Car rental firms in the driver's seat

Hai Shu is still worried about the arrangements for her family's Spring Festival holiday.

"I never expected that the most difficult step would be a car rental," said the 31-year-old human resources manager for an international trade company based in Beijing.

She made plans to leave the chilly capital for a tropical lunar New Year holiday in Sanya, Hainan province, taking her parents who live in the freezing city of Harbin in Heilongjiang province.

"I have settled the expensive flight tickets and hotel bookings. But with the holidays approaching, I'm finding it hard to rent a car in the popular coastal city," said Hai.

Most rental agencies offered her few choices of models, and cars were available for no more than five days.

She said it was "ridiculous" that the daily rental for a Volkswagen Polo had surged from less than 300 yuan (US$47.50) before the holidays to more than 900 yuan.

"It's impossible to accept," she said.

Sanya is a popular destination for the holiday, but it's not unique in its car rental situation.

"Bookings for Spring Festival got busy starting two months ago," said a counter service representative at eHi Car Service's Sanyuanqiao branch in Beijing. "Even when the daily rental fees more than doubled, they made the decision without hesitation."

The representative, who declined to give his name, said his company had prepared more vehicles for the expected holiday boom but "still cannot satisfy the surging demand".

"Chinese consumers have latched on to the flexibility and convenience afforded by traveling in a leased vehicle," said a spokesman for the Beijing-based China Auto Rental Ltd (CAR), who didn't want to be identified.

"As more people also choose to drive rented cars back home, it helps the prosperity of the business during the festival."

To provide better service and support for the "driving home" trend, CAR and other car agencies have been easing their distance limits. Generally, agencies have charged by the kilometer after a distance of 300 km for a single rental period.

"Taking a one-way drive from Beijing to Xi'an as an example, with a distance of about 1,300 km, ending the limitation can help the driver save 1,000 to 3,000 yuan, depending on different charges," said the spokesman of CAR, which claims to be the first and only car rental company to cover all China's provinces and regions.

"That also greatly stimulates the car rental business during the family reunion festival."

"Car rentals are among the segments of the vehicle industry with the greatest potential. The bookings boom will continue after the festival," said Cui Dongshu, deputy secretary-general of the China Passenger Car Association.

He also said that demand was significantly increasing in big cities like Beijing and Shanghai, where curbs on license plates were making it hard for people to own cars.

According to a survey by the automotive industry research firm Sinotrust, 49 percent of the interviewees said that they had rented cars.

As increasing demand, rising living standards and curbs on private cars combined to boost the rental sector, Cui said that the industry should be prepared to take advantage of the situation.

"How to expand rationally in different regions is one of the keys to their future," said Cui.

Shen Jun, who leads the Automotive Competence Center of Roland Berger Greater China, added that car-leasing companies needed to concentrate on providing high-quality services to win customers.

With the car-leasing sector undergoing a transition from long-term corporate rentals to short-term individual rentals, and with businesses moving from coastal areas to inland regions, industry players should target different customers with tailored strategies, said Shen.