China’s biggest car rental company prepares for ‘extreme scenarios’ amid profit slump, denies privatisation plan

CAR Inc said it is preparing for “extreme scenarios” to survive a prolonged business slump amid the coronavirus outbreak even as it denies speculations of being taken private after its stock slid following a slump in earnings.

China’s biggest car rental operator has been selling some of its assets including part of its fleet of used cars to boost its liquidity amid the economic downturn, according to company officials. The entry of new players is also leading to price discounting by competitors, eroding margins.

“The impact of the epidemic is expected to weigh on 20 to 30 per cent of total revenue for the first quarter,” Cao Guangyu, acting chief financial officer, said in an investor call late on Tuesday. The decline of new car sales has also affected the prices for used cars, the company said.

The Beijing-based group reported an 89.3 per cent plunge in earnings to 31 million yuan (US$4.4 million) in 2019 as the world’s second-largest economy grew at the slowest pace since 1990 and new car sales skidded. Car rental revenue increased 9.6 per cent to 4.9 billion yuan, according to its exchange filing on Tuesday.

The group cited some reasons, including lower than expected demand in tourist cities, erosion in vehicle prices and fees associated with an offer to bond holders to extend the maturity of its US dollar-denominated debt, for its “modest” results in 2019.

CAR Inc exchanged US$172 million of its US$500 million 2020 bonds with new 2022 securities in May last year. It redeemed the remaining 2020 notes last month, according to Moody's.