On June 1, the Ministry of Transport (MOT) and Ministry of Housing and Urban-Rural Construction solicited public consultation for the guidance on promoting the healthy development of car rental. The guidance defines four tasks: consolidating the foundation for safety management, encouraging the development of time-share rental, improving service ability and creating an excellent development environment.
Industry insiders believe that in general, the guidance encourages and regulates the development of car sharing. But unlike bicycle sharing, the car sharing market may hardly see an explosive growth. Instead, the market will expand steadily. Auto makers will embrace opportunities for transformation. But it can be ignored that there is still a long way to go before the car sharing market actually forms a mature business model and achieves profit.
Opportunity: market size grows 20 pct. annually on average
Car sharing becomes another hot spot following bicycle sharing. “International car giants, including BWM, Borore and GM, have launched car sharing services years earlier. China makes a later start. Different from online car hailing service, time-share car rental has a business-to-consumer (B to C) model, which, to some degree, can reduce the incremental of the former and supplement the urban transportation system,” Zhu Dajian, professor from the College of Economic and Management, Tongji University and head of the think tank of sustainable development and new urbanization, told the Economic Information Daily Reporter.
According to MOT’s statistics, China now has a total of 6,301 car rental enterprises, owing about 200,000 cars for renting. The market is expanding at an average annual rate of around 20 percent. Among them, over 40 enterprises are engaged in time-share car rental, most of which are original equipment manufacturers. There are more than 40,000 cars for time-share renting, over 95 percent of which are powered by new energy.
However, it is noteworthy that “China’s car rental industry is still in an initial stage. It is still facing acute problems, such as inadequate service ability, backward legal system, high risks in operation and lack of new time-share rental model. Its development is still inconsistent with the country’s economic and social development as well as the public’s diversified travel demands,” said an official from the department of transport service of the MOT.
The official added that there are no national laws and regulations specialized in car rental. Only some local governments, including Beijing, Shanghai, Chongqing, Shanxi, formulated regulations on car rental. The lack of industry laws and regulations and top-level design leads to an inconsistency among different regions in key issues, such as market access, nature of car, car insurance, retirement life and driving services. Meanwhile, due to the high cost of renting cars, difficulty in control of renting cars and the imperfect social and industrial credit system, renting cars may sometimes be stolen, or rented by cheating during the lease term. In addition, it is hard to punish if car lessees violate traffic laws during the lease term. A large number of renting cars may fail to pass annual inspection, which affects the normal operation of enterprises. As a new application of Internet in transportation, time-share rental is attracting more attention from the capital market. Yet the capital market shows some blindness while promoting the rapid development of the industry.
Policy: national top design defines four tasks
The guidance defines four tasks: laying the foundation for safety management, encouraging the development of time-share rental, improving service ability and creating an excellent development environment. While encouraging the development of time-share rental, the guidance also points out that compared with travel via large-capacity public transport, time-share car rental is a non-intensive travel model. It requires the establishment of a car delivery mechanism that matches the local public’s travel needs, urban road resources and parking resources after taking into account the urban economic development, traffic travel structure, car ownership, parking resources and other actual situations on the premise to give priority to develop public transport.
The Economic Information Daily reporter noted that compared with bicycle sharing, the guidance on car sharing has other differences: it puts laying the foundation for safety management in the first place. The guidance specifies that enterprises to carry out car rental business should be identified. Those unidentified or those refusing to be identified should not provide car rental services. If a private car is registered for rental and is consistent with local regulations, it can also provide time-share car rental service.
Another concern is difficulty in parking. In this regard, the guidance encourages to provide parking lots for time-share cars in urban commercial centers, government affairs center, residential areas, transportation junctions and other crowded public parking lots. It also encourages car lessees to use curb parking in any time by providing preferential parking fee.
According to the above-mentioned official, some cities have already actively explored into the area. As long as car renting enterprises sign agreement with local governments, their cars can park free within designated curb parking lots after paying a fixed amount of fee each year. This will not only provide great convenience for the public use of renting cars but also promote the rapid development of time-share renting.
In addition, in order to improve service capacity, the guidance also encourages car rental operators to expand via merger and acquisition, joint ventures and financing. It also supports car rental operators to expand their coverage and optimize the layout of business network via franchise, chain operations and strategic alliances so that users can rent in one place or cities and return in other places or cities.
Outlook: car makers see opportunities to transform
According to the report on the analysis and forecast of Chinese car sharing market 2018 released by independent global consultancy Roland Berger, demand for car sharing is set to increase to 160 million rides a day in 2018, with the market growing to 1.8 trillion yuan.
In the 2016-2017 China Internet Time-share Rental Car Market Research Report, iiMedia Research expects that China’s Internet time-share rental car market will reach 430 million yuan in 2016, and reach 9.28 billion yuan in 2020.
"Based on the status quo and outlook of the car-sharing industry both at home and abroad, and as many international giants have entered the industry, we believe that car sharing will become another hotspot following bicycle sharing. We suggest paying attention to enterprises that have already launched mature car sharing services,” said Yan Kaiwen, analyst with Huaxin Securities
Zhu Dajian believed that the guidance encourages the development of time-share car rental, but the development should be standardized. But unlike bicycle sharing, the car sharing market may hardly see an explosive growth. Instead, the market will expand steadily. In his view, car sharing posts a new opportunity for China's auto industry. In the idea of sustainable and green development, many foreign car manufacturers have begun to shift to time-share rental, trying to make manufacturing industry serviceable. China's car manufacturers should also learn from them to transform to the new model.
However, it cannot be ignored that the time-share renting needs heavy investment. Its expansion needs support of money. Along with operation costs for obtaining license, building parking network and charging piles, time-share renting seems not like a profitable business now. Some insiders even predict that by the end of 2017, at least half of companies engaged in time-share renting will close.
Translated by Coral Zhong
Latest comments