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Brazilian auto rental company Localiza Rent a Car in deal with auto companies for supply of 85,000 Cars at $1.4 billion

Localiza Rent a Car, a local Brazilian auto rental company based in Belo Horizonte state said Monday that it plans to invest about $1.4 billion for investments geared at revamping its provision of services. According to the announcement, the company will invest 2.5 billion reals, an equivalent of the $1.4 billion for the purchase of new cars to boost its rapidly growing business in the country.

This announcement marks the strongest sign yet of an improving auto business in Brazil, marking an increase in auto demand. Localiza Rent a Car is the biggest auto rental firm in Brazil and the Latin American continent and its new investment plans will see it buy about 85,000 new cars from the Indian firm Fiat, America’s giant car manufacturers General Motors, Ford Motor and Germany’s Volkswagen.

The investment, pegged at the staggering $1.4 billion is estimated to be equivalent to about 2.5% of Brazil’s yearly car production and light trucks, and comes as a needed deal for the foreign car manufacturers based in the Latin American state. On the other hand, Brazil, Latin America’s biggest economy and the fastest growing has given birth to a burgeoning middle class that has subsequently led to an increase in demand for motor vehicles.

The deal will see the car manufacturers deliver half of the 85,000 cars to Localiza Rent a Car by the end of 2010, while the remainder of the cars will be ready for delivery by the end of next year’s third quarter, a statement from the company reported. Localiza Rent a Car boasts 450 branches in nine countries with a fleet of cars that have grown to an impressive 9,500 cars per annum over the last two years.

According to the company, the acquisition of the cars will be crucial in advancing its operations and expanding its overseas reach. Localiza Rent a Car owns and franchises some 320 rental car locations in Brazil and seven other Latin American countries. Along with having the largest fleet of branches and rental cars in Brazil, the company is engaged in fleet management, used automobile sales, and franchising businesses throughout Latin America.

Localiza specializes in car rentals at airports, which account for nearly half of its revenues. As of December 31, 2008, the company had 72,041 cars, including 62,515 own cars; unaudited 199 car rental locations; and 35 used car points for sale.

27 July 2010.