EDITOR’S NOTE: This article is reprinted with permission from the publisher AutoData. The article includes substantial information from Priscila Von Zuben Spadine, Data and Forecast Manager at Power Systems Research.

By Natasha Werneck
AutoData

High interest rates, weak demand, and the smaller impact of the Caminho da Escola program are dragging down the pace of Brazil’s bus industry

After posting moderate growth in 2025, although below initial expectations, the Brazilian bus market entered 2026 in contraction, recording a pronounced decline in the first quarter compared with the same period last year. Data presented by Anfavea, the association representing chassis manufacturers, show that, despite a punctual rebound in March, the performance of the last three months reinforces a slowdown scenario.

Registrations rebounded and totaled nearly 2,000 units in March, up 50% from February and 9.3% higher than in the same month of 2025. In the quarter to date, however, the result remains negative: 4,400 buses were licensed, representing a 19.6% decline compared with the same period in 2025.

“For the bus market we had projected a 3% decline in 2026 and, through March, the contraction is already above 19%,” says Anfavea president Igor Calvet. According to him, the scenario “is beginning to become concerning,” especially because of the sector’s structural dependence on public programs: “A large part of the market depends on public policy, especially the Caminho da Escola program, which carries a great deal of weight.”

Calvet points out that the situation of the bus market in Brazil exposes an imbalance in this segment: “Public demand is important, but we also need to develop mechanisms to reduce this dependence.”

The weaker performance of the segment is also showing up in foreign trade. Exports fell 53.4% in March year over year and accumulated a 33.5% decline in the quarter. At the same time, production continued on the opposite path: from January to March, 7,600 chassis were manufactured, up 5.9%, highlighting a supply-and-demand mismatch.

A Stabilization Phase

According to PSR, Power Systems Research, the sector is entering 2026 in a stabilization phase after the post-pandemic growth cycle.

“There is a cycle change more than a structural deterioration,” says Priscila Von Zuben Spadine, Data and Forecast Manager. “The level of activity remains high, but there is a loss of momentum, mainly in the domestic market.”

PSR’s projection indicates production close to 27,000 buses and sales around 22,600 units this year, with a moderate contraction: “It is a decline, but still within a high level of activity,” says the consultant, who estimates a 4% to 6% drop in 2026.

In Priscila Spadine’s view, the current movement is still one of adjustment: “This is not about denying the decline, but about putting it into context within a still-elevated level. The bus market is very cyclical and depends on external factors. There is a loss of pace now, but not a structural break.”

At the same time, the consultant draws attention to the mismatch between production and sales: “Production has been increasing, but it is not being sustained by current demand. The reading is one of inventory build-up, which should be absorbed throughout the year.”

High Interest Rates Hold Back Sales

Within the industry, the tone is cautious. For Walter Barbosa, vice president of Mercedes-Benz do Brasil in charge of the Bus Division, the beginning of this year is unlike the historical pattern: “Normally the first quarter is strong for buses, but this year started differently, with a decline of around 20% in registrations.”

He avoids treating March’s performance as a sign of recovery:

“We still cannot say there has been a turnaround. February had few business days and the pace remains uncertain. We need to monitor the next few months.”

According to Barbosa, the macroeconomic environment has been weighing directly on purchasing decisions: “Global economic and political uncertainties are leading customers to adopt a more cautious short-term stance.”

The main obstacle, however, continues to be expensive credit, which discourages investment: “The base rate of 14.75% translates into a final financing cost of 18% to 20% per year. Who can afford that?” he asks. “At this level of interest rates, only those who are forced to renew or who have taken on a new contract make purchases. This postponement behavior is visible. Customers are delaying investments.”

At Marcopolo, the view is that the cycle has been interrupted, but without a drastic rupture, according to Ricardo Portolan, Marketing and Sales Director: “The market had been growing since 2022, semester after semester, and the second half of 2025 was the first in which there was a decline. That interrupts the cycle, but it indicates stabilization more than a sharp drop.”

For the executive, the first quarter confirms this trend: “In addition to stabilization, we had the effect of seasonality. Without the migration of orders from the end of the previous year, the start of 2026 reflected weaker behavior, which is typical for the period.”

