China’s rental car market may look promising for Taiwanese contenders, but it would take a long time for the country to build up unified regulations for the industry, according to Taiwanese companies interested in investing in the sector.
There is growing interest in starting rental car businesses in China because of the need for people to get around in the vast country and the still large number of people without cars.
That interest was shown on June 28 when global car rental company Avis Budget Group launched its Taiwan operations with the aim of renting cars to the 500,000 Taiwanese businesspeople working in China who are believed to prefer short-term car rental services rather than having cars of their own, to save costs.
With approximately 500,000 rental cars and 5,200 locations in more than 175 countries, the New Jersey-based company said it will be the sole car rental company in Taiwan with a global reach.
It hopes to become one of the country’s top three players within five years, through partnerships with premium car brands and local parking lot chains.
However, for Taiwanese car rental companies, it is not expected to be easy to cash in on China’s great car-leasing opportunities unless the Chinese government removes regulatory obstacles, said Hsu Chi-mu (許季睦), president of Taiwan’s Carplus Auto Leasing Corp (格上租車).
“The biggest problem is a lack of unified regulation for rental cars across Chinese cities and provinces,” Hsu said.
“Some Chinese cities will charge entrance tolls for cars registered in other cities, limiting car circulation and the convenience of leasing services because you have to pay more when you want to rent a car in one place and return it in another,” he said.
Carplus set up its first Chinese office in Suzhou Industrial Park in 2007 and then branched out into Shanghai, Kunshan, Hangzhou and Dongguan to increase the coverage of its leasing services.
The second-largest car-leasing company in Taiwan operates 26 leasing and rental offices islandwide, including six counters in Taiwan’s High Speed Rail stations.
Hsu said Carplus has maintained 30 to 40 percent sales growth per year for corporate leasing businesses in China, where new car sales are also growing rapidly.
However, given the slower pace of the Chinese government authorities it will likely take 10 years or longer to unify car leasing regulations across the country, Hsu said.
“We will continue to focus on the long-term rental business while keeping an eye on the short-term rental market,” Hsu said.
“The tier-one Chinese cities, such as Beijing and Guangzhou, may have become saturated. However, the tier-two and tier-three cities remain potential markets for the corporate car-leasing business, since the Chinese government is planning to narrow the rural-urban divide by promoting trade and investment in smaller cities,” he said.
An executive of Hotai Leasing Corp (和運租車), Taiwan’s biggest car rental company, capturing 22 to 23 percent of the market, echoed Hsu’s opinions and pointed out that China is too big of a market to manage.
“We have complete regulations and systems in Taiwan. In China, each province has its own regulations, leading to difficult management of short-term car-leasing services,” said the executive, who asked for anonymity because of company policy.
Chinese local governments also limit the total volume of car licenses issued in each city or province, and it usually takes a long time to apply for a new license, the executive added.