China vehicle rental market is expected to register a CAGR of 5.14%, during the forecast period, 2020 - 2025.
- The Car rental Market in China is majorly driven by factors such as investments from foreign car rental firms, entering strategic partnerships or joint ventures with domestic players and dealers, fleet capacity expansion of domestic players, etc. Currently, the industry is experiencing a penetration rate of around 4.1%.
- In December 2018, Europcar Mobility Group has extended its partnership with Shouqi, a leading car rental company in China, subsidiary of the Beijing Tourism Group. Shouqi Car Rental customers will be able to access Europcar's car rental services directly from Shouqi's website and are able to purchase all-inclusive packages. The agenda of the partnership is to aim a yearly increase in bookings of Europcar by 25-30%.
- Also, the Chinese government’s initiatives aimed at limiting the number of vehicles has greatly increased the demand for tourist vehicle rentals in the country. The restriction on license plates is making the newer rental companies wait for registrations, putting a curb on the ability to increase their fleet rapidly. Still, the market is fragmented in the country, with the presence of a large number of small-scale players in the industry.
- There are thousands of other rental companies with an average fleet size of fewer than 50 cars. The need for self-drive trips for leisure and business purposes, compounded with the gap between the number of cars in possession and licensed car drivers, (due to the government’s restrictions on car purchasing in order to control traffic congestion and air pollution) would augment the growth of the market considerably.
- Avis Budget Group, Inc., eHi Car Service (Enterprise Holdings), The Hertz Corporation, Beijing China Auto Rental Co., Ltd. are some of the major rental companies in the country.
Key Market Trends
Additional Features Added in Online Booking by Rental Operators
With the growing trend in technology, the ease of renting a vehicle through online booking has been the most preferred choice of customers over the past few years. As it provides the additional facilities to monitor a rental vehicle’s operation, performance, and maintenance in real-time. These features made tremendous assets for drivers and fleet managers, enabling them to better and more efficiently identify risks and implement timely improvements of their rental services.
The above new system features are expected to serve 1,500 leasing partners by the end of 2019. DiDi launched its financial services hub in its main China app in January 2019, covering a diversified portfolio of insurance, wealth management, and payment services to riders, drivers and car-owners across its ride-hailing and auto-solutions businesses. As of 2019, Didi Chuxing offers a full range of app-based transportation options for nearly 550 million users in the country.
Leisure/Tourism Continue to Capture Significant Market Share
In 2018, China outbound tourist arrivals totaled 149.72 million, placing the country among the top tourist destinations in the world. Shenzhen, Guangzhou, Shanghai, Hangzhou, Beijing, Xiamen, Chongqing, Tianjin, Chengdu, and Wuhan are the biggest tourist destinations in the country in 2018.
A major challenge for the tourism vehicle rental market in China is the process of obtaining a Chinese driving license. China is not among the 194 countries in the world that recognize the International Driver's Permit (IDP). Chinese driver's license is a basic requirement to rent a car in China and while foreigners can apply for this license, the process is a difficult one.
- In the Chinese tourism vehicle rental industry, the foreigners trouble surviving the high traffic in many cities in China is making them prefer chauffeur services or employing a driver for the rented cars. Because of Chinese wages, the cost of the drivers is also quite low.
- Despite these factors, the tourist vehicle rentals by domestic tourists is high, making the country a big market for the tourist vehicle rentals.
- Online tourist vehicle bookings are increasing in the country, due to increasing usage of smartphones and the growth in the number of users aging between 25 - 34 years, who prefer to book vehicle rentals through online channels.
- High inflow of international tourists and the growth of domestic tourists preferring car rentals is helping the growth of the tourism vehicle rental market in the country.
The Chinese vehicle rental market is significantly fragmented, with more than 100 companies having a fleet size of less than 50. The companies try to enjoy a competitive advantage over others by providing a wide range of services.
Chained operators with nationwide coverage are expected to outperform other regional players considerably due to the variety of fleets they can offer with the convenient services provided by these dominant players. Mergers and acquisitions are expected to be rampant, causing small players to strategically merge or exit the market over the forecast period, with market share concentrated among the leading players only.
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