Inchcape: EU Auto Retail Distribution Dynamics

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

Could you give me a brief overview of your background in auto distribution in smaller and developing markets?

I have over 25 years of experience in the automotive industry. I initially worked for PSA Group in sales and marketing. I managed the Southeast Asia operation in the early 2000s. After that, I moved to Toyota's Europe headquarters in Brussels, where I was responsible for network development and restructuring. I also handled sales for Lexus, Toyota's premium brand. Later, I moved to Barcelona to work for SEAT, a brand bought by Volkswagen in 1986. I was the head of network strategy and development for SEAT and managed their own retail. After that, I worked for Fiat Chrysler in Torino, and then moved back to France for Nissan. I was the network director for Europe and later for the Middle East, Africa, India, and Australia. When the regions merged, I returned to Europe to the new headquarters, still in charge of network strategy for Nissan.

Could you clarify what you mean by network strategy?

Network strategy refers to the type of network footprint you want to establish in your market. It involves determining the number of retailers, their locations, the nature of the relationship between the OEM and the retailer, the margin, branding, and customer experience. Ultimately, it's about preserving the OEM's margin while ensuring the retailer also has a sufficient margin. It's a role that involves seeing all the issues from the OEM's perspective, as you deal with daily challenges related to new product issues, pricing, and so forth.

Why would an OEM use a retailer like Inchcape? Why not handle everything themselves?

To clarify the terminology, Inchcape serves as both an importer or distributor and a retailer, for instance in the UK. So, we're discussing why an OEM would use importers to conduct business in certain markets, correct?

Yes. My understanding is that in the UK, Inchcape only acts as a retailer. However, in some markets, they are both the importer and the retailer. In others, they're the importer and partially the retailer, managing a network of third-party retailers. In markets, like Belgium for Toyota, they're just the importer. I'd like to discuss why an OEM would choose any of these models and how they might evolve. But first, why wouldn't these OEMs manage the importation and local dealer networks themselves, as they do in Germany and the US, for example?

Indeed, until recently, it was considered more cost-effective to focus on the larger markets. If we look at the automotive industry worldwide, the top 20 markets account for approximately 80% of total sales. The remaining 20% is seen as less strategic.

However, the automotive industry is currently experiencing significant disruption. This has been the case for many years, but now, with the advent of electrification and autonomous driving systems, it's becoming more pronounced. These developments mean that there will be less need for spare parts and after-sales business in the future.

Additionally, the emergence of software-defined vehicles is a significant step forward. This technology allows for remote diagnostics and preventive maintenance. Now, let's turn our attention back to distribution. The sales model is undergoing drastic changes. For instance, OEMs are now considering direct sales, a model pioneered by Tesla. They believe this approach to be more cost-effective, as one of the major burdens for OEMs is the cost of distribution.

Previously, the idea was to use importers for smaller markets, as they are closer to the customers and require less investment. This is why companies like Inchcape operate in smaller European markets like Greece and Belgium, and some markets in Northern Europe. In larger markets, OEMs typically establish national sales companies, such as Nissan France or Nissan Germany. However, new trends are changing this landscape and the business model is evolving.

OEMs are now considering the agency model for retailers. In a normal market, the retailer and the OEM are the importer. You have a contract between the retailer and the OEM. The idea is to move from this model to an agency model. In this model, the agent is remunerated through commission, which is a different approach. Initially, OEMs thought this model would be suitable, and it is where they want to go in Europe. However, it's proving complex and difficult to implement, leading to delays for almost every brand.

The complexity arises from issues such as data protection when invoicing direct customers. Despite these challenges, the trend towards the agency model is likely to continue. The question then arises, when you are dealing with an importer, can you also keep the agency model? And the answer seems to be yes. OEMs are pushing for the agency model, even where there are importers. For instance, if we look at Inchcape, I'm not sure about the situation in Belgium, but let's take Toyota as an example. Toyota is moving towards the agency model and would like Inchcape to implement the same model in Belgium.

Of course, there can be different interactions. You could have a full agency model or different contracts between the OEM and the importers. But at the end of the day, this is the current landscape of the industry.

With the agency model, the key difference is that the dealer doesn't own the car and can't negotiate the price? It's a fixed price set by the OEM. Given that this reduces the dealer's incentive to sell the car, because selling a used car stops its depreciation, if the car sits on their lot, it doesn't belong to them, it belongs to Toyota.

That's correct.

