The top-selling vehicle in Brazil is the Chevrolet Onix - Source: General Motors

The top-selling vehicle in Brazil is the Chevrolet Onix

Source: General Motors

When talking about vehicle fleet in Latin America, we cannot go without mentioning Brazil which leads in population, land mass, GDP, and fleet size in the region.

Hit with the Coronavirus pandemic just like the rest of the world, automobile sales in the 27-state nation were certainly down in 2020. A total of 1.62 million passenger cars were sold and 335,269 light commercial vehicles (LCVs) between January and December, representing year-over-year decreases of 28.6% and 15.4% respectively.

If considering trucks, buses and motorcycles, as well as cars and LCVs, total sales were 3.18 million (down 21.6% year-over-year), according to data from the country’s motor vehicles distribution federation Fenabrave.

In terms of brands, General Motors led the pack with a 17.4% market share, selling 338,549 units. It primarily consisted of the Chevrolet Onix subcompact hatch of which 135,358 units were sold (6.9% market share). The number sold, however, was 43.9% less than in 2019.

Volkswagen trailed closely behind with 327,683 units, followed by Fiat (321,836 units), Hyundai (167,443), and Ford (139,255).

Other models selling well last year were the Ford Ka subcompact hatch which saw 93,282 units leaving showrooms, as well as the Hyundai HB20 subcompact hatch (86,550 units), Fiat Strada compact pickup (80,047), and the Volkswagen Gol subcompact hatch (71,153).

In terms of production, the country took a hard hit in the second quarter of 2020 but reached near normal levels in the second semester of the year, according to data from local automobile manufacturers association Anfavea.

As for 2021, a total of 308,640 vehicles were sold in the first two months of the year, still about 22% lower than the 395,937 units produced during the same period last year.

Among the factors that have been prolonging the negative impacts on the market in 1Q20 are the increased COVID-19 cases and the lack of automobile components which would help bring production up to par, according to Fenabrave president Alarico Assumpção.

“Even with the efforts of automakers to increase production, February saw a lack of available parts and components, thus forcing some factories to halt production temporarily,” Mr. Assumpção says.

Therefore, although we can expect production and sales to eventually show improvements in 2021, keep in mind that the economy is yet to bounce back to normality and improvements should be gradual.

Partially impacted by the depreciation of the local currency over the past few months, Brazil came into 2021 with inflation of 4.52%, according to Trading Economics, being higher than the 3% or so average seen in 2020.  As for the country’s benchmark interest rate, it is at an all-time low of 2%, and for unemployment, it is seen at just over 14%.

Commercial Fleet & Leasing

Commercial fleet sales in Brazil fared better than the overall market, much of it reflected by the performance of higher priced vehicles such as SUVs, pickups, and hybrid vehicles.

While the Fiat Strada (compact pickup) saw a 5% increase in sales last year, sales of the Toyota Corolla hybrid rose 166% and the Volvo X60 hybrid rose 123% year-over-year.

In terms of leasing, keep in mind that the model of preference does differ among Latam countries. While the open-end lease more commonly used in Mexico gives the lessee more flexible terms, it does put more pressure on car seekers when it comes to taking on depreciation risk. In Brazil, it is the latter which concerns some procurement experts and fleet managers so closed-end leases - which puts more burden on the lessor - are more common.

Another factor influencing the decision of the leasing model chosen for companies is the location of their headquarters. While many of the head offices of corporations in Mexico are situated in the United States or Canada where open-end leases are more common, there is a significant number of companies in Brazil which are based in Europe which favors closed-end leases for the most part.

However, keep in mind that times are changing, and many companies are seeking new alternatives which they are not customarily used to.  Choosing your leasing model will really depend on the profile of your fleet drivers and your overall needs, in addition to the leasing model most favored by your central office.

Another differentiation to Mexico is that the Brazilian car rental and leasing market (some 40% of the Latam total) is dominated by local players.

While Localiza has the largest total fleet in the country with 279,885 vehicles (219,248 for Rent-a-Car and 60,637 for corporate leasing), it is followed by Unidas with 158,320 vehicles (72,357 car rentals and 85,963 leasing), according to regional news portal Fleet LatAm.

Ranked No. 3 in the country is local company Movida which has a fleet of 112,430 vehicles (69,925 car rentals and 42,505 leasing), followed by France-based multinational ALD Automotive with 36,000 vehicles (all leasing) and France-based Arval with 24,500 vehicles (all leasing).

Although the vehicle industry was impacted negatively in 2020, the leasing market did show an uptick for the most part last year.  While the size of Localiza’s leased fleet decreased by 10.3%, Movida saw a 14.9% increase, followed by ALD Automotive (+12.5%), Arval (+8.9%), and Unidas (+1%).

In the Headlines

One of the biggest auto industry headlines in Brazil so far this year has been the announcement by Ford Motor Co. which stated that it would be shutting down all vehicle production in the country by year-end 2021.

Impacted by significant losses in sales in the wake of the pandemic (down some 39% year-over-year in 2020), the automaker announced in January that it would be shutting down its three factories.

Two are located in the northeast of Brazil, being Camaçari (Bahia state) and Horizonte (Ceará state) and the other is the company’s Taubaté plant in the southeastern state of São Paulo.

Ford reently announced the closure of its auto assembly operations in Brazil. -

Ford reently announced the closure of its auto assembly operations in Brazil.

After more than 100 years in the country, Ford will cease the production of its current models, being the Ka (subcompact hatch), Ecosport (compact SUV), and its T4 4x4 utility which is made by its subsidiary Troller. The production of parts, however, will remain in-tact to ensure spare components availability.

