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

There seems to be a never ending cycle of oil-related problems. In 2008, supply, demand and speculation caused a massive price hike. In 2022, Russia invaded Ukraine causing another oil price hike. And now, the US-Israeli attack on Iran has driven yet another price hike. The fundamental problem is that transportation remains totally dependent on oil, and oil prices are set by a very volatile global market.

This whole problem has encouraged motorists to do the math, and the result is staggering. Motorists simply cannot afford not to buy an EV as their next vehicle. This article goes into the math behind this.

Source: Electrek: Read The Article

PSR Analysis: EVs cut across this problem, and it doesn’t impact them because electric prices are set nationally not by a very volatile global market and they are a fraction of gas prices. Electric prices are also a way out of oil dependence.      PSR

Guy Youngs is Forecast & Adoption Lead at Power Systems Research

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

Volvo Construction Equipment has officially transitioned the A30 Electric and A40 Electric articulated haulers into serial production at its Braås site in Sweden. Originally unveiled as prototypes at bauma 2025, these machines represent the largest electric articulated haulers currently available on the global market, boasting payloads of 29 and 39 tons, respectively.

Designed for high-utilization environments like large-scale infrastructure projects and mining, the haulers offer up to six hours of operation on a single charge, depending on the application. The first production units are scheduled for delivery to customers in the United Kingdom and Norway this month.

This move solidifies Volvo’s commitment to lead the heavy-duty transition, moving beyond compact machines into the most energy-intensive segments of the construction industry.

Source: Volvo  Read The Article

PSR Analysis. The serial production of 40-ton electric haulers is a “proof of concept” for the entire European construction sector. For years, the industry argued that electrification was only viable for small excavators or urban projects; Volvo has now shattered that ceiling.

For competitors like Komatsu and Caterpillar, the pressure is now on to move their European fleets toward serial production rather than limited pilot programs. For fleet operators, the “total cost of ownership” (TCO) equation is shifting; while the upfront cost remains high, the reduction in fuel costs and maintenance for such high-utilization machines makes them increasingly attractive.

This is particularly relevant given the Industrial Accelerator Act’s focus on green procurement, as public infrastructure projects in Scandinavia and the UK are now likely to mandate zero-emission machinery of this scale.   PSR

Emiliano Marzoli is Manager of European Operations at Power Systems Research

Simultaneously, KTM’s corporate structure shifted as Stephan Reiff (formerly of BMW Motorrad) officially assumed the role of Chief Commercial Officer on April 1. On the community front, KTM confirmed that the 2026 KTM Europe Adventure Rally in Gubbio, Italy, has reached near-capacity registrations.

These developments signal a move away from the “overproduction” issues of 2025 toward a leaner, premium-focused strategy centered on Austrian-made electric innovation and high-margin “Orange Family” events.

Sources: Bajaj, AutoEvolution, KTM   Read The Article, Read The Article, Read The Article

PSR Analysis.  The stabilization of KTM through Bajaj’s $642.72$ million USD (€550 million) refinancing and the Mattighofen hub expansion is a critical “rescue story” for the European motorcycle industry. By localizing the production of high-performance electric components like the Freeride E’s drivetrain in Austria, KTM is positioning itself to benefit from the EU Industrial Accelerator Act’s “Made in EU” incentives.

For the broader industry, KTM’s aggressive pivot to a “premium-core” strategy—divesting from bicycles and non-core sports cars—highlights a trend of consolidation among European motorcycle manufacturers facing pressure from Asian imports.

The successful registration of the Adventure Rally also underscores the rising importance of “experiential retail”; for players like BMW and Triumph, the message is clear: survival in the 2026 market depends as much on building a gated community of riders as it does on the technical specs of the bikes.

The integration of Indian financial capital with Austrian engineering creates a formidable competitor. KTM now possesses the scale of Bajaj Auto for global sourcing and the high-end R&D capability of Mattighofen for the European premium market. This “hybrid” model allows KTM to weather economic volatility better than it did as a standalone entity in 2024.

As the Freeride E hits dealerships this month, it serves as a laboratory for the next generation of electric street bikes. If KTM can successfully migrate this technology to a “Duke E” or “SMC E” platform by 2027, it will likely dominate the urban European motorcycle segment, particularly as cities tighten noise and emission regulations. For your newsletter, the key takeaway is that KTM has successfully “right-sized” and is now the leading European edge for electric off-road technology.  PSR

Emiliano Marzoli is Manager of European Operations 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

The investment reflects a strategy to expand the company’s manufacturing footprint in regions with strong demand for agricultural mechanization, particularly in medium-horsepower tractor categories.

Localization is expected to support supply chain development and facilitate access to financing mechanisms tied to local production requirements.

Source: Click Petróleo e Gás     Read The Article

PSR Analysis. The Indian manufacturer is positioning itself to compete in Brazil’s large and structurally important agricultural machinery market, recognizing that local production is a key requirement for competitiveness. Domestic manufacturing improves cost structure, enables access to subsidized financing programs linked to local content, and strengthens brand perception as a committed local player rather than an importer. Beyond pricing advantages, the strategy supports dealer network expansion and increases credibility among farmers, a critical factor in a market characterized by strong brand loyalty and long equipment replacement cycles. PSR

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

Automakers and dealers indicate that a more significant recovery in vehicle demand will depend on a sustained downward trajectory in interest rates, improving affordability for both retail customers and fleet buyers. The current macroeconomic environment continues to constrain replacement cycles, particularly in higher-value segments such as heavy-duty vehicles and agricultural machinery, where financing plays a central role in purchase decisions.

Source: AutoData     Read The Article

PSR Analysis. The initial Selic reduction represents an important directional signal, but its isolated effect is insufficient to materially stimulate vehicle demand in the short term. The current environment suggests gradual recovery rather than an immediate rebound, with investment decisions remaining sensitive to credit availability and expectations regarding future rate trajectory. Sustained monetary easing will be required to support stronger fleet renewal dynamics and improve demand visibility across segments. It reinforces our forecast for the year on the on-road segments.  PSR

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

The initiative aligns with Brazil’s strong biodiesel production base and leverages the country’s agricultural capacity as a potential pathway for transport decarbonization without requiring immediate large-scale electrification. The evaluation includes technical validation of fuel system components, combustion characteristics and operational reliability under commercial vehicle duty cycles.

Source: Automotive Business     Read The Article

PSR Analysis.B100 testing aligns with the agricultural sector’s push to expand domestic biodiesel consumption and supports energy security by reducing exposure to oil price volatility amid geopolitical tensions. OEMs appear to be revising their historically cautious stance toward biodiesel durability impacts, developing technical solutions to enable higher blend compatibility. However, biodiesel still faces cost competitiveness challenges relative to petroleum diesel, which may limit large-scale adoption without regulatory incentives or pricing parity mechanisms.   PSR

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

Source: Autoesporte     Read The Article

PSR Analysis. GAC’s localization is in line with the structural shift in Brazil’s automotive market, with Chinese OEMs targeting the core profitability segments through aggressive pricing, high equipment levels and local CKD production. The company’s ambitious target of 50,000 vehicles per year signals intent to rapidly gain scale and directly pressure the traditional margin pool concentrated in compact and midsize SUVs. As ADAS, connectivity and electrification become baseline features, competition shifts toward cost efficiency and speed of portfolio adaptation. In a low-growth market, incumbents face simultaneous pressure on pricing and higher content requirements, reinforcing structural margin compression.   PSR

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