As electric vehicles gain popularity and shared mobility platforms expand, car rentals have transitioned from obscurity to widespread recognition, especially with time-sharing rentals frequently making headlines. How is the car rental market segmented, what drives its development, and what does the future hold?

How to Segment the Car Rental Market?

The car rental market is divided into two categories: by rental duration, which includes long-term and short-term rentals. In practice, rentals under 15 days are generally considered short-term, 15-90 days are medium-term, and over 90 days are long-term. Long-term rentals are typically for corporate vehicle usage, while short-term rentals are primarily for personal use.

Next, they are categorized by business objectives into operating leases and finance leases. Operating leases refer to leases where the lessee aims for the use of car products, with the lessor generating investment returns by providing services such as vehicle functions, taxes, insurance, maintenance, and parts. Finance leases, on the other hand, are for the lessee who seeks ownership of the car products, and the lessor facilitates the transfer of ownership through leasing, essentially a leasing business with sales characteristics.

In the current entrepreneurial landscape, time-sharing rentals are a niche within the short-term rental market, primarily used for urban daily commutes and temporary travel, as opposed to short-term rentals for medium to long-distance self-driving. Leasing-to-own, on the other hand, is a segment of the financing lease market, contrasting with the after-sales leaseback that serves institutional financing, leasing-to-own represents a new direct car leasing method (This article is original; CarVision was the pioneer, please note when reposting).

What's Driving the Car Rental Industry's Growth?

The Chinese car rental industry has undergone three major stages since 1989: state-owned enterprise dominance, foreign enterprise dominance, and e-commerce enterprise dominance. Starting in 2014, it entered the mobile internet platform dominance phase, with rental companies evolving from state-owned enterprises to a coexistence of various types. The target customers have gradually extended from businesses to the general public, and business models have developed from single procurement to a variety of coexisting models. The driving force for its development primarily originates from three aspects:

The individual short-term rental market has experienced explosive growth.

In mature car rental markets like the U.S., short-term rentals often account for 70%-90% of the market share. However, China's car rental market has long been dominated by corporate long-term rentals, with the personal short-term rental market accounting for less than 30%. Yet, the surge in self-drive travel and the significant gap of 150 million between the number of drivers' licenses (350 million) and the number of vehicles (193 million) in China are both propelling the explosive growth of the personal short-term rental market.

Secondly, the sales of electric vehicles are driving

Amidst the dual pressures of the energy crisis and environmental protection, news of the ban on the sale of fuel vehicles has become increasingly common. With the support of various countries' subsidies for new energy vehicles, the trend of electric vehicles replacing fuel vehicles is irreversible. However, the two characteristics of short driving range and low retention value of electric vehicles also determine that their sales in the personal passenger car market are not ideal. They need to enter the short-term leasing market, where they can maximize the use of electric vehicles by leveraging the low driving range requirements and high cyclic usage characteristics in short-term rentals, while also building sales channels for electric vehicles.

Thirdly, the shared mobility platform promotes

Amidst the new regulations for ride-hailing services, platforms like DiDi are gradually shifting from light asset internet operations to a heavier capital model. Through car leasing, they can both build a mutually beneficial ecosystem with upstream vehicle manufacturers and reduce investment in automotive assets, thereby allocating more funds to technological research and development in areas such as autonomous driving and intelligent travel under data sharing (This article is original; please credit AutoCat first if republished).