dealer Council
Andre Ribeiro
• President of Jaguar / Land Rover Dealer Council
• Director of Peugeot Dealer Council
Source: ANFAVEA and news articles
www.group1auto.com 18Brazilian Dealerships Differences vs. USA
Heavily dependent on new vehicle sales
Very high interest rates / floor plan cost
Undeveloped used vehicle sales model via franchised dealers (required warranty by seller)
Registration process prevents “spot deliveries”
Finance and Insurance (F&I) income is limited; luxury leasing is in its infancy
Lower facility investments (less space required for vehicle inventory and service)
Lack of sophisticated operating software
Volatile sales rates due to government intervention
Powerful dealer councils
www.group1auto.com 19GPI Brazilian Operations Overview www.group1auto.com
GPI Brazilian Operations
Purchased UAB in February 2013 for approximately $135 million USD,
of which 65% was paid in common stock, plus assumed debt of
roughly $62 million
Operate under the “UAB” name
Most respected Brazilian dealer group – introduced to GPI by
Volkswagen Group
Since acquisition of the business, we have:
Received and opened 1 Peugeot open point
Received 1 Jaguar / Land Rover open point
Acquired 1 Mercedes-Benz dealership; and
Committed to sell 3 Renault dealerships
www.group1auto.com 21Brazil Locations
Group 1 is aligned with growing brands in Brazil
20 Dealerships / 24 Franchises Mato Grosso do Sul
Locations
• 4 BMW; Campo Grande
• 2 Jaguar;
• 2 Land Rover;
• 1 Mercedes-Benz;
• 2 MINI;
Sao Paulo Locations
• 4 Nissan; Sao Paulo
• 4 Peugeot; Sao Jose dos Campos
Santo Andre
• 3 Renault(1);
Sao Caetano do Sul
• 2 Toyota; and BRAZIL Sao Bernardo do Campo
• 5 Collision Centers
Approximately 17,500 new vehicle unit
sales over past 12 months
Mato
Grosso do Parana Locations
Sul Sao
Curitiba
Paulo
Londrina
Parana Cascavel
(1)
The Company plans to divest the Renault franchises in 4Q14.
www.group1auto.com 22GPI Brazilian Management Structure
Lincoln da Cunha Pereira
CEO / Board Member
Andre Ribeiro Roberto R. Ferreira Eduardo Amaral Marques
Commercial Director CFO Director HR / Admin
Marketing Fixed Treasury Human
Resources
Accounting
Facilities
Purchasing
Information
Technology
www.group1auto.com 23GPI Brazilian Management Team
Lincoln da Cunha Pereira
Mr. Pereira, 52, has served as Chairman of UAB’s board of directors since October 2007 and legal representative of a public auto group from 1999 to 2005. He
incorporated Atrium Telecomunicações in 1999, and entered into an association agreement with JP Morgan Partners, GE Equity and Advent International funds,
which was acquired by Grupo Telefônica in December 2004. He began his activities at Cunha Pereira Advogados, where since 1995 he specialized in the
management and administration of athletes’ and race car drivers’ careers. He previously worked for Opportunity Asset Management and was the managing
director responsible in Brazil for Barclays de Zoete Wedd, the international investment bank of Barclays Group, and has worked for over 10 years at Midland
Bank Group (currently HSBC) in different areas, as well as at Banco Bamerindus do Brazil. He is currently the vice president of the Trade Association of São
Paulo (Associação Comercial de São Paulo). He has a Law degree from the Faculdade de Direito do Largo de São Francisco, USP.
Andre Ribeiro
Mr. Ribeiro, 48, one of the founding members of UAB, has served as director of commercial operations since January 2014. Following a long and successful
career as a professional race car driver in Europe and the U.S., he became an auto retailer in Brazil in 1998. He specializes in dealership operations, including
new and used vehicle sales, marketing, parts and service, finance and insurance, and quality. Mr. Ribeiro also represents Group 1 Brazil in multiple
manufacturer dealer associations as the president of the Jaguar, Land Rover Dealer Council, and as director of the Peugeot Dealer Council.
Eduardo Amaral Marques
Mr. Marques, 35, has served as director of human resources and administration of Group 1 Brazil since January 2014. He has over 11 years of increasing
management responsibility within Unilever Brazil and served as customer supply chain director for L'Oreal Latin America prior to joining Group 1. Mr.
Marques is responsible for information technology, administration, procurement and all facets of human resources.
Roberto R. Ferreira
Mr. Ferreira, 53, has a background in Economics and experience working for multinational companies in a variety of industries, in Brazil and abroad
(Germany and USA). Mr. Ferreira has served as CFO of Group 1 Brazil since June 2014. Prior to joining GPI, Mr. Ferreira acted as Finance Director of
Delphi`s wiring harnesses division in South America for 4 years. Prior to Delphi, he led the Corporate Treasury function of Cia Nacional de Acucar & Alcool,
a start-up venture of Riverstone, Goldman Sachs and Quantum private equity funds. Mr. Ferreira previously spent 12 years with Alcatel Lucent in the
telecom sector leading the Treasury & Project Finance areas for Latin America, and worked for Siemens for 12 years and ABN Amro Bank for 5 years within
finance and marketing areas.
