China Auto Rental Inc. (CAR), China’s largest car rental company, has started preparing for “extreme scenarios” to survive the business slump caused by the Coronavirus outbreak, according to a report by the South China Morning Post.
CAR has sold some of its assets, including some of its used car fleet, to increase its liquidity during this economic downturn, according to company officials.
“The impact of the epidemic is expected to weigh on 20 to 30 percent of total revenue for the first quarter,” Cao Guangyu, CAR’s acting chief financial officer, said in an investor call.
In 2019, CAR reported 89.3% percent drop in earnings to 31 million yuan ($4.4 million) as the Chinese economy grew at the slowest pace since 1990, according to the report. Lower than expected demand in tourist cities and erosion in vehicle prices were a few of the reasons cited for low earnings in 2019.
CAR denies speculations that it’s going to take the company private after its stock dropped, according to the report.
The Coronavirus outbreak will likely affect car rental companies’ first-quarter results, according to S&P Global Ratings.
“Until the outbreak is contained and travel fear abates, we believe car rental demand is likely to continue to face pressure given consumers’ reduced willingness for leisure travel, company efforts to curb non-essential business trips, compounded with travel restrictions imposed by local governments,” said S&P.
Headquartered in Beijing, CAR started its car rental operations in 2007. As of 2015, the company operated 726 locations in 70 major cities across China.