Brazil Car Rental Market

Published on January 2017 | Categories: Documents | Downloads: 62 | Comments: 0 | Views: 339
of 6
Download PDF   Embed   Report

Comments

Content

10/12/12

Unidas

THE COMPANY | BRAZILIAN MARKET
Brazilian Market Regulation The Brazilian Automotive and Car Rental Industry Car Rental

BRAZILIAN MARKET REGULATION
Car rental companies in Brazil are subject to a wide range of federal, state and municipal regulations, including laws relating to labor rights, social security, consumer protection and antitrust matters. Generally, these regulations apply to any company seeking to establish operations in Brazil. Franchising activities in Brazil are regulated by Law No. 8,955, of December 15, 1994, which governs the licensing of rights to use a brand or patent involving the transfer of know-how and the right of exclusive or semi-exclusive distribution of products. In certain circumstances, it may also govern the right to use business management and implementation technology or operational systems developed or held by the franchisor, by means of direct or indirect compensation. #top#

THE BRAZILIAN AUTOMOTIVE AND CAR RENTAL INDUSTRY
Introduction Brazil is currently the sixth largest world car manufacturer and has the eighth largest car fleet in the world, with approximately 30 million cars with an average age of 8 years and 8 months, according to Sindipeças and Abla. The chart below illustrates the growth of the Brazilian automotive industry in the past ten years:

Source: Anfavea

The car rental is a business currently in expansion in Brazil. Sales of vehicles to car rental companies for corporate fleet rental and car rental remained broadly stable in the past ten years, as shown in the following chart:

1/6

10/12/12

Unidas

Source: ABLA, Anfavea

Over the past years we have been seen a drop in the number of car rental companies, down 17.0% since 2002. In the same period, this sector sales increased 111.6% . The graph below shows this trend of market consolidation:

Source: ABLA

The growth in the car rental fleet has confirmed the importance of car rental companies in the Brazilian automotive industry. In Brazil, car manufacturers do not offer to car rental companies an option to repurchase the cars. However, the market of used car is highly liquid in Brazil, which permits assets to be easily monetized. In addition, Unidas obtains substantial discounts from manufacturers due to the large number of cars it buys, which minimizes the initial depreciation of the Company’s cars. Budget cars, commonly known as “popular cars,” make up the highest proportion of the car rental industry’s fleet. This is principally a result of the comparatively low purchasing power of the Brazilian population. The majority of rental companies are located in the southeast of Brazil, as shown in the following map:
ri.unidas.com.br/unidas/web/interna_print.asp?conta=44&idioma=1&tipo=21036&ano=0 2/6

10/12/12

Unidas

Source: Denatran, Dec.11

Corporate fleet rental The corporate fleet rental business in Brazil started in the 1980s, when certain car rental companies began to offer the alternative of corporate fleet rental in the market. This business had already been under development in the U.S. and European markets. The corporate fleet rental business, however, grew significantly in Brazil in the late 1990s with the expansion of the Brazilian economy and of this type of business around the world. The corporate fleet rental business features certain characteristics of a wholesale business: its operations are concentrated in a central unit that manages the agreements and Unidas’ cars throughout Brazilian and it has the advantage of being able to operate in a suppliers’ network with few employees (due to the possibility of outsourcing the support and maintenance services required for managing the Company’s fleet) and at lower costs. This type of operation allows Unidas to benefit from economies of scale and enter into a large volume of transactions, along with a reduction in its fixed operating cost due to an intensive use of technology. The corporate fleet rental business has a more concentrated customer base than the car rental industry by operating basically with companies. For this reason, there is generally no major exposure to seasonal variations in demand. There is generally little room for the use of tools (such as yield management) that allow for price variation due to availability and demand because contract prices are typically adjusted in accordance with indices established by an agreement between the outsourced supplier of fleet and the customer. The utilization fee is generally higher than 95.0% and the fleet is acquired in accordance with the customer’s demand, considering that the actual use of the car varies from 12 and 36 months (long term rental). The effect of GDP growth in this industry is not as relevant as in the car rental industry. Corporate fleet rental allows companies to reduce costs associated with the ownership and disposition of car fleet. For this reason, there should be demand for corporate fleet rental not only in periods of economic expansion, but also in periods of greater economic instability. Corporate fleet rental is a capital intensive business and demands periodic replacement of used cars. The sale of used cars can take place both through retail and wholesale channels. International corporate fleet rental Generally, the corporate fleet rental market in the United States and Europe have not witnessed a significant growth in recent years, demonstrating the maturity of this business in these developed countries, unlike the Brazilian market, where this business is relatively new.
ri.unidas.com.br/unidas/web/interna_print.asp?conta=44&idioma=1&tipo=21036&ano=0 3/6

