Car Rental Supply in China Not Meeting Demand

The Chinese car rental market saw a boom during the three-day Mid-Autumn Festival in September a traditional holiday for family reunions and the National Day Holiday.

"We doubled our car fleet to more than 1,000 vehicles this year in China," said Terence Chiu, general manager of Avis Car Rental in China. "But, still, supply is greatly outnumbered by demand."

Before the Mid-Autumn Festival, bookings flew in a week in advance. With the national holiday, 70 percent of Avis’ cars were booked two to three weeks in advance, Chiu added.

Domestic car rental companies have experienced similar results as international firms. They have been more aggressive in their marketing strategies and expansion in recent years, launching advertising campaigns at places including metro stations and central office buildings months ahead of the festival and National Day Holiday.

Bookings with Shenzhou and eHi Car Service, two of the major players in the market, showed that during the Mid-Autumn Festival, all cars costing no more than 200 yuan a day to rent were fully booked. Just before the National Holiday, budget cars at these companies, such as the Mazda 2 and BYD FO, were no longer available.

Not surprisingly, the price of car rentals is also climbing along with the soaring demand. According to a salesman with eHi Car Service in Shanghai, rental fees have risen an average of 50 to 60 percent, and 100 percent for some popular models.

Cars must be leased for at least three days during the National Day Holiday. But despite the higher threshold, customers are not being deterred.

Increasing investment from venture capitalists into the capital-intensive business is one of the major driving forces behind the industry's growth, allowing rental companies to buy more new cars and launch wider promotions.

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