AAA considers future strategy

AAA Auto Chairman of the Management Board Vratislav Kulhánek spoke with The Prague Post after the company's press conference March 30 about the company's direction in terms of expanding services, foreign markets and why the profit margin per car won't get any higher than it is now for AAA Auto.

The Prague Post: How have rising oil prices changed customer behavior at AAA?

Vratislav Kulhánek: Two years ago, we were mostly selling gasoline-engine cars, but now the percentage of customers who want diesel engines has increased, and it's become more important to have  cars with low fuel consumption. We have been building our stock of diesel-engine cars, and we expect that trend and demand to continue for a few years.

TPP: AAA said its revenues have been helped by a greater profit margin per car, and the company achieved a high this year of 24.7 percent. How did the company achieve that?

VK: It's very simple: You have to buy cheap and sell high. But, of course, that depends on the cars available on the market. I think that is an extremely high margin, and I don't think it would ever reach above 25 percent; it's more than enough. Our focus is on providing our customers with better and more services, beyond simply buying and selling cars. This will include expansion in service branches, adding paint shops and things like that. We are preparing lots of changes and that will bring higher profit, hopefully.

TPP: Why is AAA not in Poland?

VK: The Polish market is very specific. Three years ago, I had to decide about it, and I said I would never go to Poland. I have some experience there when I was on the supervisory board at Škoda, so I know something about the market, which is really mainly made up of many local dealers, and they play a very important role there.

TPP: What is appealing about the Russia market, and why does AAA want to enter?

VK: Russia is a booming market, and the organization of the used-car business is at a very low level. With an experienced Russian partner, I think we can be there. For us, it's more important to test the market rather than simply invest a lot money. We'll do this step by step, very slowly, and analyze every single step to see if it brings something to us or not.

TPP: AAA wants to cooperate with a bank to offer cash loans. Is that going to require hiring a lot more staff or other infrastructure?

VK: It's a nice idea to handle the money in this way, but it's not as simple as it may sound. It cannot be done at all of our centers. Again, it's something we'll try step by step. Of course, in Prague we have a large showroom, and we can do it, but in smaller dealerships, it's something quite different: You have to make sure the money is under control at all times, you need security cameras, etc.

TPP: How many centers will provide the loans?

VK: A maximum of five. It also depends on the discussion with banks because it couldn't just be our job. If the reaction of banks is positive, it could happen relatively quickly. But the banks, of course, are very conservative.

TPP: AAA had to aggressively cut costs during the recession. How will the number of staff recover now that the crisis is receding?

VK: The period before the crisis was crazy. In one year, AAA increased its employees from 1,000 to 3,800, but that was before me [laughs]. Now we have about 1,200, and our average during the crisis was under 1,000. First, we will grow our profits, and then we can invest in employees, rather than the other way around.

Claire Compton can be reached at
ccompton@praguepost.com