In Logistics
Diego Rodriguez Americas Market Intelligence

Diego Rodríguez

Logistics & Industrial Practice Director

AMI

Luca Nacucchio Americas Market Intelligence

Luca Nacucchio

Analyst

AMI

The trucking and bus industry in Latin America is a critical component in the region’s transportation, with significant challenges in its journey toward modernization and adopting cleaner and more sustainable fuel options. The high average age of vehicles in the region, high-interest rates, limited access to credit, informality, and the concentration of loans among big companies contribute to the delay in adopting cleaner and more fuel-efficient vehicles. However, there are positive trends and examples of the industry embracing alternatives such as natural gas and electric vehicles. Governments, financial institutions, and industry stakeholders must collaborate to provide accessible financing options, regulatory support, and incentives to accelerate the modernization and sustainability of the trucking and bus industry in Latin America. By addressing these challenges and prioritizing adopting cleaner transport options, the region can improve air quality, reduce greenhouse gas emissions, and create a more efficient and profitable transportation sector.

This article will explore the state of the trucking and bus industry in Latin America, focusing on the reasons behind the delay in adopting electric and hybrid vehicles in the top four countries and potential opportunities in Brazil, Mexico, Colombia, and Argentina.


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What’s behind the delay in adopting more sustainable and fuel-efficient trucks in the region?

The trucking industry in Latin America plays a vital role in supporting trade and economic activities. However, it faces significant challenges when it comes to modernization. One of the leading indicators of this challenge is the average age of trucks in the region. In Mexico, one of the largest trucking markets in the region, the average age of trucks exceeds 22 years. Colombia and Brazil follow closely, with average ages of around 22 and 16 years, respectively. Finally, Argentina’s average age stands at approximately 12 years. These numbers reveal the need for fleet modernization to improve safety, fuel efficiency, profitability, and environmental impact.

The adoption of electric and hybrid vehicles in the trucking industry in Latin America has been relatively slow. Two main factors contribute to this delay, high-interest rates and informality levels:

  1. High-interest rates and limited access to credit: The trucking industry, especially small operators, need help accessing affordable credit due to high-interest rates and stringent loan requirements. Limited credit access makes investing in newer, more expensive units and hybrid vehicles challenging.

High-interest rates significantly impact fleet renovation in Latin America’s trucking industry. Access to affordable financing is crucial for trucking companies replacing older vehicles with newer, more efficient models considering the high capital costs in this industry. Unfortunately, we predict that high-interest rates will remain in place during the rest of 2023 and 2024, with Central Banks in Mexico, Brazil, and the majority of South American counterparts keeping the course in their fight against inflation, making it challenging for operators to obtain loans or secure financing for fleet renovation.

The high cost of borrowing creates a barrier to fleet modernization, especially for small and medium-sized trucking companies. This leads to a situation where older, less fuel-efficient trucks remain in service for extended periods, contributing to increased maintenance costs, higher emissions, and reduced competitiveness. To address this challenge, governments, OEMs, and financial institutions can find common ground to collaborate and provide more accessible and affordable financing options tailored to the trucking industry’s needs, especially the man-truck operators.

Latin American banks are providing financing options to promote the adoption of electric and hybrid vehicles in the region, with Santander, Banco Nación, and BBVA offering preferential rates and financing plans in Argentina. In Brazil, Banco BV and Banco Pan lead the financing offering for electric vehicles. Chile’s Banco Estado and Banco de Bogotá in Colombia provide attractive financing options. Banco de Occidente has developed the  “Occiauto Planeta Azul” credit line, offering financing for 100% of the vehicle and up to 84 months of installments. Banco Santander México and BBVA México offer incentives for electric vehicle purchases, and HSBC México provides specialized credit options. In Chile, Banco Estado has established a credit agreement with the brand Be-electric to facilitate financing options for bicycles, motorcycles, and cars, up to 24 installments and a 10% discount. Other banks in Panama, Paraguay, Peru, Uruguay, and the Dominican Republic also facilitate financing electric and hybrid vehicles. These initiatives aim to accelerate the transition to sustainable transportation in Latin America.[1]

Interest rates in Argentina, Brazil, Colombia and Mexico. Americas Market Intelligence.
  1. Informality: A significant portion of the trucking industry in Latin America operates within the informal sector, which means that companies within the trucking industry are not paying taxes and insurance, and their employees aren’t doing it either. This happens because there aren’t incentives for the employees to be formalized, meaning that both the governments and the trucking companies are not agreeing on basic labor law yet.

Informal cargo transportation companies are often trapped in a vicious cycle. They avoid paying taxes, which limits their income. This, in turn, prevents them from providing good working conditions and benefits for their employees, as well as upgrading their equipment. As a result, they have higher operating costs, lower productivity, and provide subpar services.

