Chinese rental company Car Inc plans expansion into internet-based, mobile services
Leading rental company Car Inc is expanding into internet-based and mobile services as demand for chauffeur-driven vehicles pushes growth
It is known as the mainland's leading car rental company, but Car Inc is breaking with tradition and, riding on China's internet frenzy, is creating a mobile platform that will offer solutions for various travel needs.
"Car Inc is more an internet company, not just a traditional car rental company," chairman Lu Zhengyao told the in Beijing.
"Automobile consumption habits will see fundamental changes in the coming years, with fewer people buying cars and more opting to rent or use chauffeured services," he said.
With a background in computing, Lu said he attached great importance to innovation and technology.
Car Inc currently operates its traditional car rentals and chauffeured services under a business-to-consumer model, but it is planning a peer-to-peer (P2P) platform that can put the different services together.
"Customers' travel needs can be very different, so we put different choices in one app to meet their demands."
A P2P car sharing service would be launched in the first half of this year, and the company would continue to add more services to the platform, Lu said. New services like car sharing could create synergy for existing services, he said. "If you are unable to find someone to share a car, you can turn to our chauffeured services."
Car Inc would likely partner with other companies in launching new P2P services, he said. A sizeable car fleet and customer base were advantages when the company was moving to internet-based or mobile services, Lu said.
New services like P2P car sharing would not be a standalone business, but it would help the company keep customers and attract attention in the market, Lu said.
Internet-based companies are challenging the traditional car rental business with the growing popularity of Uber and Yongche, mobile apps that connect users with privately hired cars. The mainland's two leading taxi-hailing apps also joined the competition last year.
Didi Dache, backed by Tencent, launched its chauffeured car rental service Didi Zhuanche in August, and Kuaidi Dache, backed by Alibaba, named its service Kuaidi One, which was launched in July. The market became even hotter when Didi and Kuaidi announced a merger last month.
Building on its traditional car rental services, Car Inc launched a chauffeured car service, Zhuanche, in January, collaborating with UCAR, its sister company. Similar to Uber, UCAR leases vehicles from Car Inc and hires drivers to take orders via mobile apps through its website or call centres.
Shrugging off the fierce competition in the chauffeured car business, Lu said more competition would help grow the market. "The chauffeured car business market is huge, it is even bigger than the traditional car rental sector," he said.
The government's vehicle-use reforms and rising demand from corporate customers would boost the need for chauffeured services from high-end travellers, Lu said.
Car Inc had an advantage over competitors as it had a large reserve of car licence plates, Lu said. As private cars hired via Didi Zhuanche and Kuaidi One are facing questions for running without commercial operation licences, calls have emerged since the end of last year to tighten regulations on car-hailing apps and to crack down on unlicensed cars.
Running a large licensed fleet makes Lu more confident about surviving the competition as he sees a bottleneck developing in the supply of drivers, especially when regulations are tightened.
However, like many other car-hailing apps, subsidies are the key business expansion strategy.
Lu does not expect to turn a profit in the coming two to three years as Car Inc is currently subsidising customers using its chauffeured services.
But Car Inc has an advantage over its competitors in controlling costs as drivers' pay is fixed and no subsidies are given to them, while competitors are subsidising both sides.
"Breaking even does not matter, spending money is what we have to do now to grab more market share," Lu said.
As huge losses are expected, Lu said running the business in collaboration with UCAR would not put too much financial pressure on the listed company.
Car Inc, which released its first full-year results after a public float in Hong Kong last September, reported a turnaround, posting a profit of 436 million yuan (HK$551 million), from a 223 million yuan loss in 2013.
The company's fleet comprised 63,522 vehicles at the end of last year, almost 20 per cent higher than the 53,022 vehicles it had a year ago, according to its annual results announcement.
Short-term and long-term self-drive rentals would remain the company's core business, while the contribution from the chauffeured car business would see strong growth, Lu said. The two segments complemented each other, he added.
A Morgan Stanley report said the fast growth in UCAR might bring strong leasing order flow to Car Inc, which might consider increasing the fleet leased to UCAR to about 30,000 to 40,000 units by the end of this year.
