Luiz C. Lacreta is the General Director, Aftersales Operations for GM Brazil.

Could you describe how much Brazil's auto market has grown over the past few years? (The industry as a whole in addition to GM's numbers.)

Assuming Brazil's auto sales numbers are rising, why have they been increasing? What demographic changes are taking place?

The main fundamental reason for the growth is the overall economic growth. A better economy is less dependent on developed countries. As China continues to grow, demanding more commodities, Brazil will continue to grow. Brazil is one of the major exporters for major commodities. With the economic growth, credit availability is also growing. Consequently, there are more opportunities for people to finance vehicles. There are no big demographics changes. An interesting fact is that we are seeing new vehicle buyers buying a mid-level vehicle due to the financial plans, instead of starting with the cheapest, entry-level vehicles offered in the market. Another interesting fact is the amount of women buying their own vehicles. The amount of women getting into the workforce and buying more vehicles has been increasing over the last decade.

How would you describe the state of Brazil's accessories-aftermarket and vehicle repair centers? Are there enough parts stores and repair shops (both independent and OEM-owned) to serve the motorist population?

The accessory-aftermarket in Brazil is a big business. US$ 2.3 Bi is the size of it. As an OE organization, GMB is the one that is leading the market both in terms of growth and in terms of product availability — we have the biggest product portfolio (more than 500 products are available ) among the OE manufacturers. We have been able to grow this business for about 52 percent a year in the last 5 years. This year we are growing in a rate of 38 percent.

Concerning vehicle repair centers, Brazil is well served in this area. Besides the OEM-owned repair shops, which are approximately 2,500 all over the country, we have another 2,400 outlets belonging to a chain of automotive centers and other thousands of independent service shops.

Do you think American-style parts stores (ex. AutoZone, Pep Boys, etc.?) would do well in Brazil?

I am not sure. The customers are well served with our current parts stores. We have some groups of independent service shops that do maintenance, but also sell parts, tires, accessories, schedule services online, etc. They are organized, with support and electronic sales through the Internet, besides the fact they are well recognized by the customer. There are dozens like these in our market. This is already similar to some of these stores you have in U.S. So newcomers would have to offer something really new and would have to establish themselves in a good manner to win in this market.

Are there any buying traits or design preferences that Brazilian drivers have that differ from motorists in other countries?

Brazilians are very concerned about design. Exterior appearance is one of the main reasons for buying vehicles in Brazil. Interior design is getting each day more important to finalize the decision process. Due to the time spent in traffic, Brazilians are starting to ask for more comfortable vehicles. Moreover, as important as design is price or cost/benefit. Brazilians are very sensitive to price. Price of their vehicles, cost of maintenance, cost to fill the vehicle with gas. That drives for the next unique difference between Brazilian consumers and others: Brazilians want Flex vehicles. Brazilians value more vehicles that can run on ethanol or gas.

Do you see other OEMs coming into the Brazilian market? Is there room for additional competitors?

Yes. There are the Chinese and Indians taking opportunity of the growth. Hyundai is also planning to start building vehicles in Brazil. The market is growing. There is room for additional competitors for sure.

And, what has been the impact of ethanol on Brazil's auto industry? How effective has sugar cane-based ethanol been as a fuel source? Based on Brazil's experience with this commodity, do you think it would work as an effective alternative fuel source in the U.S.?

One of the purchase considerations Brazilian consumers take is if the vehicle is flex. In the past, some vehicles were offered as ethanol 100 percent only. Ethanol was cheaper (subsidized by the government). In the late '90s, there was a shortage of ethanol and OEMs stopped building 100 percent ethanol vehicles. Consumers had a very bad experience with the shortage of ethanol, but ethanol continued to be cheaper than gasoline. The advent of the flex engines was the best solution to attend the market needs. It allows consumers to choose between gas and ethanol depending on the difference of the fuel price. The government is giving incentives to OEMs to offer flex vehicles with a differentiated tax (favorable) over the non-flex vehicles. This has caused some consumers to move up on the type of vehicles they buy. Instead of buying an entry-level non-flex, with a minimum additional price, they could get a less entry-level flex vehicle.