How do you address the change in alignment of incentives in the agency model? Dealers might push more used cars and might be less aggressive about selling new cars because they receive a commission, but it's not the same as moving the car off their books.

You're right. However, this is where the OEMs are realizing that they will have a balance of power. The larger you are, the better your negotiation skills. This is why in Europe, and this can apply to several markets in the world, there's a consolidation trend among the big retailer groups. In the future, the influence of these groups will be significant. They will be in a position to decide which brands they want to distribute. Of course, there will be contracts, but it's a bit more complex than that.

To be an agent, you need to have the brand identity, respect the sales process, and share part of your customer data, which is crucial. But you're not supporting the stock anymore. It's not a bad thing for the agent or the retailer group. The larger you are, the more pressure you can put on the OEM. This is why in Europe, there's a trend towards consolidation of larger groups. For instance, if you look at France, the biggest group should be ranked around 20 in the European dealer group. There will be some consolidation. I foresee some UK dealer groups making acquisitions in Europe.

How does this affect a company like Inchcape in, say, Chile?

In Chile, not so much. You're referring to the agency model and similar concepts, right?

Yes, the trend towards the agency model. How does it affect them?

The agency model is specific to Europe. It's also linked to European regulations and such. There are other larger trends, even in Chile. These include the development of online sales, less after-sales service in the future, and electrification. However, some brands and OEMs will still need distributors like Inchcape in smaller markets, which are not considered top markets. The biggest market in South America is Brazil, and then there's a significant drop in the rankings. So, it doesn't affect them much. This is why, if you look at Inchcape's global footprint, they are present in some smaller markets.

I'm trying to understand the benefits for an OEM of working through a distributor in smaller markets, like Singapore and Chile, as opposed to attempting to do it themselves. Could you shed some light on this, in these smaller markets. Singapore, for instance, isn't a developing market, but it's quite small.

Considering the size and potential of a market like Chile, it wouldn't make sense for a company to invest directly. They lack local knowledge and agility. For instance, Nissan setting up in Chile wouldn't be practical.

Could you elaborate on why it wouldn't make sense and perhaps explain why it's beneficial for a distributor to handle multiple brands in the same market? How does this increase efficiency?

With different brands, the back office operations are essentially the same. OEMs tend to have fewer demands in these markets compared to larger ones. For example, in Europe, they might require a specific number of bays dedicated to their brand. However, in a smaller market like Chile, they wouldn't scrutinize to that extent. This allows for economies of scale when handling multiple brands in a smaller market.

Let me share what I've gathered and you can tell me if it sounds reasonable. If you're a distributor with multiple brands in a market, you benefit from shared overhead costs, physical logistics, and building finance relationships. You can also manage multiple brands in the same store, increasing throughput across a fixed cost base. There's also the advantage of local market knowledge, knowing which cars and trims will sell well at different times of the year. Additionally, managing parts and service bays becomes more efficient with multiple brands, as logistics for parts can be shared and service businesses can overlap. This seems especially beneficial for brands with smaller market shares. Does this align with your understanding?

Yes, that's a valid point. Additionally, in markets like Chile, local regulations come into play. You need to establish a good relationship with local authorities. It's a different scenario if you approach with a large National Sales Company (NSC), which isn't cost-effective even in smaller markets, as it requires a minimum of 100%. Therefore, it makes sense to grow one importer for 80% of the world's markets, which only represent 20% of the global volume produced. However, the trend is towards direct sales, as OEMs believe it can lead to cost savings. This is their primary Key Performance Indicator (KPI) - to reduce distribution costs. However, this approach may not be suitable for all markets.

Let me pose a hypothetical situation. If you were a distributor in a market with several brands, you could still sell directly in that market on behalf of the OEMs. This isn't much different from owning dealerships, except for the number of physical locations. This model seems similar, but with the added benefit of economies of scale from increased density in direct sales.

That's correct. Let's consider Inchcape as an example, though it's not an accurate one since they don't operate in the Chilean market. As the importer, you would have the importer margin. However, you could also decide to set up your own retail outlet in certain locations due to pricing curves. This way, you accumulate both the distributor and retail margins. Of course, this would require investment, as property prices in Santiago are likely higher than in the countryside. But at the end of the day, it seems like a reasonable and profitable model for the importer.

Given your experience in managing networks for these OEMs, how do they decide which distributor to work with in these markets, like Chile, Argentina, Singapore, and others?

