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Car-sharing: The Future of Chinese Transportation

| Apr 18, 2016 09:53 PM EDT

Beijing transport officials released an action plan for the next five years.

As more people forego private ownership of vehicles, experts are now foreseeing new opportunities emerging from the ride-sharing sector, China Daily reported.

More and more people are preferring long-term or short-term car rentals, rather than buying their own cars upfront. Users and operators in this system do not need to meet in person and customers can leave the cars in designated parking areas outside the rental service facility.

The Boston Consulting Group (BCG) predicts that about 600,000 vehicles in China will generate approximately 80 billion yuan ($12.34 billion) in revenue by 2021 through new mobility services. The forecast is accompanied by an expected reduction of private car ownership among young people in large Chinese cities.

According to Marco Gerrits, a BCG partner, the bulk of the revenues will come from light users who need a car for occasional trips. Most passengers are already preferring to avail of car-sharing services to avoid the greater cost of paying for a car.

Availing of car-hailing services reduces fares for passengers, lessens traffic congestion, and discourages the desire to own a private car, according to Nielson Company Greater China.

Short-term car rentals are also known as timesharing. The customers drive the vehicles themselves and drop them off at scattered spots rather than rental outlets. The cars could be driven away by the next customers. The users and operators do not need to meet each other in person.

Zhou Hang, founder and CEO of Yidao Inc., sees a more significant reduction in traffic if there are more passengers availing of car-sharing services.

However, car-sharing in China is underdeveloped. Market penetration of this sector is only at 0.4 percent in China, according to Yang Yang, CEO of Harmony Commercial Factoring.

"The country had about 550,000 vehicles in the sharing pool in 2015 but 80 percent of them were for long-term rental rather than short-term," said Yang. "Today, car-rental companies are transitioning to a car-hailing or timesharing system."

Companies like BMW AG, Daimler AG and Toyota Motor are looking to invest more in car-sharing initiatives in China. BMW launched its ChargeNow service in China in 2015 as the first step in its Mobility Service initiative. Daimler began its car2share projects in 2015, providing Smart Fortwo fleets to partner companies.

Although in general Chinese consumers are still tied to the traditional ownership of private cars, Nielson's research indicates that 67.8 percent of its respondents feel there is no need of owning a car. That mindset may soon become the general rule in the future.

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