Brazilian Rental Car Demand Expected to Rise Thanks to Ride Sharing

(Bloomberg) -- Brazil’s top rental-car companies say a cultural shift toward sharing automobiles rather than owning them will bolster demand as growth quickens in Latin America’s largest economy.

The three main providers of rental cars in Brazil have far outpaced the Ibovespa’s 11 percent advance in 2018. Cia de Locacao das Americas is up 85 percent, Localiza Rent a Car SA has surged 31 percent and Movida Participacoes SA advanced 19 percent.

None of the three have drawn any sell recommendations from analysts, who see them rising between 5 percent and 22 percent over the next 12 months, according to data compiled by Bloomberg. Banco BTG Pactual SA, for example, expects strong growth to persist for longer as corporate demand recovers and Brazilians turn to rentals.

As a pro-business government prepares to take over in Brazil on Jan. 1, consumer confidence has seen a rebound and economic growth is expected to accelerate. Car rental companies, which depend almost entirely on the domestic economy, are expected to benefit from the improved scenario, as well as from increased demand from ride hailing services like Uber. Brokerage Nau Securities estimates that as many as 20 percent of Unidas rentals and 10 percent of Localiza’s are to ride-sharing drivers. Brazil is one of Uber’s biggest global markets.

Movida Chief Executive Officer Renato Franklin says that the behavioral shift will result in “significant growth” over the next few years, with more of Brazil’s 50 million cars staying with rental companies as consumers shift toward ride hailing and renting cars instead of owning them. Franklin says the companies are each picking their markets -- in Movida’s case, young drivers and online rentals, for example -- which should help growth as well.

The top three players accounted for 54 percent of the market by gross revenue in 2017. In ten years, they may reach a combined market share of around 66 percent, according to Bradesco BBI analyst Victor Mizusaki.

Brazilian Rental Car Demand Expected to Rise Thanks to Ride Sharing

Unidas -- the result of a merger earlier this year between the company and Locamerica -- now sees more rational competition and expects strong demand through the end of 2019, CEO Luis Fernando Porto said. The firm should expand its headcount by as much as 15 percent from the current 2,300 employees, according to Porto.

Competition is “forcing the companies to get better,” Localiza co-founder and CEO Eugenio Mattar said in an interview. “If you don’t improve, someone will do that and take your client.”

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