That's a good question. I can speak for Nissan, as they are also following this trend. The key deciding factor is the local footprint. For instance, if I'm Nissan and I want to move to an importer model in Chile, I would consider Inchcape as a potential local partner with international exposure, given their 20-year presence in Chile. This means they have the ability to negotiate with OEMs and so on. So, the local footprint and reputation are crucial. Speaking of Inchcape, they are well-known despite not having significant operations in major markets, except for the UK.

You mentioned other brands, and that's what I'm primarily thinking about. These Chinese OEMs are emerging. If you're Inchcape and you distribute Toyota in Singapore, along with a couple of other smaller brands, that's a good business, as long as Toyota remains successful. If BYD or Great Wall wants to get distribution in Singapore, would they be interested in working with you, Inchcape, even if you already distribute Toyota? Would they be willing to work with you if you already distribute another Chinese brand? Would they be willing to work with you at all, considering you're a Western company and they might prefer Chinese distribution? Similarly, what would Toyota's stance be? They might be losing ground, but they haven't lost yet. Would they want to sever ties with you if you took on BYD? I'm trying to understand the brand dynamics.

This used to be a hot topic for discussion.

Let me give you an example for clarity. I'm with Nissan, or rather, Renault Nissan. A few years ago, one of the major players in Africa was CFAO, a French company that distributes many brands across the continent. 10 to 15 years ago, CFAO was bought by Toyota indirectly, making CFAO essentially Toyota. Nissan canceled all importer contracts at that time because they didn't support the fact that CFAO, and by extension Toyota, was distributing their cars. However, 10 years later, they started discussions with CFAO again because they recognized CFAO's significant presence in Africa. This suggests that what might have been an issue in the past is not anymore.

To address your example, yes, you would need to negotiate with Toyota. But in my opinion, this is not a major obstacle. There are many examples where importers distribute well-known brands. And of course, with the emergence of Chinese brands, they're taking on Chinese franchises. It's definitely not a big issue. If you look at large distribution groups, I believe Inchcape has a partnership with Great Wall or is exploring different opportunities.

They have relationships with a few other Chinese brands, yes.

If you look at large distribution groups in Europe, like Emil Frey, which is the number one in Europe with a turnover of 15 billion euros, they are adding Chinese brands to their portfolio and distributing many traditional OEMs. So, definitely, it's possible.

So, Nissan wouldn't have an issue if I operated a Nissan BYD Great Wall Toyota Ford dealership?

Nissan, could face some issues. However, Nissan currently holds a 3% market share in Europe. The balance of power is not in Nissan's favor, and they will have to accept the presence of Chinese brands in showrooms close to theirs.

Chinese brands are seeking facilities and square meters because everyone initially thought that the online sales model with own retail was crucial. However, it's becoming clear that traditional dealerships are also necessary. To answer your question, having well-known OEMs and Chinese brands in the same portfolio will become less of an issue. Inchcape, for instance, is looking forward to opportunities with multiple Chinese brands.

That's interesting because that's what they claim they're trying to do. However, I've been concerned that they have an incumbency problem. Their current customers and distributor OEMs might not be thrilled about them partnering with new OEMs. This could lead the new OEMs to partner with someone else, build that relationship, and then it's hard to switch. So, they might end up getting overtaken by their partners. Are you suggesting that I shouldn't worry about this and that they'll be successful in signing up these Chinese brands, regardless of who wins in the end?

Yes, I believe so.

Should I be concerned that Chinese brands might be interested in working with other distributors? They might want to work with distributors dedicated to them, or they might want to work with Chinese distributors. I think Inchcape is very serious about avoiding corruption and bribery. This is crucial for brands like Nissan and Toyota. However, a corrupt distributor could be a feature for BYD and Great Wall. There could also be geopolitical reasons why they wouldn't want a UK company as their distributor, given the significant influence of the Chinese government in these companies. They might prefer to work with non-UK distributors. Have you heard anything about these issues, or am I just speculating?

That could be a point, but I don't see it happening. If I look at Chinese brands entering Europe, they have different ways of doing it. Some can do direct sales, but now they are trying to partner with large groups like Emil Frey and some big groups in the Netherlands. I don't see why one of the biggest UK dealer groups cannot be an importer of Chinese brands in Europe.

But in Europe, there's less corruption. However, in developing countries, there's likely to be more corruption, and Inchcape probably isn't involved in it but corruption has its benefits. So, I wonder if Chinese brands would want to partner with a corrupt distributor.

Could you be more specific about the type of corruption you're envisioning?

