Movida bets on online car sales

Pandemic makes car rentals fall

Without travel and with reduced movement of people, the vehicle rental market is another one that has been suffering during the pandemic. Proof of this is that, last Friday (22), the sector giant Hertz filed for bankruptcy protection in the United States. Here, there was also a drop in demand and revenue.

At the most acute moment of the crisis, the shares of the three giants of the sector, Localiza, Movida and Unidas, fell by 60% between the end of February and the middle of March. Now they are starting to recover but are still far from pre-crisis numbers. Despite this, Renato Franklin, CEO of Movida, guarantees in an interview with CNN Brasil Business that the local market behaves differently.

“Here, companies in the area have a more complete portfolio. It is true that there has been a drop in travel and corporate rent at airports, but we also touch monthly rent and subscription plans, while in other countries this is commanded by banks and brokers”, he explains. According to preliminary April data released by the company, there was a 26.4% drop in the number of vehicle rentals compared to the first quarter of 2020.

The fleet management sector, on the other hand, fell less, at 2.5%, while the sale of used vehicles, another important revenue area for companies, was reduced by 25.7%. Despite this, Franklin believes that this has advanced a digital transformation at Movida. “It was something for the future that we were able to put on the air at the end of March and it gave great results in April. We have already sold 3,500 cars in a 100% digital journey, delivering to the customer’s home”, he argues.

For app drivers, who use subscription plans and have rehearsed a mass car return movement, Movida has created plans in which customers only pay for what they use.

“For this segment, we think of pay-per-use modes, that is, the driver only pays for the mileage he uses. If the car is parked in the garage, you pay a very small fee”, he explains. Smaller rental companies charge R$ 10 per week, with a usage limit of 50 kilometers.

Pointing to the future, Franklin sees the company with solid governance to withstand the crisis and sees niches of performance to act during the period.

“We are the least leveraged company in the sector, with cash of over R$ 1 billion. We made a conservative cash release in April because we imagine that we will have a drop in profitability in the short term”, he says. “The trips, when they return, will first be of short distance and car. And, as only 3% of qualified people in Brazil have already rented a car, the market has a lot to grow.”

First quarter results

Movida had, in the first quarter of 2020, net revenue of R$ 1 billion, an increase of 19.6% compared to the results of the same period last year. The increase was above the average of its two main competitors, Localiza and Unidas. These numbers, however, mask a reality that the company and the entire industry have been facing since mid-March.

Proof of this is the partial that the company commanded by Franklin released in April. Despite being unaudited numbers, the company saw a 35% reduction in the service sector (which includes both car rental and fleet outsourcing) and 27% in used car sales.

Other competition numbers also catch the attention of investors. Localiza went from a utilization rate of 78.2% of its cars available for rent to 53%, that is, almost half of the cars were parked. A result similar to that of Unidas, which saw the rate drop from 76.8% to 55.9%.

Investment analyst at Mirae Asset, Pedro Galdi considers that the sector may take a little longer to see a recovery, since part of its business is linked to the airline sector. Despite this, he considers it to be a good bet for the long term. “The sector works with two taps. When the rent isn’t good, selling used cars helps,” he says.

“We will also be able to observe, after the pandemic, a change in the consumption profile. We don’t know if people will continue to buy cars. Public transport is also risky. From there, car rental can become an option”, he adds.

Bank reports see Movida in a good position to overcome the pandemic due to the growth in online vehicle sales and the comfortable cash of R$ 1.1 billion.

The market, however, is not the friendliest. In the United States, for example, the rental company Hertz, one of the giants in the segment, has already filed for bankruptcy protection. The risk, therefore, remains how long the pandemic will continue to affect the sector – and the pockets of its consumers.

Source: https://www.cnnbrasil.com.br/business/2020/05/25/ja-vendemos-3500-carros-pela-internet-diz-renato-franklin-ceo-da-movida