Vehicle Rental Prices in Brazil Soar in Pandemic; App Drivers Forced to Return Cars

RIO DE JANEIRO, BRAZIL – The pandemic has considerably impacted the cost of vehicle rental. At the start of the year, as a result of restrictive measures and the need for social isolation, the demand for cars dropped significantly.

To balance the accounts, car rental companies decided to sell much of their fleet. However, as demand picked up, there were not as many vehicles available.

According to market law, higher demand and lower supply result in higher prices. Consequently, rental prices skyrocketed, and those who suffered most from this were app drivers. Those who rent cars saw their costs grow considerably, and some were even forced to return their vehicles because they could no longer afford them.

Driver Anna Tatti, 62, says she has driven a rented car in the past. At the time, she paid a monthly fee of R$1,620 (US$324) for a new car, but the model lacked a CNG (Compressed Natural Gas) cylinder installed. It didn’t last long. Today, she rents a Versa 2016 from a well-known company, paying R$1,000 for the same time, sharing the maintenance costs with the owner. Now, she claims it is worth it:

“In a rental company, doing business is impossible. If I were to rent a gas-powered car, I would have to pay around R$2,200 per month. As the trips have decreased during the quarantine, this is virtually paying to work”.

Driver Rodrigo Santos, 53, says that the problem is not only the price charged for renting, but also the rise in fuel. According to the National Agency of Petroleum, Natural Gas and Biofuels (ANP), between December 6th and 12th, the average registered price per liter of gasoline in the city of Rio was R$4.926, while the price per liter of ethanol was R$4.054. CNG, found at R$2.985 (cubic meter) in the same period, on average, remains the most viable option.

“Some rental companies began to install CNG in rental cars, but you have to wait a long time until one is available. When they call, you need to have a credit card with available limit, and many drivers have their names blacklisted. That’s why they can’t get these cars,” says Santos. On the other hand, gasoline or ethanol vehicles consume a lot, mainly if drivers get stuck in traffic jams or drive with the air conditioner on. For over three years apps have not increased their rates, while the price of everything else is higher.

In order to pay the household bills, Juan Neves, 24, who rents a car to work in an app, was forced to diversify his service:

“I began driving acquaintances to the Lagos Region on weekends and during the week, as well as being an app driver, I’m providing delivery service to a company that hired me as an individual micro-entrepreneur”.

The president of the Brazilian Car Rental Association (ABLA), Paulo Miguel Júnior, says that among the 200,000 cars rented to app drivers, approximately 160,000 were returned in the first two months of quarantine. However, according to him, the situation has been normalizing this year.

“With travel released, drivers have returned to operation, secured more passengers and are renting cars again. The value they pay is, on average, between R$450 and R$ 500 per week,” estimates Júnior. “For December, we expect the delivery of 40,000 cars to rental companies and we have an order for another one hundred thousand vehicles next year”.

The price charged for renting in 2021, however, should also be higher. According to the president of ABLA, this is because car prices have greatly increased. Moreover, the demand for app drivers is expected to rise.

“Rental price is directly linked to sales price. Other than that, we believe that we will have more unemployed people next year. And working as a self-employed driver is a source of income in this case. That’s why the rental prices should rise again,” says Júnior.

With the relaxation of restrictive measures and the imminence of summer, the number of clients who sought Movida to rent cars has increased. According to the company, in addition to private travel, corporate trips that were previously made by plane began to be made by car.

As a consequence, the average price of the daily rates on the third semester increased by 18%, reaching R$70,30, on average. In the preceding quarter, which concentrated the most severe times of travel restrictions, the average daily rate was of R$59,50.

“The company sold more cars than usual in the second quarter of 2020, but there is now a gradual increase of fleet. It will close the year with a larger fleet than in 2019, with 3,800 more cars. The end-of-year parties and summer vacation period typically show high demand and consequently higher prices. Given that our pricing system is fluctuating and varies according to demand and supply, factors such as occupancy rate and fleet growth will be taken into account for future price definition,” says Edmar Lopes Neto, Movida’s CFO.

To retain clients who work as app drivers, Neto says that Movida has offered special conditions for the category, such as 60 days with no monthly fee for those with over six consecutive months of relationship with the rental company.

Localiza reported that it has in its car rental division over 207,000 vehicles and that, in the third quarter, it adjusted its fleet according to market dynamics, restarting to purchase cars to meet the fourth-quarter demand. It further stated that car rental pricing is dynamic and takes into account a number of factors such as car model, location, and time of rental.

New competition

With an eye on the car rental market, Fiat will begin offering the new subscription car service from 2021, through Flua! – the new Fiat Chrysler Automobiles (FCA) group mobility company. In this modality, drivers will always have a 0km customized car at their disposal, with no documentation, motor tax, servicing, insurance, and maintenance costs.

Clients may choose between eight Fiat models (Argo, Nova Strada, Toro, Cronos, Grand Siena, Doblò, Fiorino and Ducato) and two Jeep models (Renegade and Compass) and decide for 12, 24, and 36-month plans, with monthly franchises of 1,000, 2,000 or 3,000 kilometers. In case of termination after hiring, there will be a fine.

The launch will occur on January 15th, in 28 dealerships in six São Paulo cities and four stores in the capital of Paraná, totaling 32 units. From the Fiat brand, there will be 24 dealers in São Paulo, Campinas, Ribeirão Preto, Sorocaba, Valinhos, Vinhedo, and Curitiba. In the case of Jeep, eight units in São Paulo’s capital will have service points.

The FCA service is facing a market already heated by other car manufacturers, such as Toyota, Nissan, and Volkswagen, which began to offer similar 0km vehicle subscriptions – the latter two during the pandemic.

Source: Exame