10/12/12

Unidas

As shown in the following chart, the size of the corporate fleet rental industry in Brazil is still considerably lower than the size of this industry in other countries, which indicates a strong development potential for this industry in Brazil:

Source: Datamonitor, except for Brazil and Portugal (Unidas’s estimate)

Brazilian corporate fleet rental Brazil has a distinguishing characteristic as compared to developed countries. In many cases, car rental companies use their structure (branch network) not only to operate the car rental business, but also a corporate fleet rental business. Accordingly, the corporate fleet sector’s numbers are included in data published by ABLA. In the past five years, the corporate fleet rental sector has experienced a CAGR of 9.5% per annum in terms of fleet, according to data published by ABLA. This growth is mainly due to the following factors: A trend towards outsourcing fleets on the part of medium and large-sized companies; Market consolidation; and Development of services related to corporate fleet rental. The corporate fleet rental market in Brazil remains fragmented. The principal companies in the market are Total Fleet (Localiza), Locamerica, Avis, Hertz, Júlio Simões and Leaseplan. Virtually all of the more than 2,100 car rental companies existing in Brazil in 2011, however, operate in this sector. Other competitors include Arval, ALD, DaVinci, Locaralpha, Ouro Verde and Master Car Rental, among others. Unidas is among the leaders in this business segment, with a market share of approximately 7.7%, according to data published by ABLA, and a fleet of approximately 19,000 cars as of December 31, 2011.

Source: ABLA, Unidas, Localiza, Locamerica

#top#
ri.unidas.com.br/unidas/web/interna_print.asp?conta=44&idioma=1&tipo=21036&ano=0 4/6

10/12/12

Unidas

CAR RENTAL MARKET
The car rental industry in Brazil began in the 1950s. The first car rental businesses were established in the central region of São Paulo by businessmen operating in the used car market. These businesses began renting cars as a supplementary activity to their used car businesses. In the mid-1960s, the car rental industry progressed significantly as a result of the arrival of multinational car rental companies in the Brazilian market, which forced existing rental companies to improve the quality of their services. With the rise of financial leasing companies in the 1970s, rental companies became able to access loans for the acquisition of cars, further strengthening the development of the car rental industry. By the 1980s, the car rental industry had become an established industry in Brazil. There was noticeable growth in local car rental companies serving various regions of Brazil. During this period, car rental chains began to expand through a system of franchising. Despite a difficult macroeconomic climate which caused an increase in car prices, the car rental industry entered the 1990s with new challenges and opportunities, such as the opening of the Brazilian economy to foreign competitors, the Consumer Protection Code, the Brazilian Traffic Code, the launching of more economical cars with one-liter engines and the expansion in the provision of credit cards to consumers. Trade liberalization made car importing easier and consumers began demanding more quality in view of the free competition and the end of protectionism on the domestic market. Together with Brazilian consumers’ demand for cars of higher quality, these factors were important in increasing the flow of imported cars into Brazil. In the past five years, the car rental industry has experienced an average growth of 9.5% per annum, according to data published by ABLA. This growth is mainly due to the following factors: An increase in both domestic leisure and international tourism; Improvements in airport infrastructure; An increase in passenger flow at airports; The growth of conferences and industry fairs; Standardization of credit cards; Large-scale investment in telecommunications, infrastructure, energy, agriculture and exports; and Access to long-term financing. The car rental sector in Brazil remains fragmented. In 2011, approximately 2,100 local companies were in this business. Unidas is among the leaders in this business segment, with a market share of approximately 5.8% in numbers of total fleet in 2011, with a fleet of approximately 11,500 cars as of December 31, 2011, in accordance with data published by ABLA.

ri.unidas.com.br/unidas/web/interna_print.asp?conta=44&idioma=1&tipo=21036&ano=0

5/6

10/12/12

Unidas

Source: ABLA, Unidas, Localiza

Last Update on July 05, 2012

ri.unidas.com.br/unidas/web/interna_print.asp?conta=44&idioma=1&tipo=21036&ano=0

6/6

Sponsor Documents

Or use your account on DocShare.tips

Hide

Forgot your password?

Or register your new account on DocShare.tips

Hide

Lost your password? Please enter your email address. You will receive a link to create a new password.

Back to log-in

Close