Baby, you can drive my car
- Source: Global Times
- [11:32 November 22 2010]
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Rental cars stored at one of eHi's outlets. Photos: Courtesy of Lin Yan
By Yao Fangqin
No longer are the rich and affluent the only ones taking to streets in China and leaving the city and their problems in the dust behind them. In recent years the rise of car rental has become an affordable option for many would-be road enthusiasts. While international car rental companies are focusing on business people, tourists and other high-end customers, Chinese car rental companies, not to miss out on an opportunity, are instead reaching out to young people who are not wealthy enough to own their own car, but still want to experience the fun and mayhem of a road trip.
China's car consumption
Statistics from the China Association of Automobile Manufacturers shows that in 2009, China, for the first time, exceeded Japan and the US, as the biggest automobile manufacturer and consumer in the world with a yearly growth rate of 48 percent and 46 percent respectively. According to the Transport Administration Bureau under the Ministry of Public Security, the number of people holding driver's licenses in China reached more than 120 million by the end of 2008. It is estimated that the number will reach 170 million by the end of this year. However, the number of people with a private car is not as high as the number of people holding licenses. Because of the extreme burden of traffic congestion, particularly in first-tier cities like Beijing and Shanghai, the government has tightened the distribution of license plates and implemented other regulations to limit car flow. During the 2008 Beijing Olympics, the "single/double car number control system" was put into effect, which meant that cars whose license plates ended in certain numbers could only drive on designated days. Also, 70 percent of business cars were taken off the road for the duration of the games.
Today, despite skyrocketing fuel prices, the number of car enthusiasts in Shanghai continues to grow. With such a huge demand, it is no surprise that car rental companies are hoping to gain a big slice of this growing market.
Hertz, one of the world's biggest car rental companies, entered China in 2002 in a joint venture with local company Shanghai China National Auto Anhua Car Service (SCNAACS). After struggling for three years, the joint venture ended in failure. SCNAACS's debts, including both an unpaid road maintenance fee which amounted to nearly 2 million yuan ($301,214) along with outstanding bank loans, led to the joint venture's shutdown.
In the same year, Avis, another international car rental company came to China through an alliance with the Shanghai Automotive Industry Sales Company (SAISC), a subsidiary of the Shanghai Automotive Industry. The two Fortune 500 companies founded the joint venture Anji, and both companies have a 50 percent share of the business. At present, Avis has 26 operating locations in 20 cities across China and is continuing to expand throughout China hoping to have 131 locations by 2012. When asked if they were worried about Hertz's failure in China, the Deputy General Manager of Anji Car Rental and Leasing, Andy Peng, concluded that they were fortunate enough to find the right partner.
As a sub-company of the China National Real Estate Development Group Corporation in Beijing, SCNAACS's business in Shanghai faced restraints from the beginning as all revenue went to Beijing and spending also had to get approval from Beijing. This relationship caused unbalance between both companies, as each cared about what they could take from the business but refused to shoulder certain responsibilities.