Marcopolo is working with the expectation of a 5% to 10% decline in bus sales this year: “To close the year within this range, the market will need to grow over the next quarters, even if the final result remains below 2025.”

Portolan reinforces the impact of expensive credit on business: “There is no cancellation of already closed orders, but there is a postponement in purchase decisions. Customers are delaying larger volumes because of financing costs.”

For PSR, this picture should persist in the short term: “The macroeconomic scenario does not favor a recovery in private demand. High interest rates and uncertainty tend to delay investments,” says Priscila Spadine. She also warns about pressure on operators: “Margins are increasingly tight, which reduces the incentive for fleet renewal.”

Expectation of Slight Improvement

For Roberto Cortes, president of Volkswagen Caminhões e Ônibus, it is still too early to define a trend for the bus market: “We are at the beginning of the year. January and February were weaker, but March returned to a level closer to last year.”

According to him, the sector depends heavily on fleet renewal cycles: “These movements are not linear. Over the course of the year, the market tends to normalize.” Even so, the expectation is conservative: “Today we are working with a stability scenario compared with 2025.”

Cortes also points to credit as the main brake: “With high interest rates, purchases are restricted to those with immediate needs. The math simply does not work.” He also notes that new technologies depend on incentives: “Electric and gas-powered buses need subsidies. Without that, they do not gain scale.”

At Iveco Bus, as indicated by the division’s director for Latin America, Maurício Yamamoto, the scenario is seen as an adjustment after a positive cycle: “The beginning of 2026 reflects postponed purchases, the pace of bidding processes, and the high cost of credit.” Despite this, he sees fundamentals as preserved: “The market remains demanding, with a need for fleet renewal and transportation modernization.”

According to Yamamoto, the expectation is for improvement throughout the year: “As bidding processes and renewals move forward, we may see a gradual recovery.”

Caminho da Escola

In recent years, the performance of the domestic market has been strongly influenced by federal government tenders for school bus purchases: “Caminho da Escola accounts for around 30% of sales and continues to be a relevant support factor,” Yamamoto agrees.

In this sense, the most recent relief came on April 14: after several delays and uncertainties about the continuity of the program that guarantees revenue for manufacturers, the Ministry of Education carried out the tender for 7,470 school buses. In all, thirteen types of vehicles were tendered, with prices ranging from R$459,000 to just over R$1 million per unit, depending on the configuration.

VWCO will supply most of the buses, since it presented the best prices for 6,590 units, or 88.2% of the total tendered volume. Marcopolo/Volare will supply 620 units and Agrale another 260.

Portolan, Marcopolo’s director, reaffirms the importance of Caminho da Escola but without expecting additional momentum: “The program is essential to maintain the market level, not to expand it.”

Holding Pattern

In the foreign market, expectations are also for weakness among chassis and body manufacturers: “After a strong 2025, the trend is for exports to decline, although less intensely. It should not be a growth driver,” evaluates Priscila Spadine of PSR.

Given this set of factors, the consensus is that 2026 will be a transition year: “If we have lower interest rates and maintenance of public programs, the market may sustain itself at a higher level.” Otherwise, the sector should remain in a holding pattern, as Portolan summarizes: “The growth potential exists, but it depends directly on more affordable credit and more favorable financing conditions.” PSR

Global medium and heavy truck production is expected to increase in most important regions this year, but China’s MH truck segment probably will see a major structural change. Overall production in South America is expected to be flat, although Argentina is likely to post a gain of almost 10%.

North America. Medium and heavy truck production in North America is expected to increase by 9.4% this year compared with low 2025 production. While class 8 truck production is expected to increase by 11.3% this year as order rates for class 8 trucks improved strongly from December – March. 

Improvement in freight rates and freight demand along with tightening truck capacity and some level of truck pre-buy ahead of the 2027 GHG emission regulations is expected to drive increased truck production this year.  However, a protracted conflict in the Middle East would put significant downside pressure on truck demand primarily due to higher fuel cost, supply chain disruptions and an overall concern about the state of the economy moving forward throughout the year.