Here are some of the specific problems that informal trucking cargo companies face:

  • Low service rates: Informal companies often charge lower rates making them more attractive to customers, but it also means limited revenue and growth potential.
  • Limited income: Low service rates translate into meager revenues, making it difficult to meet financial obligations, maintain their equipment, or access credit.
  • Concentration of loans among big companies: The loans and financing options for the trucking industry primarily focus on larger companies. This leaves smaller operators and independent truck drivers with limited financing opportunities to invest in cleaner and more efficient vehicles.
  • Outdated equipment: Informal truck operators often use older trucks because of their informality and limited legal structure to access credit lines. This can lead to higher operating costs, lower productivity, and safety hazards.
  • Subpar services: Due to these problems, informal cargo transportation companies often provide inferior services. This can include delayed deliveries, damaged goods, and lost shipments.

Informal operators need help accessing credit, complying with regulations, and investing in modernization. In addition, the informal nature of their businesses often limits their ability to secure financing for purchasing electric or hybrid vehicles.

Number of trucks in the top 4 countries in Latin America and the informality levels in 2022. Americas Market Intelligence.

Despite the challenges, there are promising trends and examples of the trucking industry in Latin America embracing cleaner and more sustainable transport options

One alternative gaining traction is using natural gas as a fuel source. Natural gas-powered trucks offer lower emissions, reduced fuel costs, and improved air quality. Brazil and Argentina have made significant investments in natural gas infrastructure and are incentivizing the adoption of natural gas vehicles in their trucking fleets. For example, in 2021, Reiter Log, a Brazilian company, made a significant decision to embrace sustainability in its logistics operations. They purchased 124 Scania natural gas trucks powered by compressed natural gas (CNG) and biomethane. This marked the beginning of their journey towards a more sustainable transportation fleet. Recognizing the positive impact of their initial investment, Reiter Log took another stride in 2022 by expanding its fleet of natural gas vehicles, doubling it to 248 trucks.

Argentina aims to implement a comprehensive renewable energy plan by 2030, targeting the modernization and transition of its vehicle fleet. Currently, from the nearly 15 million vehicles in the country,[2] 7 out of 10 employ gasoline, two on diesel, and only 1 utilizes Compressed Natural Gas (CNG). The plan sets ambitious goals, including replacing 9.5% of light-duty vehicles with electric units, increasing CNG conversions from 9% to 15%, and replacing 6.8% of heavy-duty vehicles with electric alternatives. The plan also involves replacing 13,000 vehicles in the public administration with electric technologies and aims to introduce electric and CNG buses in urban and long-distance transport. In addition, Argentina seeks to reduce emissions and promote cleaner and more sustainable energy sources in its transportation sector.

At AMI, we see tremendous potential in the electrification of the last mile delivery in Latin America, with private companies involved in the e-commerce segment, like Mercado Libre and DHL, at the forefront.

According to the study “Forecast of EV Penetration and its Impact on Global Oil Demand,” published by Columbia University in 2022, EV penetration in the heavy-duty long-haul segment is expected to reach 2% globally, considering the current technical restrictions to move large volumes of cargo with battery-powered trucks and poor infrastructure. Heavy-duty long-haul trucks represent 70% of all commercial vehicles, with light duty representing 10% and mid-size at 20%. The same study predicts 10% adoption for light-duty last-mile delivery vehicles and 4% for medium size long-haul units.

Considering the technical challenges to switching heavy-duty trucking services employing electric units, we forecast less than 1% of all units adopting electric transport alternatives by 2025 in Latin America, with few opportunities available, including drayage operations at ports. However, at AMI, we see tremendous potential in the electrification of the last mile delivery in Latin America, with private companies involved in the e-commerce segment, like Mercado Libre and DHL, at the forefront. For instance, Mercado Libre operates a fleet of 800 electric units across the region in countries like Chile, Mexico, and Colombia. As e-commerce grows double-digit in the next five years, the industry will provide the momentum needed to show concrete benefits in fuel savings and greater operating margins to convince other sectors to transition to greener transport.

Pilot projects involving electric and hybrid trucks are emerging across the region. These projects demonstrate the potential of electric and hybrid technology in the industry. While the adoption of electric and hybrid vehicles faces challenges related to infrastructure and high upfront costs, the ongoing projects provide valuable insights and pave the way for broader adoption in the future. For instance, Volkswagen’s e-Delivery, launched in Argentina in 2023, produces zero gas and noise emissions.

Global OEMs will find great opportunities to expand their vehicle sales, especially vans in Latin America’s courier and e-commerce segments, as infrastructure investments are less onerous, operational requirements are much simpler compared to developing nationwide charging stations, and juicy margins allow greater bandwidth to private operators to invest in this technology. AMI can support you with forecasting demand scenarios and lead generation research to identify the companies ready to pull the trigger to procure new units and the main hesitations to overcome.

