The highs and lows of fleet management in Brazil
The fleet management sector in Brazil has faced a wealth of challenges over the last few years, caused in no small part by the pandemic, the fuel-crisis, and the omnipresent chip shortage.
Operational challenges including complex legal and political demands, onerous environmental hurdles, fuel hikes and tax interventions, have all served to make the e-mobility journey feel like a long, upwards but interesting haul.
From EV uptake and emission regulations to tech adoption, we examine the hurdles – and the opportunities – for those responsible for Brazilian fleets.
Brazil, as a significant player in the automotive industry with 27 car manufacturers with huge export operations, has been hit hard by the global chip shortage.
Car manufacturers in Brazil have been forced to scale back production or even temporarily halt production lines. This has caused a severe shortage of new vehicles and increased lead times for customers awaiting deliveries.
The pandemic effect
The pandemic inflicted many challenges on fleet managers in terms of ensuring the safety and well- being of drivers, managing vehicle maintenance and service schedules, and adapting to changing business needs.
The pandemic may be over, but the long-term impact most certainly isn’t.
Remote fleet management tools and technologies have gained traction to monitor and optimise fleet operations. With lockdowns, travel restrictions, and work-from-home arrangements, employee mobility patterns drastically changed – and have not returned to pre-pandemic norms. Many companies still apply remote work policies, resulting in reduced business travel and commuting. This shift has led to a decline in overall fleet utilisation and a revaluation of fleet size and composition. Business travel has been widely replaced by virtual meetings as fleet managers seek ways to reduce expenses, optimise fuel consumption, and streamline fleet operations to aid the pandemic recovery.
Brazil’s Federal Government Program has implemented significant tax reforms that directly impact all operators, suppliers and outsourced support services to the fleet sector. The introduction of the ‘Fuel of the Future’ aims to expand the use of sustainable fuels and prioritise the development of fuel technologies for land, water and air transportation through favourable tax incentives for vehicles with lower fuel consumption and lower CO2 emissions.
Emissions get highly regulated
The Brazilian government has been tightening emissions regulations to address environmental concerns through the introduction of the PROCONVE program which sets emission standards for all vehicles.
The latest phase, PROCONVE L7, sets stringent limits on pollutant emissions meaning that all newly manufactured light-duty diesel vehicles in Brazil must comply with these stricter emissions standards.
Brazil has been actively improving vehicle safety standards to enhance road, driver and pedestrian safety. In 2021, the CONTRAN (National Transportation Committee) introduced new regulations requiring mandatory electronic stability control (ESC) systems for light commercial vehicles. This regulation aims to reduce accidents caused by loss of control and improve vehicle stability.
Additionally, Brazil has adopted the Latin NCAP (New Car Assessment Program) safety rating system, which evaluates the safety performance of vehicles.
Trends in the vehicle leasing market
Changing ingrained behaviours and cultural attitudes towards transportation can be a significant challenge in the transition from ownership to leasing. Private car ownership is still highly valued and aligned with status in Brazil.
However, the Brazilian leasing market is on an upwards trajectory. Even though the market has been long-term dominated by owned cars, there is a growing requirement for long and short-term rental solutions. This demand is driven by companies evolving mobility needs post pandemic, and in response to soaring fuel costs and supply chain difficulties.
There was a 12% increase in rental registrations (441,858 cars) between 2020 and 2021 according to Brazil’s vehicle renter association ABLA. Unlike elsewhere in the world, Brazil’s rental market is dominated by smaller, local finance and lease companies rather than larger international providers. Smaller companies provide impressive bargaining power to obtain cheaper car deals and competitive terms from OEMs, along with a more personalised service.
Just add fuel (or charge) and go!
Car subscription has been the fastest-growing rental model in Brazil since the pandemic. As an ‘all inclusive’ model of motoring with no long-term contracts or upfront payments, car subscriptions offer greater need-based flexibility with no vehicle downtime wastage costs. The sector grew by 16.4% in 2022, according to Abla, the Brazilian Car Rental Association.
Multi-bid leasing making in-roads
Although the vast majority of corporate fleets in Brazil are owned – not leased, multi-bid leasing is becoming more commonplace. It has grown in popularity in recent years as companies seek to optimise their fleet TCO. By inviting bids from multiple leasing providers, businesses can negotiate competitive rates and favourable leasing terms.
Fleet tech adoption is steadily increasing – driven by the need for greater operational efficiency and cost optimisation. Fleet management software adoption is on the rise driven by a desire to streamline administrative tasks, automate workflows, and provide comprehensive reporting and analytics capabilities.
Mobile apps are also gaining traction among fleet businesses, providing real-time access to critical information, improving productivity and enhancing operational efficiency.
Moreover, fleet businesses are also increasingly leveraging data analytics for better decision-making and predictive maintenance strategies.
Telematics to go
Fleet businesses are embracing telematics to improve fleet visibility and facilitate operational enhancements. Personal safety and car security is a big issue in Brazil, so telematics is seen as an invaluable tool to address these omnipresent concerns.
The number of active telematics systems in Brazil reached approximately 2.1 million units in 2020 and is set to grow year-on year by around 9.3%.
EV adoption in Brazil
The overall market share of electric vehicles in Brazil is still relatively small, accounting for less than 1% of total vehicle sales.
The government’s commitment to clean energy, the expansion of charging infrastructure, and the introduction of more affordable electric vehicle models are expected to drive significant growth in the coming years.
Although the total number of EVs among corporate car fleets is relatively small, the number of leased electric vehicles has seen a remarkable annual growth rate over the past two years with government incentives, including tax exemptions and charging infrastructure investments, stimulating adoption.
However, the EV market faces two significant obstacles. The first is cost. The TCO of a vehicle used to drive around 150 km per day (including purchase, fuel, maintenance), is practically the same as a combustion vehicle. Secondly, even the major cities don’t have the recharging infrastructure needed to facilitate EV mobility. According to the Brazilian Electric Vehicle Association (ABVE), the country only has around 2,800 public and semi-public charging stations, in addition to the network of private recharge and electric car dealerships.
Mobility trends in Brazil still lag behind other global regions. There are several infrastructure and social challenges that mobility initiatives face, hindering their implementation and growth.
In Brazil there is a preference for individual car use over shared mobility options. Encouraging a shift towards sustainable and shared modes of transportation requires efforts to promote awareness, education, and behaviour change. Ensuring the safety and security of users in new mobility initiatives is also critical. Concerns regarding accidents, theft, and personal safety can impact the adoption and trust in these services. Implementing effective safety measures and addressing security concerns are important for the success and growth of mobility initiatives.
Brazil’s transportation infrastructure, especially in urban areas, often faces limitations and congestion issues. Inadequate road networks, traffic congestion, and a lack of dedicated lanes for alternative modes of transportation can hinder the expansion of mobility initiatives.
Integration between different modes of public transportation, such as buses, trains, and metro systems, is crucial for a seamless and efficient mobility system. However, in Brazil, there are often challenges in integrating these modes effectively, resulting in limited connectivity and inconvenience for fleet managers.