By Brazil Stock Guide – Localiza (RENT3) is accelerating used-car sales to rejuvenate its fleet and restore the company’s ideal operating cycle after a quarter of strong momentum. The rental giant sold 75,500 vehicles in the third quarter, a record, yet executives said the company must reach about 85,000 units per quarter to return the fleet to its “optimal” 14–15 month age range. That level reduces maintenance costs, strengthens margins and improves returns across divisions.
Localiza said the quarter marked a key turning point. The annualized ROIC reached 15.4%, generating a 5.3 percentage point spread over the company’s debt cost, the first time the metric returned to the historical band since the sector’s downturn. CFO Rodrigo Tavares told analysts that the business is now positioned for a new expansion cycle once Brazil’s interest rates begin to fall.
Nora Lanari, head of investor relations, said the company is already seeing sequential gains in rental pricing, utilization and fleet productivity, supported by AI-powered tools and a renewed cost agenda.
IPI Effects Not Fully Absorbed
The IPI tax cut dominated investor questions. Localiza said the R$929 million ($163 million) impact booked in the quarter resulted from a technical application of the decree, model by model, without judgment. Tavares said the used-car market is already showing higher monthly depreciation than the historical 0.5% rate, but stressed it is too early to know whether the adjustment proved conservative or excessive. He expects clarity only in early 2026 as the market digests price resets and supply shifts.
Executives also noted that younger cars tend to deliver higher resale prices and lower refurbishment costs. That helps both rental divisions protect margins even as depreciation rises. The company acknowledged, however, that the IPI effect has not fully passed through and could continue to pressure used-car values over the next few months.
Younger Fleet Improves Margins, Costs and Credit Risk
Localiza said rejuvenating the fleet remains the most powerful structural lever in the business. Younger vehicles lower maintenance expenses, reduce prep time and increase branch productivity. They also improve credit indicators, especially in the heavy-vehicle segment, which drove delinquency volatility in 2024.
The company reduced provisions for doubtful accounts to roughly R$75 million in the quarter, down from R$100 million in the second quarter. Lanari said the improvement came mainly from the truck portfolio, where Localiza increased repossessions and began reselling units earlier in the year.
Localiza closed the quarter with a fleet of 632,267 vehicles in Brazil, stable year over year, while maintaining high utilization and stronger commercial efficiency in the rental car operation.
GTF Margins Strengthened by Tax Credits
The fleet management division benefited from accelerated tax depreciation, which is now recognized across the entire base following the integration with the former Locamerica system. Localiza reported about R$50 million in one-off tax credits, but said gains should remain higher on a recurring basis. Executives described the targeted segments within GTF as already operating inside the company’s desired ROIC spread, reducing the need for aggressive pricing changes in the near term.
Rental pricing trends remain constructive. Localiza highlighted higher average daily rates and stable volumes, though the company noted increased competitive pressure in short-term daily rentals late in September. Tavares said Localiza has limited exposure to that segment and will continue pricing based on customer willingness to pay, competitive dynamics and return targets.
Seasonal Strength and 2026 Outlook
The company also sees a seasonal boost ahead. The fourth quarter is typically strong for rental car demand, especially in October, before slowing in November and December as Brazil enters the vacation period. Localiza plans to open more branches in the quarter, increasing capillarity and supporting additional fleet rotation.
Localiza ended the period with R$12.3 billion ($2.16 billion) in cash, enough to cover short-term debt and automaker payables. Net debt-to-fleet value remains comfortable despite the IPI-induced adjustment. The company said negotiations with automakers for 2026 are ongoing, and it expects new-car prices to move broadly in line with inflation.
Executives emphasized that the next strategic milestone depends on interest rates. If the Selic falls and the company’s ROIC spread rises toward 7.7–8 percentage points, Localiza may choose between maintaining elevated profitability or lowering prices to accelerate volume growth and consolidate share.
Lanari said that once the fleet returns to its ideal age range and interest rates ease, Localiza will have capacity to resume a faster expansion cycle anchored in stronger cash generation, operational efficiency and a healthier used-car market.
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