BMI View: The country's tourism outlook has become slightly more muted in recent months, and we believe this is weighing on bus sales as companies are relying on older models. This has prompted a downward sales forecast revision for 2014.
Bus and coach sales in Brazil declined 12.7% year-on-year (y-o-y) in the first five months of 2014, to 11,399 units. Previously, BMI forecast 6.5% growth in this segment in 2014, as we expected companies to ramp-up bus purchases due to increased tourism flows and increases in tourist spending. However, it appears most companies bought vehicles in 2013, or are relying on older models, as the country's tourism outlook has become slightly more muted. Accordingly, we are revising our forecast to a drop of 10% in 2014.
|Fleet Size Growth Steady As Companies Keep Vehicles|
|Bus And Coach Fleet Size Historical Data And Forecasts, Units|
High Base Effects
Bus and coach sales in Brazil increased 14.3% in 2013, to 32,918 units, on the back of low base effects, increased tourism flows over the year and the expectation of further growth in the tourism sector in 2014 ahead of the World Cup. These strong sales increases created high base effects, which has partly informed our bearish forecast for 2014.
Tourism Flow Outlook Muted
BMI forecasts hotels and restaurants industry value to increase 0.5% in 2014, to BRL71.7bn, representing a slowdown from 1.1% growth in 2013. Moreover, we are forecasting a decline in industry value of 9.7% in US dollar terms in 2014, reflecting currency fluctuations.
BMI is anticipating high arrivals of foreign tourists, with growth of 10.5% expected in 2014, totalling 6.6mn. Furthermore, BMI expects outbound tourism growth to slow sharply in 2014 as most Brazilians elect to stay at home for the World Cup; outbound tourism will total 7.3mn, growth of only 0.6%.
However, this picture is slightly more bearish than our previous outlook, as we expected stronger growth in both tourism flows and industry value in dollar terms. BMI believes that this slightly more muted picture may have prompted tourism companies to rely on previously purchased buses in 2014, instead of investing heavily in new stock.
BMI estimates that the size of bus and coach fleet in Brazil currently stands at around 600,000 units following sustained growth in the segment in recent years. This suggests that a number of older buses are on the roads, and companies are relying on this older stock (or purchasing second hand buses, which would not be captured in the new sales figures) as they look to cut costs.