Car rental industry insiders call for market regulation

• Source: CNTV.CN
• [10:12 January 18 2011]
• Comments

Having heard the news that the preferential purchase tax for passenger cars with 1.6-liter engines and smaller will be eliminated before Jan. 1, 2011, Li Shuhong, general manager of Nanjing Minsheng Car Leasing Company, has affirmed her decision to expand the company's business scope of long-term charter vehicle services to include short-term car rental services.

"We will open four outlets specializing in car rental services in Nanjing, Suzhou and Wuxi in January 2011," Li said.

The factors that support her decisive expansion stem from the recent changes in cars-related macro policies such as repeated oil price hikes and new rules released by Beijing to limit the issuance of car licenses. There are also related signals including the growing traffic congestion, increasingly limited parking space, rising parking fees and the public rental car initiative jointly conducted by Shanghai and Germany in the aftermath of the Shanghai World Expo. These factors have made her believe, "The spring for the car rental industry is about to come." She has reasons to support her conclusion: With the rise in the threshold of buying and using cars, more and more people will give up buying cars and choose public transit in their daily lives and car rental services for special occasions.

However, the development of the car rental market is unsatisfactory.

Industry insider Liu Xiaohu said that there are about 300 to 400 car leasing firms with business licenses in Nanjing and numerous others without business licenses. "As the 'Administrative Permission Law' adopted in 2004 has canceled the administrative approval on the establishment of car rental firms, and car rental enterprises are under registration management, the car rental industry is virtually under no management," Liu said. As there is nearly no threshold for the establishment of car rental firms, many only have one private car to rent and firms with 20 cars are considered large ones.

It is found that there are two principal types of vehicle rental consumers: Enterprises that charter vehicles for long periods and individuals who rent cars for short periods.

The long-term charter vehicle services for enterprises are popular in cities like Suzhou. Mr. Xue, director of the Passenger Transportation Department of the Suzhou Municipal Transportation Administration Bureau, said following the initiation and development of the Suzhou Industrial Park and the Suzhou New and Hi-Tech Development Zone, a large number of Taiwan and foreign-funded manufacturing enterprises have built factories in Suzhou and outsourced employee shuttle services to other firms. The earliest batch of vehicles chartered by enterprises appeared in Suzhou around 1998 and the number of registered chartered vehicles owned by 71 charter vehicle service providers has already exceeded 2,400 units. Today, more than 200,000 workers commute to factories and offices by chartered vehicles each day in Suzhou.

Nanjing Minsheng Car Leasing Company currently provides a large foreign-funded enterprise with long-term charter vehicle services including 92 vehicles. It offers passenger vehicles to shuttle workers between factories and homes, limousines for business receptions and cars to senior executives. "Taking a 150,000-yuan car as an example, we offer consumers the car with a driver at the rate of 6,000 yuan per month and cover maintenance, claim settlement and all other fees," Li said. Enterprise clients have not only saved the one-time investments for vehicle purchases but have also minimized the personnel management workload and related risks.

The short-term individual car rental services are considered by many car rental firms as a new source of profit. Zhang Jun, who has many years of experience in vehicle rental services, said that the target consumers of the individual car rental market mainly include those who recently acquired driving licenses or have just started their businesses and have special demand for traffic tools, white-collar workers who work and live in different places, ordinary people who temporarily need to use vehicles, car owners who need special models of vehicles, tourists, and those who have stable jobs but are not wealthy enough to buy cars.

According to statistical data, there are 600,000 private cars and nearly 1.6 million people with driver's licenses in Nanjing. This means that nearly 1 million people have licenses but no cars and they form an enormous potential consumer base for the car rental industry.