The transition toward greener public transportation in Latin America will accelerate in the next decade

The bus and public transportation industry in Latin America plays a crucial role in providing affordable and accessible transportation to the masses despite being heavily underfunded and underdeveloped. However, similar challenges exist regarding modernization and adopting cleaner transport options. From oldest to youngest, the average bus age is 21 years old in Colombia, Mexico being next at 14 years old, Argentina the third with 12 years, and Brazil the youngest at six years old on average.

Like the trucking industry, high-interest rates pose a significant obstacle to bus fleet renovation in Latin America. Public transportation private operators need help to secure affordable financing to replace outdated buses with newer and more fuel-efficient models while government budgets have a tight lid too. This combination creates higher maintenance costs, reduced passenger safety, and lower operational efficiencies. Collaboration between governments, OEMs, and financial institutions is critical to providing alternative financing options in countries like Brazil and Mexico, where the adoption of electric buses is way behind other neighbors like Colombia or Chile, where support for fleet renewal initiatives in the public transportation sector has been fiercer.

The adoption of cleaner and more sustainable transport options is gaining momentum in the bus and public transportation industry. According to the UN, the trolleybus systems implemented several decades ago in Latin America present a strategic opportunity for local governments in their efforts to promote electric mobility systems. As of May 2023, over 4,000 electric buses are operating in the region, doubling the number of units since 2021. Bogota (1,485), Santiago de Chile (1,180), and Mexico City (623) lead the rankings.

Electric buses provide zero-emission transportation, improving air quality and reducing noise pollution in cities like Bogota, Mexico City, and Sao Paulo. Although challenges such as high initial costs and limited charging infrastructure need to be addressed for broader adoption, governments and industry stakeholders have expressed their willingness to invest in electric mobility and charging infrastructure to encourage the deployment of clean transportation in urban areas.

Electric buses in Latin America 2023. Americas Market Intelligence.

Other public transport alternatives explored in LatAm include battery-powered buses. For example, Brazil is expecting[3] 2152 electric buses for the Sao Paulo municipal bus system after they banned diesel-fueled buses. In the case of Argentina, a lithium battery-based bus was presented this month.[4] Also, by 2030, Argentina aims to replace 21.81% of urban buses with electric buses (8,847 units) and add 7,538 Compressed Natural Gas (CNG) buses to the regular urban fleet. Additionally, 5,378 units of B100 biodiesel buses will be added to the urban fleet. To support these changes, 3,981 ultra-fast chargers, 20 hydrogen refueling stations, and 66 Charging Stations or Yards will be installed. This plan could result in a reduction of emissions by 0.49 MtCO2e. In the long-distance sector, 3,950 CNG buses and 2,722 Liquefied Natural Gas (LNG) buses will be added to the regular intercity fleet, possibly saving 0.13 MtCO2e.[5]

Municipal governments have recognized the opportunity to invest in the formalization and improvement of public transportation in South America, actively working to make mass transit more accessible, affordable, and of better quality. Governments have prioritized public transportation over individual commuting in the past five years because of high traffic congestion and poor road infrastructure to accommodate the increasing number of cars. This is the most significant contrast to Europe, where the adoption of clean public transport is fueled primarily to cut greenhouse gas emissions. For this reason, the adoption of electric buses in Latin America is promising. It will accelerate in the next decade, doubling the number of units every two years to reach 40,000 to 50,000 units by 2030.

Next Steps

We encourage global OEMs to actively monitor Latin America for new government and private contracts to supply electric or alternative units. It is well known that public bidding in Latin America is prone to unfair practices, but actively engaging with a firm like AMI can provide you with unique insights and human intelligence to uncover which bids are free, transparent, and rigged.

Contact us and let us know your inquires.


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Sources

[1] Portal Movilidad, 2023. “¿Qué bancos ofrecen financiamiento a vehículos eléctricos en Latinoamérica?” Consulted June 20, 2023

[2] Diálogo Chino, 2023. “La nueva estrategia de Argentina para reducir las emisiones de carbono, analizada” Consulted June 20, 2023

[3] Portal Movilidad, 2023. “SPTrans a la espera de 2152 buses eléctricos tras prohibición de flotas diésel en São Paulo“. Consulted June 20, 2023.

[4] PV Magazine, 2023. “Presentan en Argentina un bus eléctrico diseñado en la Universidad Nacional de La Plata“. Consulted June 20, 2023

[5] Lewkowicz, J., 2023. “¿A qué apunta el Gobierno en el sector de transporte para 2030?” In: Página12. Consulted June 20, 2023


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