Meanwhile, regional production of the Ranger pickup, Bronco SUV, Mustang Mach 1 sports coupe, and new generations of pickups and utility vehicles will be taking place in the neighboring countries of Argentina and Uruguay.Other news this year include those coming from the country’s two largest car rental and leasing companies, Localiza and Unidas. While Unidas approved a 450 million (US$82mn) bond issue in February, Localiza has teamed up with US-based telematics solutions provider CalAmp to provide new mobility solutions for the former’s fleet such as real-time fleet management.

Localiza and Unidas are also planning to merge with one another, a move that would establish a new group that would be valued at more than 60 billion reais (approximately 78% being Localiza).With an expected fleet of some 490,000 vehicles (336,000 Rent-a-Car and 154,000 Corporate Fleet), the new group would represent some 15% of the automobile sales market in Brazil, definitely giving it an advantage when it comes to economies of scale. The deal has yet to be approved by the country’s antitrust agency Cade.

Finally, its always good to keep up to date with who’s who in the industry and among the new executive appointments in Brazil this year so far include: Eugenio Matter (Localiza board of directors chairman); Bruno Lasansky (Localiza CEO), Dirlei Dias (Mercedes Benz Brazil, head of post sales); Ken Ramirez (Hyundai Brazil and South/Central America, CEO); and Cyro Martins (Volvo Brazil, Manufacturing VP).Trends: Today & TomorrowAs for ongoing trends, non-car options for last-mile mobility have been on the rise in the country for at least two years.The use of motorcycle-based on-demand delivery services such as I-Food, Rappi, and Uber Eats were on the rise before the start of the Coronavirus pandemic in 2020, and they have grown significantly more in popularity throughout the COVID age. This mobility option will likely continue on into the future.

Meanwhile, mobility models revolved around car-sharing and subscription services are making their way into the market. For one, local banking giant Itaú Unibanco introduced Vec Itaú in December 2020, a shared electric vehicle (EV) solution in the city of São Paulo.

While the mobile phone app-based service will initially be available for the general public, the bank is also seeking to work with vehicle rental and leasing agencies as well as OEM dealerships.

Currently in its testing phase, the service has started with five vehicles (a BMW i3, a Jaguar i-Pace, and three JAC iEV-40s) and be supported by four charging stations.  Charged with an initial access fee and a per-minute cost, vehicles will be unlocked via blue tooth and returned to a dedicated recharging point.

2021 JAC iEV-40 - Source: JAC

2021 JAC iEV-40

Source: JAC

With that said, we cannot talk about automobile fleet trends today without discussing the possibility of making the move to electrification.Although some fleet managers are starting to make the transition to electric vehicles (EV), there are still some waiting on the sidelines due to barriers such as the high cost of these vehicles, the lack of recharging infrastructure available, the “green” alternative of ethanol which is very common in the country, and the relatively high residuals on gasoline cars.In Brazil, residual value determination is supported by Kelly Blue Book – locally known as KBB – which has recently entered the market or the long standing local valuation table known as FIPE.Regardless of the barriers, improvements in infrastructure and EV model availability are taking place in the country (primarily in the Southeast).

Last year, the São Paulo unit of Portugal-based electric energy company EDP installed 64 rapid EV chargers in the states of São Paulo, Rio de Janeiro, Espírito Santo and Paraná, giving motorist 2,500km of driving range mainly along highways.This is just one of many initiatives under the 464mn-real (US$82mn) Efficient Electric Mobility Solutions program put together by Brazil’s electric energy regulator Aneel.

Meanwhile, government officials are also preparing measures to facilitate business such as special financing and tax credits for the EV industry and legislative changes aimed at helping the market.

As for the private sector, Audi is currently investing 10 million reais to roll out 200 electric car charging stations across the country by the end of 2021. Being done in partnership with local utility Engie Brasil Energia, the 22kW rechargers are said to be fire, shock and weather-proof.

Among the other OEMs installing rechargers in the country are BMW which is estimated to have at least 200 stations and Volvo with another 500.

In terms of vehicles, among the electrified models available in Brazil are hybrids from Toyota, Volvo, and Lexus and full electrics from Audi, BMW, Chevrolet, JAC, Jaguar, Mercedes Benz, Nissan, Peugeot, Porsche, Renault, and Volkswagen.

Some of the Electrified Vehicles Available in Brazil
 

Hybrid

 

Toyota

Prius (hybrid); Corolla (hybrid flex)

Volvo

XC-60 (hybrid); XC-90 (hybrid)

Lexus

UX 250h; UX300h; RX 450h; ES 300h; LS 500h

 

 

Full Electric

 

Audi

e-tron

BMW

i3

Chevrolet

Bolt

JAC

iEV20; iEV40; iEV60

Jaguar

I-Pace

Mercedes Benz

EQC

Nissan

Leaf

Peugeot

208 e-GT

Porsche

Taycan

Renault

Zoe

Volkswagen

eGolf


Brazil has approximately 44,000 EVs on roads and this footprint is increasing at a rate of approximately 2,000 units per month (some 1.5% of sales). According to a study by international consultancy firm Frost and Sullivan, electric and hybrid vehicles are expected to reach a penetration rate of more than 5,000 units per month by 2025.As we can see, Brazil is a vast country with a large automobile fleet market awaiting innovative ideas to bring fleet management to the next level. By multinationals and local players coming together to strategize the market, we can expect new and interesting things coming to the country over the months and years to come.

Originally posted on Automotive Fleet

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