Europe. Medium and heavy truck production in Europe is expected to increase by 6% this year compared to 2025.  After very low truck demand during the past few years, it does appear that demand may have bottomed out and has started to improve this year.  Truck demand in Western Europe is expected to improve this year as the fleets will need to replace their older trucks purchased in 2022 and 2023. 

With regard to the conflict in the Middle East, if this conflict is relatively short lived (a month or two), it will probably have minimal impact on the European and global economy.  However, if this conflict were to drag on and oil tankers could not pass through the Strait of Hormuz, this would impact Europe with higher energy prices and supply chain disruptions.  Just the thought of an economic slowdown would likely give the fleets pause on capital investment.

South Asia. After a strong level of vehicle replacement during the past few years, commercial vehicle production is expected to increase by 3.1% this year compared with 2025.  In India, truck and freight capacity has mostly rebalanced and MHCV production is expected to increase by 3% this year compared with 2025.  Demand is expected to grow in the mid-term owing to a strong macroeconomic environment, healthy fleet utilization levels, Government capex on infrastructure projects, and stable freight demand. 

South America. Medium and heavy commercial vehicle production is expected to be flat this year compared with 2025.  Production in Argentina is expected to increase by 9.6% as the economy is improving and inflation is down significantly from a year ago.  MHCV production in Brazil is expected to be flat this year while vehicle production in Columbia is forecasted to increase by 5% this year.

Japan/Korea. Medium and heavy commercial vehicle production in Japan and South Korea is expected to increase by 2.1% in 2026 over last year.  Commercial vehicle production is expected to increase by 2.1% in Japan and increase by 2.6% in South Korea this year. 

In Japan, infrastructure spending and the continued need for the fleets to replace older trucks will be the primary reasons for increased truck demand this year.  For both Japan and South Korea, the trade tariff uncertainty will place pressure on the OEMs in their various export markets throughout the year.

Greater China. In 2026, China’s heavy-duty truck industry total sales are expected to remain in a high range of 1.1 million to 1.16 million units, showing a trend of “slight total growth but drastic structural change.” Domestic sales, supported by the concentrated replacement of China V emission standard models and the continuation of the “trade-in” policy, are projected to be approximately 700,000 to 790,000 units, while the export market will become a key growth pole, contributing an estimated 300,000 to 340,000 units.   PSR

Chris Fisher is Senior Commercial Vehicle Analyst at Power Systems Research

The Brazilian federal government reversed the decision to resume the application of taxes affecting school buses acquired under the Caminho da Escola program, administered by the Fundo Nacional de Desenvolvimento da Educação (FNDE). The discussion involved the potential reintroduction of tax charges impacting the cost structure of buses supplied through the public procurement framework, particularly related to federal and state taxation such as IPI and ICMS, as well as uncertainty regarding the treatment of PIS/Cofins.

The clarification of tax exemption conditions allowed the release of a new tender round that had been temporarily delayed due to pricing uncertainty. The Caminho da Escola program represents an important institutional demand channel for domestic bus manufacturers and body builders, particularly for configurations adapted to rural transport conditions. The expected procurement volumes support the renewal of school transportation fleets and help maintain baseline demand levels in a segment that has been affected by constrained financing conditions and slower private sector investment dynamics.

Source: AutoData     Read The Article

PSR Analysis: he release of a new tender round under the Caminho da Escola program reinforces the relevance of institutional procurement as a stabilizing demand mechanism for the Brazilian bus industry. In a context of weaker early-year market performance and still restrictive financing conditions, the program contributes to mitigating cyclical volatility by sustaining baseline production volumes. However, the timing of contract awards and production ramp-up suggests that a significant portion of the impact should materialize in 2027 rather than fully in 2026. From an industry perspective, the program improves short-term visibility for OEMs and bodybuilders while partially offsetting the slowdown in private fleet renewal, although its structural impact remains limited by fiscal constraints and dependence on public budget allocation cycles. PSR

Fabio Ferraresi is Director, Business Development, South America, at Power Systems Research

