Brazilian rental car demand profiting from ride sharing

Bloomberg

Brazil’s top rental-car companies say a cultural shift towards 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 January 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 behavioural 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 towards ride hailing and renting cars instead of owning them. Franklin says companies are each picking their markets — in Movida’s case, young drivers and online rentals, for example — which should help growth as well.