Chinese commercial vehicle company to invest over $25 million in El Salvador

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By LatAm Reports Staff Writers

The DFAC Dongfeng brand expands in Central America with a large portfolio of commercial cars and in El Salvador will begin operations between September and October.

The new commercial vehicle brand of the company Dongfeng Automobile Company (DFAC) will enter the Salvadoran market in the coming months with an initial investment of between $7 and $9 million.

DFAC is the fourth largest Chinese commercial vehicle factory in the world that in alliance with the car distribution company Magna Motors, of Dominican origin, arrives at the Central American market.

Magna launched DFAC Dongfeng Central America last week in Cancun, Mexico, both for El Salvador, Guatemala, Costa Rica and Honduras. The brand is also found in countries such as Mexico, Colombia, Bolivia, Uruguay and Argentina, which will add more than 87 distributors in the region.

Javier Laínez, general manager of Magna Motors for Central America, explained to Salvadoran media that the investment with which they arrive in El Salvador in September is between $7 and $9 million in the first year of operations. The same amount will be for each of the Central American markets and includes inventories of spare parts and products, as well as renovations of the facilities where the offices will have and the hiring of equipment.

But the goal of the business group in the country and the region is long term. “The strategic plan is designed for the next three years. I mean, we have to have full national coverage in three years. That is independent from the creation of points for service coverage, which is also another strategic issue that is very much associated with the B2B relationship with the companies,” Laínez added.

The executive emphasized that they are projecting an investment that can exceed $25 million per country. “Because our growth is to get to about 8 to 10 per cent market share. It’s quite aggressive within the segment; we have a significant expectation of volume,” he said.

In the Salvadoran market they arrive as a “new player” who intends to change the current game, as they aim to seduce consumers with more competitive prices than those of other competitors and who would be between 15% and 20% below the prices of similar vehicles.

What kind of cars will they sell?

The portfolio of products they will offer are in segments such as pick-up 4×2 and 4×4, loading panel, microbuses, trucks, heads and buses, as well as their spare parts.

The catalogue includes dump trucks, chassis cabin trucks, trucks with palangana, 11.1 and up to 24 and up to 24 and 32 passengers, 1-ton cargo panels and a truck (head) capable of dragging 50 tons. Also, one of the innovations they plan to introduce to the market soon is a 100% electric truck of 3.5 tons, with an operating range of 355 km and a power of 65 KW, consuming 98.05 kWh.

The vehicles that will sell, although manufactured by the Chinese company, will have engines Cummins, Isuzu, Mitsubishi and Nissan, as Dongfeng develops products for these brands.

In El Salvador they will focus on marketing vehicles that they consider to have more demand, ranging from 1 ton to 10 and 14 tons, as they are traditional cargo vehicles that move a lot in the urban sector and that move goods in the interior of the country, Laínez explained.

In this regard, he mentioned that the 2.5-ton vehicle, which is 60% of the volume in El Salvador in the commercial car segment, whose average price of the competition is about $21,000 and $22,000, would be selling it at 20% below that price, that is, it would cost about $17,600.

Hugo Iraheta, manager of DFAC in El Salvador, emphasized that they are very identified what the Salvadoran user uses to a greater extent and that is why the focus of the new brand is to enter to compete with the models of greatest movement in El Salvador and with guarantees of 3 years or 200,000 kilometers, which happens first.

“This demonstrates the confidence we have in the product and how we also transmit this confidence to the final consumer, because being sure that our vehicle is covered by any factory damage during this period, gives that tranquility,” he said.

Laínez stressed that one of the strategies to enter the Salvadoran market is to ally himself with trade unions such as the Salvadoran Association of Vehicle Distributors (ASALVE), as well as with local banks.

“It’s a way to get in because obviously we’re going to be a new market participant and for us it’s very important to start with this spearhead that’s DFAC, because it’s looking for a mobility solution for the productive segment,” said the manager for Central America.

He also mentioned that they are looking for partnerships with companies that are accustomed to handling heads, transport entities that outsource to large industries and being able to be an option in that segment.

Laínez believes that in El Salvador there is a peculiarity that he has had very little incursion of new brands and therefore sees potential in the acceptance that Chinese DFAC vehicles may have.

“We believe that with the brand and we as distributors will be a generator of change within the market and within the segment. The commercial market is about 30% of the total industry, the volume of the industry. That makes it really weigh enormous and today it is concentrated on very traditional products,” said the regional executive.

Magna El Salvador will operate as an importer and direct distributor, managing the entire process from the factory to the final customer, i.e. the sale of cars, services and spare parts, they said.

In the next three years they plan to have three branches to cover the main headers, that is one that attends San Salvador (it would be in Old Cuscatlán), one in San Miguel and Santa Ana.

They will also sell Chinese buses

The manager of DFAC in El Salvador detailed that in the case of the buses manufactured by the Chinese company Dongfeng, the plan is to introduce buses but also large road buses for more than 60 passengers, but that will depend on the interest of the customers.

Iraheta added that public transport considers it fundamental and sees that at the moment there is “a good relationship with the country of origin of our product and it is ideal for us, not only because of the tariff issue, because at some point there may be benefits of this type, but also the market begins to know these types of products and certain stigmas that it can have on the product is beginning to be removed.”

In response, Iraheta indicated that they see a great opportunity for the Chinese brand and says it meets the needs for the country.

This article has been translated after first appearing in El Salvador