Imagine a scenario where a local Chinese businessman partners with a local Chilean businessman. The Chilean has strong political ties and some money, and they start importing BYD, Great Wall, and Changan cars. This is because someone in China suggested these brands, and they facilitate the process locally with some under-the-table payments. The Chinese businessman, who has party ties, does better because of the corruption.

You're right. This is a plausible scenario.

However, since you work in Europe, you might not have encountered this. Let me pose a different question. Let's say Volkswagen partnered with Inchcape, who I believe also operates in Chile. I'm using Chile as an example because it's the country I remember.

Yes, you're correct.

Now, let's say I'm not happy with my sales performance in Chile because I'm losing market share. And let's say I'm losing share because BYD, Changan, and Great Wall are all gaining share. And let's say they're also distributed by Inchcape. Naturally, I would blame the distributor for my loss. How difficult would it be for me to change distributors?

First of all, you have a contract. This contract includes performance indicators, bonuses, and so on. You can leverage these. Secondly, yes, you could potentially change, but it's quite complex. I've done this in some markets. Changing the distribution in a country isn't easy because you need to have the right group. For example, Volkswagen would look for a group as professional as Inchcape, which isn't easy. It also takes time, not just because of the contract, but also due to confidentiality. This has to be very confidential because otherwise, you could have issues with your distributor, stock, and so on. So, if your question is whether it's simple to change, the answer is no. It's very complex to change distributors in a market. So, if I were Volkswagen and I was frustrated, I would put pressure on Inchcape and try to find a solution before changing distributors.

Could you help me understand a bit better why it's so hard to change?

The main reason it's hard to change is that you need to find a group that can provide the same level of service and is willing to invest. For instance, if Volkswagen's market share is decreasing, a new importer would have to invest in marketing. It's not that simple. They would also have to buy the remaining stock. So, it's quite complex. It's not done overnight. It's not rocket science, but it takes time and needs to be carefully prepared. Furthermore, in some smaller markets, there aren't many local players with a deep understanding of the market.

I believe it really boils down to the local distribution options in places like Chile or Singapore. Who else could you collaborate with and what kind of infrastructure do they have?

In Singapore's case, which I had some experience with a few years ago, it's not that simple. You need to target the right group, which should have some facilities. Most of the time, they are already associated with other brands. It's a time-consuming process. I recall it was very confidential. You only change your structure if there's a significant issue that can't be resolved.

In Singapore, you mentioned that if they're already associated with another brand, they wouldn't take on more brands. Could you elaborate on why the fact that they're already with another brand matters?

For Inchcape?

You were discussing Inchcape in Singapore, mentioning there are only so many distributors, each with different facilities and capabilities. But you also mentioned that some of them are already associated with other brands, and I didn't quite understand that last point.

Yes, I see. This was 15 years ago, so details are a bit fuzzy. I was working for Peugeot at that time. We chose Sime Darby, who were distributing other brands. Sime Darby was very confidential towards their brand. There was a representative involved. It's usually a one-year process. In the case of Volkswagen, if you're losing share, you're losing money. So, you also need to discuss the margin for your new importers. It's not as simple as it seems.

How would you apply pressure if you're unhappy in that scenario? Would you just threaten to leave?

Most of the time, you have a contract, typically on a three to five-year basis. The first means of pressure is simply not renewing their contract. Then you can play with the importer margin, which is a form of financial pressure. They need to invest in the facilities and the brand identity, but at the end of the day, it's a financial pressure.

The problem arises if you say that you're going to raise the prices or lower the discount on the car. They might argue that they would have to increase retail prices, leading to a loss of more share, correct?

Yes, but depending on the brand, they are supposed to sell at a recommended selling price. Most of the time, it's a matter of negotiation. Having done this for many years, it usually ends up as a compromise.

I suppose there's real uncertainty about the quality of the next distributor you might switch to. They might not be any better.

Yes.

When you're negotiating with a distributor in a secondary market, what are the key points of discussion? Is it the discount to the Manufacturer's Suggested Retail Price (MSRP), the volume of cars, or the mix of cars? What are the main aspects in the relationship that you focus on?

We negotiate all those aspects. The primary indicator is the number of cars on an annual basis because the number of cars determines the margin level for the OEM. Then, the investment the importer should make. This includes marketing investment, retail investment, and the level of after-sales turnover. As an OEM, you also negotiate the level of parts the importer is going to buy, as well as diagnostic tools. Ultimately, it's a financial negotiation. The key KPI is the commitment to a certain number of cars, for instance, 5,000 cars this year. This is tracked on a monthly basis. However, in smaller markets like Chile, the focus is not as intense. I would typically discuss the business plan with the managing director twice a year and set new targets.

