Hertz Franchisee Develops Opportunities in Mexico

No insurance replacement market, no auction sales, no turn-back cars and little chance of insurance recovery: Those are just some of the issues that Moises Behar faces as general director of AVASA, the largest Hertz franchisee in Mexico and one of the biggest in Latin America.

But with those challenges comes opportunity. With Mexico’s reasonable fuel prices, a groundbreaking partnership with Wal-Mart and a virtual white space in the local market, AVASA is developing new territory, and has grown from a fleet of 700 vehicles to 6,000 in five years.

AVASA by the Numbers
AVASA has been a Hertz franchise for more than 25 years and is part of a holding company that owns dealerships.

AVASA’s fleet of 6,000 units is spread throughout 80 locations in 28 cities and 17 states.

Fully half of AVASA’s business comes from America, with 35 percent from Mexico and 15 percent from Europe and Canada. The leisure/business mix is 60/40, with Cancun, a major tourist destination, factoring heavily into those numbers.

The Cancun location is the largest in Latin America, Behar says. It competes with about 70 car rental operations, many of them mom-and-pop stores, and 5,000 taxicabs.

To more fully service its foreign clientele, AVASA is preparing to become the first Latin American licensee to offer Hertz Gold Key service. Behar has been upgrading the Cancun office, the first in the program, to comply with the program’s numerous service requirements.

AVASA manages a 200-square-meter reservation center with 40 positions. GDS systems work similarly in Mexico, and AVASA works through booking engines such as Travelocity and Orbitz. AVASA receives corporate support from Hertz and benefits from its reservation centers.

Utilization rates have averaged 75 to 79 percent this year, Behar says.

A Taste for the Exotic
Chrysler vehicles make up about 95 percent of AVASA’s fleet. Chrysler does not have the same supply and residual value issues as it does in America, Behar says, and is in fact growing in Mexico.

AVASA runs some 1- to 4-ton trucks, and 3 percent of AVASA’s fleet is luxury cars. AVASA is building a light-duty truck rental division with the introduction of the MUEVELO program. MUEVELO, which is Spanish for move, is filling a niche in the local market that is ignored by the competition.

AVASA is the only Mexican Hertz licensee to offer Hertz’s Prestige Collection, in this case the Mercedes B- and C-Classes and BMW 1 and 3 Series. AVASA also rents the Mini Cooper, Smart Car and the Fiat 500 (Ciento Cinco), not sold in the U.S.

Bucking a trend in North America, AVASA finds success renting large vehicles such as the Hummer H3 SUV and muscle cars such as the Dodge Challenger and Dodge Charger Super Bee. “There’s a very big demand for them, especially for people in their ‘40s who really get a kick out of it,” Behar says.

One big factor in renting large muscle cars is the competitive daily rental rates, averaging $100-$150 a day with unlimited mileage. In addition, fuel prices have remained steady at less than $3 per gallon. Fuel is subsidized by the Mexican government, so high fuel prices have not affected auto rental operators as they have in the United States or Europe.

“The Europeans have had a gas problem forever,” Behar says, noting that when foreigners come to Mexico and have a chance to drive a Hummer or a Challenger, they take the opportunity. “We haven’t seen people renting smaller cars to save gas money,” Behar says.

CONTINUED:  Hertz Franchisee Develops Opportunities in Mexico
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