There is a perceptible change in the vehicle funding and ownership pattern in Brazil, with vehicle buyers increasingly giving a wide berth to the expensive ‘ownership’ vehicle funding model. Instead, they are gravitating toward the more cost-effective ‘operational leasing’ model, wherein they can return the vehicle at the end of the contract period and avoid residual risks.
The growing scope of the mobility ecosystem is creating an environment wherein stakeholders such as original equipment manufacturers, corporate customers and dealers can establish long-term profitable relationships with fleet leasing companies.
New analysis from Frost & Sullivan, Analysis of the Brazil Vehicle Fleet and Leasing Market, expects the total sales of passenger vehicle and light trucks to touch approximately 3.1 million units in 2015. The company car segment, which consists of leased vehicle segment and outright purchase, is anticipated to grow at a compound annual growth rate of nearly 5 percent by 2020, and account for more than 20 percent of the sales.
“With mobility as a service is picking up traction, vehicle leasing will prove to be a profitable business in the long term,” said Frost & Sullivan Intelligent Mobility Research Analyst Abishek Narayanan. “The need of corporate customers to drive down costs related to finance, time and manpower is the key market driver, as leasing presents cost efficiencies through economies of scale.”
One of the biggest markets for vehicle leasing will be the small- and medium-sized enterprises that do not have much flexibility in terms of initial investment or focus on non-core areas. This creates a fertile market for fleet leasing, fleet management and other associated services.
The Brazilian mobility market is highly fragmented with players offering various mobility services, ranging from core leasing to short-term rentals and fleet management. In addition to the presence of more than 5000 players in the market, the complex tax structure leads to large tax payments and compliance issues, which lower the attractiveness of the business.
In spite of this fragmentation, the leasing market will move toward consolidation as it will enable participants to achieve economies of scale, share best practices and gain a strong capital structure. These benefits will see it through the current environment of stringent credit regulations.
“Creating awareness regarding the potential advantages of leasing and the consolidation of players through inorganic growth is vital to enhance the quality of mobility services,” noted Narayanan. “Furthermore, market consolidation will create a stronger consortium of participants and other stakeholders that can form formidable lobbying groups and stimulate market growth.”
Analysis of the Brazil Vehicle Fleet and Leasing Market is part of the Automotive & Transportation Growth Partnership Service program. Frost & Sullivan’s related studies include: the Electric Vehicle Market in Latin America, Select LATAM Commercial Vehicle Markets, the Mexican Tire Aftermarket and Passenger Vehicle OEM Strategies for INOVAR Compliance in Brazil. All studies included in subscriptions provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants.
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Analysis of the Brazil Vehicle Fleet and Leasing Market / MBBA-18