Ask a Brazilian what kind of car they drive, and chances are that it will be a flex-fuel vehicle – a vehicle capable of running on either gasoline or ethanol or a mix of the two. Such cars represent 90% of new fleet production in the country and 50% of cars in circulation. Launched in 2003, flex-fuel vehicles were one of the key drivers of growth in sugar cane ethanol production in Brazil; prior to their creation, sales of cars running solely on ethanol was close to zero. The launch of these cars, coupled with a spike in oil prices, propelled ethanol production in the country.
“This triggered a huge expansion of the industry, beginning in 2005 and 2006,” says Giovana Araújo, head of the agribusiness equity research at Itaú BBA. “Since then, we [have seen] 112 new mills in Brazil.”
