China's Biggest Car Rental Company Enters the Used-Car BusinessBloomberg News
Car Inc. targets used car sales in 100 cities by next year
Company plans to expand to new car retail sales later
Car Inc., China’s biggest rental company, surged the most in more than a year in Hong Kong trading after saying it will begin selling used cars next month to retail buyers and a substantial shareholder sold stock at a premium.
Car Inc.’s stock jumped 14 percent, the most since Sept. 19, 2014, to close at HK$13.48. The benchmark Hang Seng Index gained 1.2 percent.
The company will start with sales in eight cities and expand to about 100 smaller municipalities next year by acquiring existing dealerships, Chairman Lu Zhengyao said in an interview in Beijing Friday. It will initially sell cars that are part of its rental fleet and subsequently offer pre-owned vehicles from other providers as well as new cars, he said.
“Demand for used cars will mainly come from the smaller cities in China where the business is still fragmented. It’s like we are expanding into some uncultivated land,” said Lu. “We will make the best use of our rental cars as well as take advantage of our lower purchase costs.”
Car, founded in 2007, will target lower-income consumers in smaller cities rather than big cities where buyers prefer newer vehicles. Sales of pre-owned passenger vehicles in the country will climb sixfold from 2013 to 36 million units by 2023, according to estimates by the China Automobile Dealers Association.
The company will sell used cars that have run less than 100,000 kilometers (62,137 miles) and have been in use for less than three years, said Lu. The vehicles will come with a two-year quality warranty, he said. Car also plans to start selling new vehicles leveraging its bargaining power with automakers, said Lu.
Car, which started an Internet car-booking service in January, is targeting customers who spend at least 60 yuan ($9.40) a trip. The company’s vehicles on average run 300,000 trips each day, said Lu. More than 70 percent of the customers of such chauffeur-driven cars are iPhone users, he said, citing analysis of downloads of its apps.
The company set up a lab in Silicon Valley in April and employs about 80 people, Lu said. Car’s ride-hailing offering will focus on high-end customers and not on car pooling and low-end services.
China’s transport ministry said Saturday it’s drafting rules for online car-hailing services to protect passenger safety by banning the use of private cars, according to a statement on its website. Car said its services are in line with the government guidance.
Car said separately on Monday that Grand Union Investment Fund, a substantial shareholder, agreed to sell a stake of about 5 percent to UCAR Technology Inc., a chauffeured-car service company. The shares will be sold at HK$13.5 a share, an 8 percent premium to the average closing price in the preceding 30 days.
— With assistance by Tian Ying