The most recent data on financed car purchases point to a slow and consistent process of increasing delinquency. Faced with the limited supply of cars with more affordable prices for most consumers, the auto trade is losing the protagonism that it once had and corporate sales, especially to rental companies, have become the salvation of the automakers to avoid greater idleness in factories – it is a dangerous process of automotive deindustrialization in the country. This is the portrait of the Brazilian market and, for now, there are no signs that anything will change.

The default rate on new car loans, released this week by the Central Bank of Brazil, reached 5.1% in August, 0.2 percentage points above the average recorded in July. It is six consecutive months of high index, which measures the delays superior to ninety days in the financing payments.

In comparison to August 2021, delinquency rose 1.7 percentage points, influenced by the greater indebtedness of families whose income is being eaten by inflation. Since the beginning of the year, the index has advanced 1.1 percentage points, more than in the whole of last year, when the rise was 0.9 pp.

For Anfavea, according to its president Márcio de Lima Leite, credit is getting more expensive and more difficult, but it doesn’t mean there is a demand crisis. Even because the volume of delivery of brand-new cars is growing – and driven, it is true, by rental companies.

This segment is quickly recovering the volumes left behind because of the semiconductor crisis, which greatly limited production in 2021. According to Marco Aurélio Nazaré, president of ABLA, Brazilian Association of Car Rental Companies, delivery times have improved compared to last year, when the rental market waited up to 180 days to receive a brand-new car.

Comparing the pace of the first quarter of this year with the following three months, purchases by rental companies grew 85.4%. Nazaré stated that “our sector bought 223,967,000 new cars in the first half of 2022 and these purchases represented 49.3% [practically half!] of the total purchased in the whole year of 2021.”

Result: the total fleet of the rental segment grew by 6.3% in the first six months of 2022. Thus, if the same pace is confirmed by the end of the year, the rental sector expects the market to be even closer to normality next year. Historically, rental companies are responsible for the pur8chase of approximately 20% of all cars and light commercials sold per year in Brazil.

This business, often classified as direct sales, from the manufacturer to the rental company, has everything to grow, increasing the participation of these companies in the total sales result of the national market. This is because there is a need for 500 to 600 thousand cars to balance the stocks of the rental market next year.

Meanwhile, the individual consumer is running out of options because, even with the tendency to stability, the interest rates for the acquisition of brand-new vehicles remain very high, around 27% on average. And with manufacturers giving priority to corporate customers, versions, colours, equipment and finishes preferred by consumers are often missing in dealerships.

Original Story: Uol | Leandro Alves 
Photo: Photo by Cesar Fermino in FreeImages.com
Edition and translation: Prime Yield