Market is expected to grow in 2022, but volume will still be lower than before pandemic

08/10/2022

Fabiano Todeschini — Foto: Nilani Goettems/Valor

The bus industry is going through an unusual moment. As soon as it hit Brazil, the pandemic emptied public transportation in cities and roads. Mass vaccination then brought the hope of a return to normality. But the recovery of sales has been slower than industrial players expected. The companies that operate the lines have not yet recovered from the impact of the health crisis. In addition, semiconductor shortages are affecting production. And even if chip supplies normalize, as predicted, demand is likely to fall in 2023. A new emissions law, effective as of January, will cause bus prices to rise due to the cost of the technology needed to reduce emissions.

The expected expansion of 23.5% of the domestic market in 2022, according to the latest projection of the automakers’ association, Anfavea, is not a reason for celebration, since the last two years were very bad. If this forecast of 17,300 vehicles is confirmed, the Brazilian bus market will return this year to what it was in 2015, the first of four consecutive years of crisis in the sector before a recovery interrupted by the pandemic. Some executives reckon that only in 2024 will sales return to the level of 2019, the year that became a reference for the industry. In 2019, nearly 21,000 units were sold.

The urban segment is the one that brings the most uncertainty. “Municipalities are having cash flow problems because they had to direct funds to public health and need to decide if they will be able to subsidy fares,” said Fabiano Todeschini, CEO of Volvo’s bus division in Latin America. “The urban bus suffered a lot because the pandemic took half of the people off the streets. That’s why we still see bad numbers,” said Danilo Fetzner, head of Iveco’s bus division in Latin America.

With the exception of large urban centers such as Rio de Janeiro and São Paulo, which need to renew the fleet more often due to the number of inhabitants, in smaller cities, in addition to emptier public coffers and struggling operators, it is not yet clear how many of those who leave for work every day will return to buses, how often, and whether they will continue to use public transportation. “Remote work is a new reality and it hits those who survive on fares,” Mr. Fetzner said. In addition to the pandemic, unemployment has also driven people off the buses in the last two years. That’s why industry executives are keeping a close eye on the recent advance in employment levels.

The coach bus industry has suffered, too. “Operators are still bruised from the pandemic and will first get companies back on their feet and then go shopping,” Mr. Todeschini said. The recovery of tourism has been gradual. There is also a great expectation that the increase in airfare prices and the reduction in the offer of flights will cause the migration of part of those who used to travel by plane to buses, said Ricardo Portolan, Marcopolo’s head of commercial operations for the domestic market.

Marcopolo, a traditional bus body maker, saw a stronger demand in June and July. Mr. Portolan said the company was unable to make more bus bodies due to the delay in the arrival of chassis produced by assemblers affected by the shortage of semiconductors. In his view, the demand will grow significantly. “We expect the road segment to be much stronger in 2023,” he said. According to him, due to the shortage of semiconductors, the waiting time for making bus bodies, which used to be around 60 days, increased to 90 or even 120 days.

The prevailing view among executives, however, is that many companies that bought buses this year, especially in the coach segment, did so in an attempt to escape the price increase that will come from the entry into force of the so-called Euro 6, a legislation that forces the industry to reduce the level of emissions of trucks and buses produced as of January.

“Clients are bringing forward purchases to protect themselves from increases. That’s why demand this year will be stronger than in 2021, but will slow down again in 2023,” Mr. Fetzner said. In his view, after a year of the new administration and a “higher cost accommodation with Euro 6,” the market will look better in 2024. The industry does not reveal how much prices will rise. Some estimate a minimum 15% hike because of the new technology alone.

Two segments, however, helped the industry to offset the difficulties – chartering and the Caminho da Escola program. As for chartering, the need for social distance was precisely what made demand increase. Companies in the industrial sector that provide transportation for workers, who worked in person the whole time, had to double their fleet to ensure distance between the occupants of the buses. It used to be one person per row. With the normalization of this transport, now, many vehicles – in this case, second-hand ones – were sold to short-distance road transport companies or to urban transport companies in metropolitan regions.

Created in 2009, Caminho da Escola is a federal social program aimed at transporting students from rural areas. It has remained independent of the federal administrations since then. The program uses funds from the National Fund for Education Development (FNDE), which has maintained the routine of calls for bids.

Exports have also helped the sector. Urban transportation systems in Santiago and Bogotá have been supplied, in large part, by the Brazilian industry. And demand tends to increase with the forecast of new bids. Volvo, for example, sends 60% of its Brazilian production abroad.

*By Marli Olmos — São Paulo

Source: Valor International