8 Aug 17

Portrait of Localiza, the Brazilian rental giant

If you are not Brazilian, the name 'Localiza' may not ring a bell. If you are, it most certainly does. 'We are one of the top 50 most valuable brands in the country', says Joao Andrade, the company's Managing Director of the Fleet Management division. But even non-Brazilians should take note: 'Localiza is the most highly-valued public traded rental car company in the world today'.

These are exciting times for Localiza. The company recently moved into new headquarters in Belo Horizonte, a few months ago crossed the symbolic boundary of 150,000 vehicles under management, and at the end of last year concluded a clever pact with Hertz.

Leadership position
On both the Brazilian rental and leasing market, Localiza is a force to be reckoned with – the result of a long history with strong roots in local soil.
The rental company was founded in 1973 in Belo Horizonte, the capital of Minas Gerais state and the sixth-largest city in Brazil. Via organic growth and acquisitions in Brazil's northeast, the company achieved the leadership position in the Brazillian car rental market as early as 1981.
An extended expansion throughout the Eighties and Nineties, also into the fleet rental business, culminated in an IPO in 2005, with a market capitalisation of $295 million. By mid-2017, that had grown to $3 billion, with an average daily traded volume of $17.4 million.

Unique model
That value reflects the central position Localiza occupies in the Brazilian market. Localiza has four main pillars: car rental (just over 100,000 cars and 6.7 million clients), fleet rental (just under 39,000 cars and 992 corporate clients), franchising (just under 13,000 cars) and seminovos - the used-car business (with 45% of the vehicles sold to their final customer).

“We have a unique business model”, says Andrade. “We buy cars in large volumes, and also have a large network of locations where we resell those cars again. At the start and the end of the vehicle's life-cycle and at all moments in between, we are able to use our bargaining power and maximise cross-selling to secure the best possible deal”.
Last year, Localiza purchased more than 92,000 new vehicles, more than double the volume of the next Brazilian rental company (Movida, 45,000 units). Localiza has a 34% share of the Brazilian car rental market, more than the second (13.5%) and the third competitor (7.6%) combined; and 12.2% of the fleet rental market (more than any of its Brazilian competitors).

Homegrown professionalism
With over 40 years' experience, a widely-distributed service network and a well-integrated remarketing operation to raise funds, Localiza is highly valued by financial ratings companies, and has a very low cost of finance. “We are indeed a very sound company, both from the financial and from the operational point of view”, Andrade confirms.
If the Brazilian fleet market is relatively mature, compared to other markets in the region, it is thanks to the homegrown professionalism of companies like Localiza, who combine local knowledge with the financial size and operational vision to keep up with developments in the wider world.

“We are very client-focused, and have high degrees of client satisfaction; they generally stay with us for a very long time. We are constantly innovating, and we are currently undergoing a digital transformation. Sometimes, it feels like I'm no longer the General Manager of a car rental and leasing company, but the director of an IT department”, Andrade laughs. Localiza is offering in increasing degrees solutions for connected fleets and online rental, via mobile apps among other things.

Latin America
But Localiza is not just a Brazilian company. Its rental operations extend into most other Latin American countries (exception: Venezuela and the Guyanas), although volumes are as yet relatively small.

And at the end of last year, it concluded an interesting deal with global rental giant Hertz. In short, Localiza acquired Hertz Brazil, and entered into a strategic alliance with Hertz in other markets.

The alliance comprises among others a referral agreement, which will see Localiza customers served by Hertz outside South America, and Hertz customers by Localiza in Brazil. “The agreement also entails the exchange of technology and best practices between both companies”, says Andrade.
Localiza, the Brazilian rental giant, may soon enough become a household name well beyond the borders of its home market.

Authored by: Frank Jacobs