Two rental cars outside a Homeinns hotel in Beijing. Beijing Shouqi Group and Homeinns Co Ltd entered strategic partnership on Aug 11 in Beijing to increase the number of car pickup and return outlets in the hotel chain's network. Hao Yan / China Daily
With cities across China putting restrictions on new car purchases, hire sector is expecting a bright future
Chinese car rental companies are accelerating expansion of their fleets in tier-two and tier-three cities, in expectation of gaining a larger share of the rapidly evolving mobility market over the next five years.
Beijing Shouqi Group and Homeinns Co Ltd entered a strategic partnership on Aug 11 in Beijing to increase the number of car pickup and return outlets in the hotel chain's network, as the two companies' combined network would cover not only tier-one cities but also tier-two and tier-three cities, according to the companies' news release.
Shouqi Car Rental covers 66 cities with a network of nearly 500 locations, while Homeinns operates nearly 3,000 hotels in 355 Chinese cities.
Wei Dong, chief operating officer of Shouqi Car Rental and CEO of Shouqi Limousine and Chauffeur, said: "Shouqi Limousine and Chauffeur will expand to 40 cities by the end of this year, from its current 22 cities."
Both Beijing Shouqi and Homeinns are controled by the Beijing Tourism Group, after its Shanghai Stock Exchange-listed hotel arm BTG Hotel (Group) Co Ltd took over the hotel company for 11 billion yuan ($1.66 billion) in December.
Zhang Junyi, a partner with Roland Berger Strategy Consultants Greater China, told China Daily that car rental companies are seeking higher profitability through varied approaches including network expansion.
"A car rental company may benefit from a larger network which attracts more customers," he said. "Some could make more money from larger fleets, while some may save costs through close cooperation with car manufacturers and a lower procurement price."
Roland Berger Strategy Consultants foresee stronger growth in Chinese customers' spending on car hiring. It expects car rental revenue growth to accelerate in the 0next five years to 65.7 billion yuan from 50.7 billion yuan in 2015, a 29.7 percent increase, owing to an expected surge in business rentals.
Car Inc, China's largest car rental company by fleet scale, said in a written reply that as of March it had expanded its network to 74 major cities covering all provinces with 739 directly operated service locations.
The company believes the Chinese car hiring market is in an early stage where it is developing slowly and with limited penetration. But it said a 27 percent compound average growth rate would be possible by 2018.
Car Inc's net profit more than tripled to 1.4 billion yuan last year from 436 million yuan in 2014.