www.group1auto.com 24Attractive Brand Mix
GPI vs. Industry New Vehicle Unit Sales YTD 3Q14 New Vehicle Brand Mix (YTD 3Q14 Revenues)
% Mix
100% Nissan Renault
8% 9%
Toyota Land Rover
20% Nissan
12%
BMW / MINI 16%
80%
Renault
16% Peugeot
Peugeot BMW / MINI 7%
27%
60% Land Rover / Jaguar
83% Toyota
16%
Other 21%
40%
23%
GPI brands are well-positioned for growth
Top-2 dealer group in:
• BMW
20%
1% • Land Rover
25% 7% • Mini
1%
6% • Nissan
0%
2% • Peugeot
UAB Industry Top-10 dealer group in Toyota
Source: ANFAVEA and GPI
www.group1auto.com 25GPI Dealerships in Brazil
BMW Nissan Land Rover
Cascavel Parque Curitiba
BMW / MINI Toyota
Londrina Sao Jose dos Campos
www.group1auto.com 26Business Mix Comp – 3Q14
New Vehicles
3Q14 Revenue & Gross Profit
Used Vehicles
Parts & Service
Finance & Insurance
2% 2%
4% 16% 4%
11% 8% 10% 13% 11%
28% 26%
17%
27% 36% 27%
39% 38%
42% 41%
10%
13% 71%
58% 54% 58% 11%
11%
32% 39%
19% 22%
Revenue Gross Profit Revenue Gross Profit Revenue Gross Profit Revenue Gross Profit
United States United Kingdom Brazil TOTAL
Total Company Parts & Service Gross Profit Covers 90% to 95% of
Total Company Fixed Costs and Parts & Service Selling Expenses
www.group1auto.com 27What GPI Brings To Brazilian Market Near Term: Better Capitalization More favorable inventory and facility financing Better financial discipline and controls Digital marketing expertise Sales operation best practice sharing Global OEM relationships www.group1auto.com 28
What GPI Brings To Brazilian Market Longer Term: More capable and efficient operating systems and software Extensive parts & service expertise Employee training resources Ongoing financial power to grow www.group1auto.com 29
Building Strong Reputation
Two GPI stores were honored with ranking in the Top 5 (#2 and #5) of 31 stores measured by a
major OEM Performance Ranking for July, August, and September of this year.
www.group1auto.com 30Why Brazil? Future GROWTH!
Over time, Brazil new vehicle market will grow quickly
Expect new vehicle unit sales of 3.4mm in 2014; expect flat growth in 2015
Down 8% – 12% from 2013
Market growth is over-weighted toward non-Big Four(1) brands in Brazil
Industry sales have grown at a 4.7% CAGR since 2008 and are estimated to increase ~27% over the next
five years
GDP growth likely to outperform U.S. over next five years
5-year CAGR:
United States: 2.4%
Brazil: 4.1%
(1)
5th Largest new vehicle sales market
4.7% 5-year CAGR (2008-2013)
Vehicles-per-population is one of the lowest in developed markets
Highly fragmented, little consolidation
Top 15 auto dealers represent ~19% of the total market
Numerous acquisition opportunities
Significant growth potential
Source: ANFAVEA, Roland Berger Strategy Consultants, and the IMF
Nissan Parque
(1)
Big Four brands include Chevrolet, Fiat, Ford, and VW
www.group1auto.com 31Positive Industry Projections
Sao Paulo International Motor Show
Impressive attendance of approximately 1 million people over 11 days, with 41 brands
displaying 500 vehicles across 915,000 square feet.
www.group1auto.com 32Summary
Brazilian auto market growth is inevitable
GPI has established a credible operating platform
GPI has established a world class Brazilian management
team
Local talent and OEM relationships will fuel a long term,
deliberate growth strategy
www.group1auto.com 33CORE VALUES
Integrity We conduct ourselves with the highest level of ethics both personally and professionally when we
sell to and perform service for our customers without compromising our honesty
Transparency We promote open and honest communication between each other and our customers
Professionalism We set our standards high so that we can exceed expectations and strive for perfection in everything
we do
Teamwork We put the interest of the group first, before our individual interests, as we know that success only
comes when we work together
www.group1auto.comAppendix www.group1auto.com
Operating Management Team - Corporate
Earl J. Hesterberg – President and Chief Executive Officer and Director
(April 2005)
35+ Years Industry Experience
Manufacturer and Automotive Retailing Experience: Ford Motor Company; Ford of Europe; Gulf States Toyota; Nissan
Motor Corporation in U.S.A.; Nissan Europe
John C. Rickel – Senior Vice President and Chief Financial Officer
(December 2005)
25+ Years Industry Experience
Manufacturer and Automotive Retailing Experience: Ford Motor Company; Ford Europe
Darryl M. Burman – Vice President and General Counsel
(December 2006)
20+ Years Industry Experience
Automotive-related Experience: Mergers and Acquisitions; Corporate Finance; Employment and Securities Law – Epstein
Becker Green Wickliff & Hall, P.C.; Fant & Burman, L.L.P.
Peter C. DeLongchamps – Vice President, Financial Services and Manufacturer Relations
(July 2004)
30+ Years Industry Experience
Manufacturer and Automotive Retailing Experience: General Motors Corporation; BMW of North America; Advantage BMW
in Houston
Wade D. Hubbard – Vice President, Fixed Operations
(May 2006)
35 Years Industry Experience
Automotive Industry Experience: Gulf States Toyota; BMW North America;
DaimlerChrysler Corp./Mercedes-Benz; Nissan Motor Corporation USA; Ford Motor Company
Mark Iuppenlatz – Vice President, Corporate Development
(January 2010)
15 Years Industry Experience
Automotive-related Experience: Corporate and Real Estate Development; Construction -Sonic Automotive; REIT
J. Brooks O’Hara – Vice President, Human Resources
(February 2000)
30+ Years Industry Experience
Automotive Industry Experience: Gulf States Toyota
www.group1auto.com 36You can also read
