Auto rental speeding up

Several Chinese car rental companies have recently been competing to get listed overseas after a few years of fast expansion in the domestic market, which is still young but features an improving business environment.

eHi Car Services, an auto rental company operating in more than 90 Chinese cities, filed with the US Securities and Exchange Commission for an IPO on October 4, and is expected to go public on the New York Stock Exchange.

eHi will be the second listed Chinese auto rental company following CAR Inc, which got listed in Hong Kong on September 19. CAR has 717 directly owned stores covering 70 major cities and 202 franchised service centers in 162 smaller cities, and owns a fleet of over 52,400 cars as of June this year.

China's auto rental market has undergone fast expansion in the past few years. The revenue of the rental sector increased from 9 billion yuan ($1.47 billion) in 2008 to 34 billion yuan in 2013, with a compound annual growth rate of 29 percent, according to data from global consultancy Roland Berger.

The Roland Berger data also noted that the number of rental cars has also grown from 100,000 units in 2008 to 369,000 units in total nationwide in 2013, with the compound annual growth rate hitting 30 percent.

CAR, the biggest Chinese auto rental company in terms of revenue, has experienced fast development in the past seven years with its customers growing from 450,000 at the end of 2011 to 1,962,000 as of June 30 this year, Zhang Yan, director of public relations at CAR, told the Global Times Wednesday.

Analysts attributed the fast development of the Chinese auto rental market to a better business environment such as an improved credit system and a gradually changing notion that social status is tied to car ownership.

Better business environment

The number of cases of fraud in the auto rental sector in recent years which have caused business risks and losses has declined substantially, Luo Lei, vice secretary-general of China Automobile Dealers Association, told the Global Times Wednesday.

Previously there were cases when some customers rented autos and did not return them to the rental companies, according to Luo.

Luo ascribed the fewer fraud cases now to better management by the companies and an improved credit system for the customers.

"The popularity of the second generation of identification cards and credit cards has improved credit guarantees from the customers," Zhang said.

Zhang suggested that the rental companies share their own redit rating systems with each other, and the government regulatory agencies set up a system to improve the credit system for this sector.

In addition to the better credit system, a larger demand for auto rentals from enterprises and government agencies is another driving factor for the fast development in the sector.

"More enterprises chose to rent cars rather than purchase autos to reduce operations cost," said Luo, adding that a reform of official car fleets, which have long been criticized for years for wasting public funds, is another stimulus for the auto rental sector.

The State Council, China's cabinet, announced a guideline in 2011 to rein in the use and purchases of autos for official use to avoid wasting public funds.