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The crisis is an accelerator for innovation in Latin America too

Latin America has been severely hit by the pandemic. In mid-November, total COVID-19 cases in the region was 11.3mn and deaths from the virus summed up to 408,200, representing 21% of the world’s cases and 31% of the reported deaths all while the sub-continent represented only 8.2% of the world population.

- Pascal Serres

In June the IMF was forecasting a -10% recession for Brazil and Mexico and the situation could be even worse on the rest of the continent, in the Andean countries in particular.

Fleet management leaders will become more powerful

While 2020 automobile production and car registration numbers could drop by as much as 30% year-over-year, the corporate leasing market looks quite stable. Considering new contracts and extensions of existing contract, leasing portfolios have remained solid as companies are working with assets where revenues are not necessarily affected. In its insight letter, FleetLatam observes portfolios decreasing by 0.2% only in 2020 for the sub-continent.

As it is generally the case after a crisis, market leaders have consolidated their leaderships, as is the case with International alliances like ALD/Wheels and Arval/Element.

International alliances (number of cars)

 20202019Growth
ALD/Wheels + Arrend & Autocorp81,29175,368+7.9%
Arval/Element + RDA, Relsa, Mareauto121,747116,620+4.4%

Corporate customers have not yet reduced their fleet in a context where working from home has grown. However, overall mileage has reduced and fleet managers are now looking for more contract flexibility in the future.

Adjustments are expected for the medium term

So far, fleet managers have only negotiated contract extensions but they start looking for additional savings and the flexibility they need to close contracts at any time and at no cost, looking at ways to offer their drivers alternatives to company cars. Flexibility will be a challenge for the market in the coming years. Those new products will change the business model and pricing method. Start-ups are developing new products but remain unprofitable and international lessors are still hesitating between partnering or incorporating new products elaborated by others.

  • Arval seems to prefer partnering with a RAC organisation while ALD is developing its own pool fleet. All local operators (Localiza, Unidas, Movida in Brazil, Renting Colombia, Mitta, Tattersal, Salfa in Chile) have been combining the two products from the very beginning and it seems to have worked well (contrary to Europe or North America)
  • Start-ups and lessors are investing in MaaS solutions (like RDA with Awto in Argentina, Chili and Colombia)
  • Fleet managers could be tempted to go back towards allowances and let their drivers manage their mobility requirements.

How to combine cost and flexibility is a key question both for suppliers and fleet managers. Will it be managed as an exception, as a combination of different products, as a subscription or through an allowance to drivers?

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