You mentioned that brands have become more open to having different rival brands in the same distribution network. Are there still any major restrictions? Are there still any brands that won't ever mix, for example, seeing a BMW, Volkswagen, Toyota, and Mercedes dealership on the same street?

Companies like Volkswagen and Stellantis, due to their extensive portfolio of brands, will prioritize their own brands. For instance, if you represent Volkswagen in Chile, Volkswagen will pressure you to represent SEAT and Skoda rather than a Chinese brand. The same goes for Stellantis with all the Fiat brands and former Peugeot. However, I don't see any blocks from any OEM. The industry is much more open than it was 15 years ago.

The balance of power is shifting towards distribution rather than the OEM, especially in smaller markets.

In such markets, an OEM will never go with a national sales company because it doesn't make sense. If you are a well-known organization with a reputation, it's a kind of business for life, although I'm exaggerating a bit.

What is Inchcape's reputation?

Inchcape has a good and professional reputation, but it's known for not investing heavily in their brands. It specializes in somewhat exotic markets. If I were an OEM, I would expect strong negotiations with Inchcape regarding financial aspects. Inchcape has represented some brands for a very long period in some markets. Its reputation is backed by numbers. Inchcape may be in the top three retailers in the UK, but its international exposure makes it well-known. The brand name is recognized.

I'm referring to the distributor business, not the UK retailer. How does Inchcape's technology compare to that of other importers and distributors?

Honestly, I'm not sure about the specifics as I'm not closely involved with them. When you refer to technology, you mean in all aspects, correct?

Yes.

As I mentioned, I'm not directly involved with them. However, from what I've heard in the industry, they are quite innovative. They have an online sales platform and are actively communicating. They are striving to improve and align with the new sales business model and the new way of distributing cars.

You mentioned that it's complex to switch distributors and it's not a major area of focus. How often do OEMs change distributors? How long do these relationships typically last?

That's a difficult question to answer globally, and I don't have specific figures. But if you look at Nissan, for instance, in their major regions such as Africa, Middle East, Europe, and so forth, I don't think they change more than two or three distributors per year. And when I say three per year, consider that there are about 150 markets. So, when you have an importer contract, it's typically a long-term relationship, regardless of the contract terms.

Do you think it's becoming easier or harder to change distributors over time?

It's becoming easier because as the distribution is globally disrupted, there are new entrants in the market. This could tempt you to partner with them. There are also new investors in distribution, so there are more players than before. The regulations, at least in Europe, favor distribution, so it is easier. However, for the markets that account for 20% of global sales volumes, this is not a top priority for the OEMs. As long as you have the right partner, you won't waste time trying to change. I don't know the specifics of Volkswagen's situation in Chile, but you would need very good reasons to change your distributor there.

You manage the distributors for Nissan in the Middle East and Africa, correct? That's 150 countries.

Yes.

Of those distributors, how many are single brand distributors? How many are multi-brand distributors? In other words, working with Nissan and another OEM.

The setup and models in this region are quite diverse. In the Middle East, Nissan has been partnered with some distributors for 50 years. This is a long-term relationship. Among these, I would say, in the Middle East, 80% are single-brand Nissan. These are historical. The situation in Africa is different. Here, we have set up partnerships with groups that specialize in Africa. They are all multi-brand. In more strategic markets like Saudi Arabia, we have established two importers who are multi-brand because this is a state organization, so we need to engage with the key players. So, it's a mix.

You mentioned that Nissan has two importers in Saudi Arabia.

Yes, it's a historical model. One for one part of the range and the other for the other part of the range. It's an unusual model.

If Inchcape were to approach you about acquiring some of these African distributors or perhaps some of these Middle Eastern distributors, and then hopefully over time acquiring other brands' distributors, would you welcome this because it would professionalize the process, or would you not? I'm trying to understand your view on this as it aligns with their roll-up strategy.

I think it would be welcome. In Africa, for example, Nissan made a significant mistake 10 years ago by terminating the contract with CFAO because CFAO was acquired by Toyota. This showed a lack of professionalism. If Inchcape comes to Nissan with a good proposal in a market where they have some relationship or are ready to invest, I think it would be welcome. The Middle East is a bit different because of the long-term partnerships in some markets. It would be difficult for anyone to enter the Emirates market, for example. However, in some markets, it could work because the relationship is not so good. As I initially stated, if you have a long-term relationship and no major issues, you keep your importers. In the case of Africa, we don't have long-term relationships and we have some issues. So, we are ready to discuss with professionals.

