China Auto Rental bows out of chauffeur service after CCTV report

By Zhao Qian

China Auto Rental Ltd announced it had ceased its chauffeur service immediately Thursday, following a State media report that the business is illegal.

The company admitted chauffeur services, which is a common business among auto rental firms, infringed on the country's laws.

Yao Hongjun, deputy chief executive officer with China Auto Rental, apologized to customers who already ordered the chauffeur services while speaking at the press conference Thursday.

The action came two days after China Central Television (CCTV) reported Shanghai-based eHi Car Rental's chauffeur services were illegal.

According to the laws, auto rental firms could only offer self-drive cars, while charging leasing fees and chauffeur services are not allowed.

"These guidelines aim to avoid legal disputes when accidents happen and protecting consumer rights," said Ma Dongxiao, an attorney with Grandall Legal Group (Beijing), said Thursday.

Requests for comment from eHi and two other international auto rental giants, Avis China and Hertz China, were not provided by press time Thursday. But chauffeur services could still be found on their Chinese websites.

"The profit margin of chauffeur services is three to four times that of the self-drive business, because the labor costs domestically is relatively lower, and utilization rate of existing cars of chauffeur services is also higher than the self-drive services," Yao said, without disclosing profit data.

Consumer demand does exist, especially for foreigners from international companies, said Yao.

"The major reason for such a so-called gray business existed for such a long time, is, consumers demand," Li Xuerong, an analyst with CIC Industry Research Center said. "Maybe one day, the government could allow auto rental agencies with a good reputation and strong capital strength to enter into this area,"
"But it takes time for the government to regulate the current disordered and immature market," Li said.

Combined with some non-registered companies, the actual number of auto rental agencies has surpassed 10,000, according to CIC's senior analyst Li Yemen. For Yao, "if regulations are open in this area in the future, we would like to (be legally licensed)," Yao said.