Similar model, different challenges
However, a similar business model cannot necessarily assure a similar success, given that the situation nowadays is quite different from when the 7 Days Inn was first established and the whole economy lodging industry was troubled with financial strains.
With a booming market, China's car rental companies have gained great popularity among investors over the last two years.
China Auto Rental has raised 1.3 billion yuan ($203 million) in total, eHI Car Rental more than 100 million ($15.6 million), and Topone Car Rental about 60 million ($9.4 million).
According to Deng Jiliang, key account manager of the Dongfeng Nissan Passenger Vehicle, car rental is a capital-intensive business. Thus, a company's competitive edge usually depends on its financial strength, which decides "how many vehicles it can buy and how much market share it can obtain."
With sufficient capital, the current Chinese car rental giants started intensive expansion campaigns in purchasing vehicles, opening new chains, and merging small companies.
By now, Auto Car Rental has set up over 300 chains in 48 cities, with 14,000 cars in service. The eHI Car Rental company also increased its car inventory to 6,000 over a network of nearly 300 locations.
Yet, Reocar Rental only owns 230 cars and has set up 12 locations in Guangzhou, Guangdong Province and Changsha, Hunan Province so far.
Therefore, the top priority for Reocar is to purchase more vehicles and expand the service network, analyzed Southern Weekly. Well aware of that, Reocar announced on August 29 that it had received funds from Fidelity Investments and Sequoia Capital.
Though refusing to tell the specific amount, Huang Ji revealed that it was an eight-digit fund.
Huang added that Reocar will increase its car inventory to 1,500 this year, 6,000 to 8,000 by next year, and more than 10,000 by 2013.
By drawing support from the 13 million members of 7 Days Inn, Reocar will open more new chains in Kunming of Yunnan Province, Guiyang of Guizhou Province, and Wuhan of Hubei Province, where pressure from the big rivals is relatively small, according to Huang.
However, Zheng, the big boss of Reocar, has been trying to keep a low-profile and is not likely to call Recocar "another 7 Days Inn of the car rental industry."
He stressed that though Reocar and 7 Days Inn are targeting some of the same customers, "the two are not associated with each other."
However, Sun Qian, managing director of Sequoia Capital China, admitted frankly "we bet on people, and that is why we decided to invest in Reocar."