But that’s easy, I hear you say, its Australia and its sunny. Well, how about cold and snowy Canada? Transport Canada’s Zero-Emission Trucking Program, recently published a study which monitored over than 200 thousand kms (124,224 miles) of diesel and electric truck data over a year of operations in the Montreal-area. There findings were staggering with nearly $200k of savings per electric truck

Meanwhile in Europe, Trailer Dynamics in Germany has a different idea. Instead of electrifying the tractor, electrify the semi-trailer, so if you use an electric truck, great, this boosts your range, but if you are using a diesel truck, the e-Trailer can reduce fuel costs considerably. The benefits of a self-powered, battery-electric semi-trailer go beyond reducing CO₂ emissions as the technology also promises significant efficiency gains, which is music to the ears of fleet managers

Source: PV Magazine: Read The Article

PSR Analysis: This article is one of many that give a clear indication of where trucking (especially reefers) will go in the future, but the key isn’t really the cost saving, the efficiency improvements or the de-carbonization, but rather insurance. In the trucking world, if you have a 100k cargo of say, pharmaceuticals, the insurance company has historically insisted on a second diesel ICE to power the reefer unit alone. This is why this real life test of refrigerated goods in Australia’s heat, is very telling.    PSR

Americans are warily eyeing prices at the pump as oil shipments through the Strait of Hormuz grind to a halt amid the threat of Iranian attacks on vessels. The IEA took the unprecedented step of saying it would release 400 million barrels of oil from reserve on Wednesday. But oil is far from the only product for which the world economy is heavily dependent on the shallow, narrow waterway which connects Persian Gulf ports with the rest of the world. From the metals market to agriculture and autos, a de facto closure of the strait would ripple through business sectors and both the U.S. and world economy.

Aluminum is a good example. It is one of the biggest non-petroleum commerce casualties of the U.S.-Iran war. In 2025, the Middle East accounted for roughly 21% of unwrought aluminum imports and 13% of wrought aluminum imports — and those percentages have been rising. Unwrought aluminum is the raw, unprocessed metal in forms like ingots and billets, while wrought aluminum has been mechanically shaped into sheets, rods, or other finished forms used directly in manufacturing.  

“The Iran situation is having an impact, and as the conflict continues, industry concerns may grow,” said Matt Meenan, spokesman for the Aluminum Association, a trade organization representing the U.S. aluminum industry. “This is a highly dynamic situation,” Meenan said. 

The longer the Middle East conflict goes on, the more damage that will be done to supplies of products that Americans expect to be on the shelves. 

“The Gulf is a major supplier of aluminum, and disruptions could tighten supply chains for advanced manufacturing,” said Tony Pelli, practice director of supply chain security and resilience at BSI Consulting, a global risk management firm. “Aluminum prices are already rising, and further disruption could increase input costs for automotive, aerospace, and construction manufacturing in the U.S. and Europe.” 

SOURCE:  CNBC – 3-11-26

PSR Analysis. It is always something.  Just as the North American trucking industry has started a transition into a positive freight environment, an on-going conflict in the Middle East could derail this transition.  During the last three months, the OEMs have seen stronger order books primarily driven by tighter truck capacity, improved freight rates and improving freight demand along with an overall sense of optimism. 

If this conflict ends relatively quickly and the Strait of Hormuz can fully open-up, the commercial truck market will continue to improve this year and beyond.  If this conflict drags on, it will almost certainly give the fleets pause on purchasing new trucks out of fear of a major freight slowdown or even an economic recession.    PSR

Chris Fisher is Senior Commercial Vehicle Analyst at Power Systems Research

Parallel to this commercial growth, MAN is finalizing the transition of the Lion’s Coach E into series production. Following its world premiere at Busworld Europe in late 2025 and the successful completion of rigorous winter trials in the Arctic Circle in March 2026, the Lion’s Coach E is the first battery-electric coach from a major European OEM to enter serial production at the Ankara facility, with first customer deliveries slated for later this year.

