The Road to Growth for Auto Rental in China

Corporate analysts and industry insiders say the auto rental market could become China's next big hope, with one leasing company executive saying the prospects for car rental businesses are "enormous," according to China Daily.

Emerging car rental businesses will become "the best propellant for the entire [auto] industry," said Zhang Xiaolin, chairman of Haina International Auto Leasing, a Sino-Japanese joint venture.

By 2015, China's car rental market is expected to hit 400,000 vehicles and produce $2.8 billion in annual revenue, according to the China Taxicab and Livery Association. Consulting firm Roland Berger goes even further, estimating annual revenue at $5.9 billion.

China was once known as the bicycle kingdom, but now it is one of the world's largest automobile consumers. Civilian automobiles went from 31.6 million in 2005 to 91 million last year, and that number is expected to hit 200 million by 2020.

News for China's auto market is not all positive, however. Xinhua News Agency stated that problems of the car market include gridlock, pollution and energy shortages.

A 2009 government work report by Premier Wen Jiabao stated that the administration would "facilitate the development" of the car rental market.

In a sector where companies are fighting for market control, one of the winners is China Auto Rental, the industry's No. 2 company behind eHi until last summer. But China Auto Rental is now operating in 58 cities, with a fleet of 22,000, and is looking to almost double that figure by the end of the year.

In July, China Auto Rental opened a 24-hour store in Shanghai.

China's auto rental companies flourished in 2006 and 2007 when Hertz International and Avis failed to adapt their stores to the Chinese business environment. As a result, those two companies mostly suspended their business in the country.

Frozen credit markets, recessions and US automaker bankruptcies since 2008 coincided with a boom in China's own car rental sector. And as market conditions improved, foreign capital started to return to China.

But the promises of growth are accompanied by various problems. At the end of last year, about 80 percent of China's 5,000 registered auto rental companies each had fewer than 50 cars.

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