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Car rental firms expect boost from ride sharing

‘SIGNIFICANT GROWTH’:Many ride-sharing drivers in Brazil are actually renting cars, as people move away from wanting to own them, a trend that firms are betting on

Bloomberg

Brazil’s top car rental companies say a cultural shift toward sharing automobiles rather than owning them is likely to 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 stock index’s 11 percent advance this year. Cia de Locacao das Americas is up 85 percent, Localiza Rent a Car SA has surged 31 percent and Movida Participacoes SA has grown 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, data compiled by Bloomberg showed.

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 Tuesday, 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 such as Uber Technologies Inc.

Brokerage Nau Securities said it estimates that as many as 20 percent of Unidas SA rentals and 10 percent of Localiza’s are to ride-sharing drivers.

Brazil is one of Uber’s biggest global markets.

The behavioral shift would 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, Movida chief executive officer Renato Franklin said.

The companies are each picking their markets — in Movida’s case, young drivers and online rentals, for example — which should help growth as well, Franklin said.

The top three players accounted for 54 percent of the market by gross revenue last year. In 10 years, they might reach a combined market share of about 66 percent, Bradesco BBI analyst Victor Mizusaki said.

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 next year, chief executive officer Luis Fernando Porto said.

The firm should expand its headcount by as much as 15 percent from its current 2,300 employees, Porto said.

Competition is “forcing the companies to get better,” Localiza cofounder and chief executive officer Eugenio Mattar said. “If you don’t improve, someone will do that and take your client.”

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