If I understand correctly, Inchcape typically purchases its cars at about a 24% discount to the MSRP when they're the importer and the retailer. Is that standard?

You mean the importer margin?

Yes, the importer and retailer gross margin.

It seems high, but not unrealistic. Those are some numbers I can see. Around 20%.

Has that decreased over time, or has it remained stable? How has that evolved?

Are you referring to the importer?

Yes.

Again, it's a market-by-market approach. For instance, in Germany, retailer margins are typically large. The business model is under pressure, so OEMs are starting to drastically reduce their distribution costs. However, if we consider the 20%, 24%, it has been relatively stable over the years. There isn't a single answer as it depends on the market. But no, the 20% you mentioned has been quite stable over the years. I don't see it moving to 15%.

And I suppose the challenge for the OEM is if, let's say it's 21%, and you start asking for it to be 18%, the distributor may have to reduce the number of locations, cut the sales budgets, raise the prices, and all of that could hurt your sales. It's like squeezing a balloon.

It's a business discussion. You have 20%. With this 20%, you are expected to invest a certain amount in marketing, and in retail. If you sell less than your partner, Inchcape will ask for an additional discount. And yes, you're right. This is where Inchcape's reputation for not investing much comes from. They have been very strong in their business discussions, at least in my experience. Like every organization, they are very focused on the bottom line, which makes sense.

Are there other aspects I should consider as I think about how Inchcape's distribution business evolves over time, over the next 10 years?

I believe Inchcape is smart enough to adapt to sales trends and business models. I don't think they will enter markets with a lot of competition. That's why you don't see them in Europe. They have specific strengths in certain areas and I see them developing in these areas. I believe the Chinese market could be an opportunity for them to add those brands to their portfolio and conquer new territories. The general trend is, in my opinion, favorable to distribution groups, and Inchcape has competencies and strengths. They are very well established in some areas.

In the 150 markets you're in, do Tesla and BYD and other Chinese brands, Tesla not being Chinese, have established distribution? Or is that something they still need to build out?

Tesla is very specific. So, are we talking about Chinese brands?

I'm considering the new electric manufacturers, particularly the Chinese ones and Tesla from America. Have they established their distribution networks yet? Have they selected distributors?

I can't recall the brand, but Al-Futtaim, one of the largest distribution groups in the Middle East, has acquired a Chinese brand. I've seen all the Chinese brands entering Europe, some through partnerships with distributors. However, they haven't done so in every market. If you're an importer, now is the right time to start discussions.

There's a bit of a land grab happening? Chinese brands are choosing their distributors?

Exactly, that's correct. I can tell you that I'm talking to them on a regular basis now. This is happening in Europe and not just there.

And what about Tesla? Have they chosen distributors worldwide?

Tesla is unique in that they have a single model and their own distribution. In my opinion, it would be very complex, in the future, for them not to rely on distributors or retailers in some specific markets.

How are they going to manage without distribution in Mauritius?

Mauritius is a different story, particularly with electrification. But you're right, if Tesla wants to expand, they will have to modify their business model slightly and they will need to enter some markets with distributors. Definitely. But I see them as less aggressive than the Chinese at the moment.

I just want to clarify. The Chinese brands, like Changan or Great Wall, don't care if you have BYD, do they?

They don't mind. To be very open with you, I've been in contact with Changan. They are in the early stages of seeking a presence in Europe and I believe if they can find a solution, they won't mind that BYD is nearby.

Do you have any idea if a Chinese brand would prefer to go with Inchcape or another company? I suppose it's a market-by-market analysis.

Yes and no. If I am Chinese brand and I'm unfamiliar with how things work in Africa, I would tend to simplify things. If I have a strong partner, I think I would rely on them.

Right. If I know they're great, I'm going to ask them to invest alongside me to grow my business in this new place?

Correct. I'm quite surprised by their level of knowledge today. In some areas, I believe Chinese brands are considering Europe in the same way Europe considered China 30 years ago. They have attractive products, but they are still lacking the right people and the right organization. They are exploring a new market with regulations that seem complex to them. Therefore, they tend to seek support from professionals and importers, as in the case we are discussing.