Source:  Traton Press Release  Read The Article

Industry Implications. The 30% year-on-year order increase (2025 vs. 2024) underscores a “decoupling” of European fleet demand from the broader global freight recession seen in North America and Brazil. For MAN, this growth is a critical endorsement of its “full-liner” strategy, proving that its diversified portfolio—particularly in urban buses and light vans—provides a necessary buffer when the heavy-duty truck market fluctuates.

The launch of the Lion’s Coach E represents a high-stakes strategic play to capture the “last frontier” of transport electrification: long-haul travel. By being the first major European manufacturer to move from prototypes to a dedicated serial production line in 2026, MAN is effectively setting the technical benchmark for the industry. This first-mover advantage is bolstered by the use of shared components from the MAN eTruck program, allowing for rapid scaling and providing a mature solution for tour operators facing imminent “Zero Emission Zone” restrictions across European capitals.   PSR

Brazilian vehicle exports showed mixed performance in early 2026, increasing significantly to Mexico while declining sharply to Argentina. Growth in shipments to Mexico reflects stronger demand conditions and efforts by Brazilian OEMs to diversify export destinations, while the drop in Argentina is linked to weaker domestic demand, tighter import controls and foreign exchange constraints.

Overall exports remained supported by regional demand adjustments and production planning by automakers, with light vehicles representing the bulk of volumes. The shift indicates an ongoing reconfiguration of South American automotive trade flows amid macroeconomic instability across key markets.

Source: Automotive Business      Read The Article

PSR Analysis. Diversification supports volume stability but depends on sustained competitiveness against Mexican domestic production and global platforms. Short term performance will remain sensitive to Argentina’s macroeconomic normalization and trade policy conditions. The trend suggests continued adjustments in production allocation, logistics planning and market positioning across the Mercosur automotive value chain.  PSR

Fabio Ferraresi is Director, Business Development, South America, for Power Systems Research

OEMs adjusted output in response to lower order intake, particularly in the heavy duty segment. The result highlights ongoing volatility in Brazil’s commercial vehicle cycle and limited short term impact of policy support measures on production levels.

Source: AutoData      Read The Article

PSR Analysis. The contraction indicates that structural demand drivers such as freight activity and credit conditions remain more decisive than industrial policy incentives in the short term. Market recovery will depend on cargo volume growth, financing availability and operator confidence. The sector remains in a cyclical adjustment phase, with production planning closely tied to order backlog dynamics. Medium term effects of Mover Brazil will likely materialize gradually through efficiency gains and fleet modernization rather than immediate volume expansion.  PSR

Fabio Ferraresi is Director, Business Development, South America, for Power Systems Research

The vehicle is expected to be produced locally and positioned in the compact SUV segment, supporting Volkswagen’s regional electrification roadmap. The launch reinforces the company’s focus on hybridization technologies adapted to Brazilian market conditions and regulatory trends.

Source: Automotive Business     Read The Article

PSR Analysis. The Tukan signals Volkswagen’s strategic alignment with Brazil’s ethanol ecosystem by prioritizing flex hybrid solutions over full BEV adoption in the near term. This pathway offers lower infrastructure risk and faster market scalability but depends on cost competitiveness and consumer acceptance. The project reflects an expansion stage within the brand’s regional electrification strategy, with potential spillovers across Mercosur supply chains. Market impact will depend on pricing strategy, local content levels and policy incentives for hybrid technologies.  PSR

The PSR-TPI measures truck production globally and across six regions: North America, China, Europe, South America, Japan & Korea and Emerging Markets. This data comes from OE Link,, the proprietary database maintained by Power Systems Research.

All Regions. In 2026, all regions are expected to see some level of improvement in the MHCV segment. After low levels of production in Europe and North America in 2025, a slight increase in demand in 2026 is expected as both regions recover and should see stronger demand in 2027 and 2028. All other regions are expected to see improvement as well.

Global. Globally, medium and heavy commercial vehicle production is expected to decline by 3.7% this year over 2025. A moderate softening of the global economy along with negative impacts from increased tariffs had placed pressure on vehicle demand last year but market conditions are stabilizing heading into 2026.  PSR

Jim Downey is Vice President, Global Data Products, at Power Systems Research
Chris Fisher is Senior Commercial Vehicle Analyst at Power Systems Research