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No terra incognita: Fleet management in Colombia

Like many other South American countries, Colombia is terra incognita for foreign visitors. They keep away for fear of drug cartels and/or guerilla fighters. True, those problems did exist - but were not as bad as many of you heard. And Colombia today truly is a welcoming country, with beautiful cities like Cartagena; exciting entertainment, like dancing the salsa in Cali; and interesting trips, like visiting the cano cristal (a mysterious colourful river in the middle of the jungle). But we're not here to discuss salsa or travel.

No: this article is about Fleet Management. But the introduction does make a valid comparison. A similar thing used to happen in Fleet Management: many of the multinational companies that operate in Colombia considered it terra incognita; so, rather than relinquish control over their fleet to a local leasing company (generally called 'rental companies', even if they provided either full-service leasing or fleet management), they thought it wiser to have direct control over their fleet. Direct and complete ownership, they thought, was a better protection of their operation and of their fleet users. But setting up your own dedicated fleet department is a complicated business, especially if your core business is in an entirely different field. You will need to hire a team of professionals to manage a fleet of a few hundred vehicles spread out all over this large and unknown land.

Penetration rate

And Colombia certainly is large: with an area of 1.14 million km2 and 49.3 million inhabitants, it's the 25th largest country in the world, and the 29th most populated. Considering Colombia's total fleet is only 5.6 million vehicles strong, that gives a ratio of 114 vehicles per thousand inhabitants. Not only is that well below the corresponding ratios for Europe (570) and the U.S. plus Canada (661), it is also lower than the average in Central and South America (176). So, Colombia's vehicle penetration rate is not just low globally, but also regionally.

And yet the Colombian automotive market also has its strong sides, not least in matters of production. This is because 60 years ago, the Colombian government decided to protect local automotive production by imposing high tariffs on imported vehicles. This incentivised local production - even though the government imposed a strange condition: manufacturers seeking permission to produce locally had to have a 4x4 vehicle in their portfolio. Local production led to strange bedfellows: GM and Isuzu ended up sharing a plant, as did Renault and Toyota, and Mazda and Mitsubishi.

Sales Top 10

By now, those strange combinations are a thing of the past. The only manufacturers still producing locally are GM and Renault, which are also the two top-selling brands in Colombia. Examining the figures for May 2017, the Top 10 of automotive sales in Colombia looks like this:

1. Chevrolet 22.5%

2. Renault 20.3%

3. Nissan 8.8%

4. Kia 8.4%

5. Mazda 7.9%

6. Ford 6.5%

7. Volkswagen 4.1%

8. Toyota 3.5%

9. Hyundai 3,2%

10. Suzuki 2.7%.

These manufacturers, and another 25, are well represented on the Colombian market, with a total of more than 680 dealers (sales + workshops) spread throughout the country. This is a very important point for fleet managers: in countries like Peru and Chile, almost the entire network is concentrated around the major cities - Lima and Santiago, respectively. But Colombia has many important cities apart from the capital Bogota, for example Cali, Medellin, Barranquilla, Bucaramanga, Cartagena, Manizales, etc. These cities are distributed throughout the national territory, and although the distances between them are not that great, the geography is quite challenging. A 500-km trip could take as long as 10 hours, sometimes even more. That is why having a good service provider with national coverage is essential for major companies thinking about acquiring a fleet in Colombia.

Fleet Sales department

The act itself of acquiring a fleet was a lot of hassle until a few years ago: you had to negotiate the vehicles in each city separately. However, things have since changed for the better. The distributors now all have a Fleet Sales department, which will help you with information on types of vehicles, with service providers for those vehicle types in the various parts of the country, and with delivery of the vehicles directly to the various cities where you need them.

In operational terms, acquiring the vehicle is the easy part these days. Then you must familiarise yourself with the wide array of measures to be taken - many of which are to be renewed annually - to ensure that you manage your fleet correctly. For example, you need two insurances: a mandatory insurance called SOAT, which must be renewed every year; and an all-risk insurance that is not mandatory, but still a 'must-have'. The vehicles are subject to a registration tax and also to an annual city tax - which obviously varies for each city where the vehicles are registered. All vehicles must have a road assistance kit, which contains a great number of items which must be updated annually, such as the fire extinguisher and the batteries for the flashlight. While it is not that difficult per se to manage these details, they are quite far removed from the core business of any multinational company. One final example: if your fleet includes trucks, you will need a special government permit that effectively registers those vehicles as part of a dedicated 'transport company'.

Fuel management

When discussing fuel management, there are various options. You could conclude alliances with a number of companies, on the understanding that not all of them would be able to service your needs across the entire country. Another option is to use a credit card specifically for fuel, but that will not generate any price advantage.

In terms of vehicle providers, it is a good idea to check out the local landscape. There are a range of excellent local companies, including Renting Colombia, Equirent, Rentandes and Avis. Also present on the market are a number of well-known international lease providers, such as ALD Automotive.

In conclusion: don't worry too much about your fleet in Colombia. It is not terra incognita: there are excellent vehicle brands available, excellent dealers and excellent renting companies to help you manage your fleet. So if you are thinking about entering the Colombian market, rest assured that your fleet will be in good hands; you will have plenty of time to go dance the salsa in Cali.

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CV Bloggers

Andres Jaramillo-Botero
SEPA Consultores - General Director

Andres Jaramillo-Botero is a Colombia-based consultant on Fleet Management, Public Transport and Asset-based Financing. He began his professional career in the financial sector, working as a stock broker. After finishing his MBA, he took up a position at Renting Colombia, the full operative lease subsidiary of Grupo Bancolombia. In a career spanning 15 years, he was the company's Regional Manager in Colombia, General Manager in Peru, and finally overall CEO. Andres also worked as the General Manager of the Group Express, a group of companies dedicated to public bus transport. He was responsible for moving 25% of the public transport passengers in Bogota, managing more than 2,500 buses. Andres is a graduate in Business Management from CESA, the Colombian School of Business. He also holds an MBA from England, and is currently obtaining a Master's in Innovation and Entrepreneurship from the University of Barcelona, in virtual mode.

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