Localiza acquires Unidas in Brazil, what’s next?
With the recent announcement in Brazil of the acquisition by Localiza (the country’s largest car rental and leasing company) of Unidas (the second largest), many questions arise for both OEMs automobiles and fleet buyers, so let’s go ahead and answer some of them here. .
What are the next steps and when will they take place?
The new company must sell part of its assets. This includes rental agencies in cities where they have a significant market share as well as some of its vehicles.
While agency closures will occur in markets where competing companies have little or no ownership, the exact number of vehicles for sale has not been stipulated. Local analysts, however, see it in the 71,000 range or the equivalent of about 15% of the original size of the new groups.
Although no company name has been made public, Localiza said it was already in negotiations with potential buyers. The prospective buyer will need to be approved by Brazilian antitrust regulator Cade. No deadline as to when this should be executed has been disclosed.
“I think the transition will be done quickly as the new company will be eager to take advantage of its position. Localiza is a very cost-conscious company that knows the Brazilian market well, and it will be aggressive in trying to get discounts from the automakers, ”said an industry expert. Milad Kalumé Neto (pictured left) told Fleet LatAm.
The newly incorporated company will also be banned from making new car rental acquisitions for three years. He must inform the Cade of such operations during the period and disclose any new long-term operations of the fleet for a period of five years. Last but not least, the new group cannot hire any key executives from competitors for at least five years.
What impact will this have on the competition?
Localiza and Unidas are the two main players, respectively. They are followed by Movida in third place, then by companies like Ouro Verde, LM Frotas and a dozen others which constitute the bulk of the market.
Compared to Localiza and Movida, local newspaper Folha reported that Unidas offers some of the most competitive prices on the market today, both in terms of car rental and corporate fleet management. If this were the case, with Localiza absorbing Unidas, prices could rise and Movida would obtain faster margin returns.
“In general, the purchase of Unidas by Localiza is not such a bad deal for Movida. They will soon be the second player in the market and I think they will be quite competitive ”local sales advisor Yuri Sanchez (pictured right) told Fleet LatAm.
However, some believe that most of the competitors are worried about this news because the market will be more concentrated. “While Localiza was able to buy a large number of cars in the past, it will be able to buy even more when combined with Unidas,” said Mr. Kalume, director of business development for the automotive business intelligence company. Jato Dynamics.
Given the scale of their purchases, the new company will be able to negotiate the purchase of vehicles at lower prices. This will be a problem for the automakers as they will be forced to offer huge discounts.
What impact will this have on offers for fleet buyers?
Although the terms set out by CADE reduced the new group’s market share to less than 50% from 72% previously, some analysts predict a price increase for the car rental market and possibly the corporate fleet.
“To maintain competitive prices, healthy competition is necessary,” says Paulo Miguel Jr. (photo on the left) who is president of the Brazilian car rental association ABLA. For that to happen, we have to have a strong competitor in third place – that is, a company after Movida – or maybe more.
Part of this will be in Cade’s hands as he will approve the companies that will take over some of the assets of the Localiza hangar.
We are monitoring the merger closely as it will bring significant changes to the industry. However, as some details of the terms are confidential, we are not sure exactly how this will influence the market, added Miguel.
“In terms of service, I don’t see much change for fleet managers as there are still different mobility alternatives. Of course, there will have to be a balance between cost and quality of service, but overall I expect very strong competition in the market soon, ”Mr. Kalume said.
When it comes to the vehicle footprint, fleets and rental companies in Brazil have a total of around one million vehicles. Localiza owns 28%, followed by Unidas (18%), then Movida (12%), the only companies that exceed the 100,000 vehicle threshold, ”the ABLA leader told Fleet LatAm.
“The remaining 42% of the market is split between 15 medium-sized companies (eg Ouro Verde, LM Frotas) and around 11,000 small local operating companies, he explained.
In the third quarter of 2021, Localiza’s turnover was around R $ 2.7 billion and Unidas’s was R $ 854 million. While Localiza has a fleet of around 300,000 and 5,000 employees, Unidas has around 170,000 vehicles and 2,300 employees.
With the disposal of assets, the newly formed Localiza group should have a fleet of around 400,000 vehicles, including 250,000 Rent-a-Car and 150,000 Corporate. Movida has around 110,000 cars (73,000 Rent-a-Car and 37,000 Corporate).
Localiza and Unidas were contacted for further information, but were not available for comment at the time.
To learn more about the footprint of automotive leasing and fleet management companies around the world (prior to this business transaction), download the latest Global Fleet e-book on the subject.