China’s leading rental company CAR Inc. published on Tuesday its H1 2016 performance report. With 764 service points and 99,727 cars covering 93 major cities, the company basketed a total income of RMB 2.97 billion (USD 446.3 million), a YoY growth of 29%.
This leading car renter founded in 2007 now welcomes a challenger in car rental industry, and that is the leading one-stop mobile transportation platform Didi Chuxing (Didi), who announced on Monday that it has introduced its own online car rental service. The beta testing in Shanghai that started in July will enter multiple tier-one and tier-two cities by the first half of 2017.
Didi’s online rental car service is being offered aside from its other seven types of services, which include car hailing, social ride-sharing and enterprise solutions.
Yet Didi’s car rental service differs from most incumbents in the car rental industry. Instead of having cars of its own or integrating resources from private-car owners, Didi cooperates with existing leasing firms, who will be helped to improve operational efficiency and reduce costs. According to Didi, it is in discussions with leading car rental firms including eHi, whose services are offered in over 200 cities in China.
Analysts suggested a few main reasons for this move by Didi.
Primarily, ride-hailing prices are going up, the market is returning to some sort of equilibrium, and new services and products are needed to generate more profits.
Since late July, ride-hailing services were legalized in China. Regulations require ride-hailing platforms not to offer prices that are apparently lower than those of taxis.
In August, Didi’s acquisition of Uber China indicates an end to the market’s crazy cash-burning. In other words, there might be fewer ride-hailers with fewer subsidies available. Didi must find new ways to generate profits, with its operational expertise and niche in data-driven intelligent dispatching.
From another perspective, it’s a good time to set foot in China’s short-term and tourist car rental market, an industry with great potential and opportunities.
Data from the China Tourism Automobile and Cruise Association (CTACA) shows that in 2015, 58.5% or 2.34 billion of China’s four billion domestic tourist trips were completed in rental cars, and the number is estimated to surpass 5.8 billion by 2020.
Additionally, the value of China’s short-term car rental market will grow from RMB six billion (USD 901.8 million) in 2013 to RMB 18 billion in 2018, according to analysis by Roland Berger Strategy Consultants.
Didi has no doubt established its dominance in the ride-hailing business. With close to 300 million users across over 400 Chinese cities, Didi completed 16 million rides in Q2 2016.
But will Didi grab a bite out of the cake that CAR Inc. so tightly holds? It’s unclear yet. The two players are running in different modes and have different focuses in the car rental business: Didi does not have its own cars and only provides SUVs and MPVs at present, unlike the veteran CAR Inc. which runs with its own cars and a rental system already laid out nationwide.
Game on, Didi and CAR Inc.
(Top photo from Baidu Images)