Setback for rent-a-car demand; slow subscription progress

In the 10th edition of ÃÛ¶¹ÊÓƵ Evidence Lab's survey of Brazilian car rental consumers and potential vehicle buyers, for the first time (ex. COVID period), the survey indicated rental industry demand weakening. In our view, a soft seminovos market could be the indirect cause of demand contraction. As higher car prices, along with high family debt and low credit availability, have negatively impacted vehicle depreciation, car rental companies have increased tariffs to recover profitability, possibly hindering demand (the survey showed financial factors remained the main drag on car rental volume). Regarding subscription vehicle service, despite increased awareness of the product, the latest survey indicated a slow pace of growth again. The share of respondents who believe renting costs about the same or is cheaper than owning a car decreased to 71% (from 77% in the previous survey), getting close to the 2020 level (the lowest of the series, at 70%). Moreover, there were no significant changes in the willingness to rent a vehicle instead of owning one (22% for monthly rentals and 24% for annual rentals, both +1pp YoY).

Lower purchasing intentions but improved purchasing momentum perception

The number of respondents planning to buy a car in the next three years dropped slightly (87%, -2pp from the previous survey). At the same time, 34% of respondents believe now is a bad or a very bad time to buy a vehicle in Brazil (-11pp YoY and closer to the pre-pandemic level). In our view, this may reflect improved car supply, given supply chain normalization and the Brazilian government's incentive program for individuals to purchase cars. We observed marginal fleet aging in this edition vs. the previous one, with cars up to three years old representing 44% vs. 47% in Nov 2022 and cars four years or older up to 56% from 53% in Nov 2022.

Other significant conclusions for car rental players

  • Ride-hailing apps: We noted some decelerating trends. The share of respondents who used such apps less often or did not use them rose 2pp to 28%, while those who used them more often remained flat (40%). Future usage intentions also deteriorated: 37% were likely to increase their frequency (-3pp YoY), while 28% expected to reduce it (+6pp YoY).
  • Used car sales channels: We noticed overall stability, with direct from owners and car dealerships remaining the main channels, mainly to other car-selling websites (+2pp to 4%). Among customers who planned to buy a used car, we noted a surge for car dealerships (+6pp to 30%), while the rest were stable in the yearly comparison.Ìý
  • Insurance replacement continued to show a stable trend.