Car-rental business expected to boom
May 30, 2016 Category Automotive, Weekly
Car-rental firms have their eyes on China’s 327.37 million drivers that were licensed as of the end of 2015. That compares with about 124 million cars in private hands, according to the Ministry of Public Security. The bigger the gap, the greater could be the demand for rentals. The country’s biggest car-rental company, CAR, has a fleet of 88,853 vehicles. Its first-quarter net profit soared 55%, compared with a year earlier, to CNY274 million. Sales rose 56% to CNY1.63 billion, while car-rental revenue climbed 36%, according to a report by Leon Chik, a J.P. Morgan Analyst. Its fleet utilization increased two percentage points to a record 64.2% in the first quarter. Some of the reasons behind the surge in demand for rental cars also include measures to control the chronic air pollution in major cities as well as congestion, which are making it less appealing for people to own cars. In addition, those living in cities but who lack a hukou, or household registration, that grants them full rights to healthcare and other benefits, cannot buy cars, even though they may have driving licenses. So the gap between the number of qualified drivers and actual car owners will continue to expand. Among the biggest threats to the car rental business is the rise of online car hailing services like Didi and Uber, whose aggressive pricing has lowered demand for rental cars.
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