Car rental firm puts its foot down

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Last updated at: (Beijing Time) Monday, December 29, 2003

Car rental firm puts its foot down

Global car rental giant Avis is reviving up its expansion in China as Anji Car Rental & Leasing Co Ltd -- its domestic joint venture (JV) -- opened a new branch yesterday.

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Global car rental giant Avis is reviving up its expansion in China as Anji Car Rental & Leasing Co Ltd -- its domestic joint venture (JV) -- opened a new branch yesterday.

It was the second regional branch set up by Avis and its domestic partner within a month. The Suzhou outlet is regarded as the lead phase of the US-based firm's massive Chinese push, despite a company official forecasting narrow profit margins for the next three years.

"We are prepared to look at the coming three years as a startup stage, when we'll focus on fostering our business and gradually scaling up our domestic operations," said Xia Jun, who is vice-president of Anji.

Anji is a 50/50 JV set up in January between Shanghai Automotive Industry Sales Corp (SAISC) and Avis Europe Plc. The two sides pumped US$66 million into the venture, the first of its kind in China.

"To run a car rental business well in China, you need patience (and) in that case, we'd expect our profit margins to remain at meager levels during our infancy," Xia added, alluding to the immaturity of the domestic car rental market, which features limited public acceptance and high operational costs for car rental companies.

Yet, Avis seems resolute. It plans to set up 70 outlets nationwide by 2008 and such a network -- mainly covering China's economically more developed areas -- will be a huge boon for Anji, according to Xia.

The group's first regional branch was established in Guangdong Province's Guangzhou in mid December,and other outlets will follow in Beijing, Jiangsu Province and Zhejiang Province in the next two or three months, he said.

Xia refused to reveal specifics of the investment plan, but said much of the money will go into the establishment of a sizable vehicle fleet to meet growing demand.

In Shanghai, where Anji operates eight outlets, the company has about 1,000 vehicles.

The company said its revenue is expected to grow about 30 per cent this year, compared to the previous 12 months.

However, analysts have predicted Avis is in for a less than smooth ride. While the car rental market will not mature any time soon, competition will become increasingly fierce.

Besides Avis' long-time rival Hertz, owned by US auto giant Ford, domestic car rental firms are also trying to secure shares in the market.

Beijing-based Capital Car Rental Corp, for example, established earlier this year a strategic partnership with Hebei Tangshan Lianbang Car Rental Co Ltd. The two are respectively China's largest State-owned and private car rental firms.

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