1. Establishment of NIPPONDENSO REFRIGERACOES LTDA. (NDB)

[5] Sales activities amid a price handicap

The year after its establishment, in 1976 NDB began full-scale operations of its aftermarket business at a location in São Paulo.
The greatest challenge, however, was cost.
Brazil’s northernmost Amazon basin is home to the Manaus Free Trade Zone, which does not impose customs duties on part imports. Although Manaus had been selected as a candidate site for NDB’s entry into Brazil because of this incentive system, DENSO determined that the location was not suitable for local production and other future developments due to the fact that it was too far from the car A/C demand region and there were no part manufacturers located there. Therefore, DENSO ultimately decided to select São Paulo as the home for this group company.
The companies in the São Paulo area that served as competition for NDB sold kits consisting of air conditioner parts from the Manaus Free Trade Zone. Unlike its competition, however, NDB was forced to raise its prices due to the cost handicap of customs duties, which stemmed from kits consisting of imported parts from Japan.
In order to compensate for this price handicap, NDB found it essential to establish a robust service network along with its efforts to promote the high quality and functionality of its products. Consequently, the first step was for NDB to appeal the strength of DENSO’s technical capabilities and future potential to distributors, so NDB held a one-week workshop to inform distributors of the installation techniques. The workshop combined classroom learning and practical training, and was attended by participants from São Paulo and Rio de Janeiro, as well as from Belém, Recife, and other distant regions.
NDB also undertook the challenge of becoming an O.E.M. for automobile manufacturers, but the results were less than favorable.
Consequently, NDB shifted direction and succeeded in the spot delivery of 500 units to GM Brazil after acquiring designation as a genuine aftermarket parts supplier. Later on, the expanding range of vehicle models equipped with NDB’s air conditioners led sales to nearly double in number every year, with unit sales exploding from just 614 in 1976 to 5,500 units in 1979. This feat occurred at a time when DENSO Headquarters was struggling with its approach to the GM Headquarters. This achievement also had a positive advertising effect for NDB’s aftermarket activities in Brazil by demonstrating the high quality of its products.