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Car sharing on the road to China

By Li Fangfang | China Daily | Updated: 2014-06-09 07:13

Concept holds opportunities and challenges for providers looking to capture new market

Rocketing oil prices, traffic filled roads and concerning environmental problems make car sharing a promising trend for personal mobility, according to consulting firm Roland Berger.

The concept, which originated in Europe and North America, is moving to developing countries, particularly in Asia.

Nearly 2 million people in the world have now subscribed to car sharing memberships, according to Roland Berger.

Globally, the car sharing vehicle market is expected to grow by 70 percent annually. Many providers of the service have recognized the market potential and are actively seizing opportunities with businesses and private customers as target groups.

The consulting firm said China's car sharing market is expected to grow at a rate that exceeds the global average.

In a study titled "Sharing the future - Perspectives on the Chinese car sharing market" Roland Berger identified an approximate compound annual growth rate of 83 percent for the next five years.

Andreas Maennel, principal at Roland Berger Greater China and co-author of the study, said he believed that Chinese customers have a very positive attitude towards car sharing.

"Car sharing in China is still at an embryonic stage, but is excepted to develop positively," he said.

The company's statistics show that in 2013 the scale of car sharing in China was still small, with only 780 vehicles.

However, the number is expected to grow by 83 percent annually to 16,100 vehicles in 2018.

Technological trends such as widespread mobile Internet and government support for the car sharing business in selected regions and pilot cities will be driving forces in the market.

These combined with increasing environmental awareness are expected to have a positive effect on the market.

'car2share'

German vehicle provider Daimler AG was the first automaker to offer a commercialized corporate car-sharing program in China, after it started its car2share program in Shenzhen in February. The concept was the Chinese version of Daimler's successful car2go project, which runs in 25 cities in Europe and North America and offers one-way point-to-point rentals.

Daimler's initial trial phase in China offered a fleet of 30 smart Fortwo cars to 10,000 employees at Tencent Holdings, one of the nation's leading Internet companies, for both business and private trips.

After email registration car2share members could book vehicles online, pick up the car at Tencent's parking lot and drive away.

Payment was charged by the minute, with discounted fixed rates for hourly and daily use, and completed on return using Wechat Pay by scanning a uniquely generated quick-response code.

In the future, Daimler plans to expand the program to other cities with various car models."A forward-looking concept, our car2share pilot project provides a flexible, convenient and environmentally friendly approach to urban mobility in China," said Hubertus Troska, Daimler's management board member and chairman and CEO of Daimler Greater China.

A 34-year-old entrepreneur surnamed Zhang also saw the market potential and is starting a new business by developing a mobile application called Atzuche.com in Shanghai.

His app will provide a platform for private car owners to lease their unused vehicles, with insurance and credit guarantee offered and managed by his company.

"For customers who want to hire a car, the price will be lower compared to big car rental companies - around 30 percent. And the app will help people with demand find their favorite cars in the nearest distance," said Zhang, who launched the app last week, initially providing service in Shanghai.

Huge opportunities

Maennel at Roland Berger anticipates a broad range of opportunities for providers of car sharing and innovative fleet solutions in China.

According to Zhang Junyi, partner at Roland Berger Greater China, market entry will be eased by governmental support in the form of subsidies and preferential policies.

He said government subsidies were specifically expected to improve business operations. For example, in the future, governments will provide larger free parking zones to car sharing operators as an incentive and also subsidize development of electric vehicles.

As an increasing number of players enter the car sharing market it is expected that a wider product range will be introduced to meet the needs of different customers and apply flexible pricing packages accordingly.

There are challenges to car sharing in China, including relatively low taxi fares, the preference for ownership over renting and steadily worsening traffic conditions.

In addition, a Roland Berger consumer survey found low awareness among Chinese consumers: 76 percent are interested, but only 11 percent had heard of the concept.

Moreover, Chinese traditional values of vehicle ownership over shared services were not expected to change drastically in the near future. To capture the Chinese market's interest, awareness of car sharing needs to be raised through marketing, communication efforts and tailored product offerings.

Four steps

Roland Berger's experts proposed four steps to successfully enter the market while reducing market entry risks.

* Defining business model

Potential car sharing providers need to account for China's market specifics during the setup of their fleet, as business models established elsewhere are not directly transferable.

Key differences in infrastructure and sprawling urban areas pose challenges for customer accessibility, said the Roland Berger study.

In addition, credit records and commercial insurance policies are limited.

* Product offerings

Car sharing providers found it necessary to offer different product packages and flexible pricing options to capture different consumer groups.

Operators who provide vehicles with unique designs and integrate electric or low-emission vehicles into their fleets will be successful in China's car sharing market, according to the Roland Berger study.

In addition customized and easy-to-access services that enrich the consumer experience must be offered to Chinese consumers.

* Government lobbying

Lobbying and cooperating with governments at various levels will help car sharing providers in a number of ways. Support from authorities can help reduce approval and licensing times and provide access to a sufficient number of license plates.

In financial terms, governments can offer more favorable taxation policies and lower costs for parking and land.

* Pilot cities

Major cities with strong local governmental support and high customer awareness such as Hangzhou, Beijing, and Shenzhen are ideal cities for piloting the car sharing service in China. Pilot cities need to be chosen carefully to minimize market entry risk. Zhang said the battle for the Chinese car sharing market had only just begun and no dominant player has emerged yet, leaving opportunities open for local vehicle manufacturers.

lifangfang@chinadaily.com.cn

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