Car Rental Market Heats Up as Chinese Tourists Embrace Self-Drive Travel

    As Chinese tourists are embracing self-drive travel, international car rental companies and major investors are lining up to secure a piece of the market.
    For Chinese travelers, the United States is the most attractive destination for self-drive tourism. (Shutterstock)
    Daniel MeesakAuthor
      Published   in Finance

    Niche types of tourism are taking off in China, with the growth of tourism types such as adventure tourism, ecotourism, sports tourism, and self-drive tourism all in the high double digits. As a result, the car rental market is now heating up across the world, with numerous partnerships formed between established international players in the car rental market and Chinese travel companies.

    Just last week, Paris-based Europcar—one of the leading car rental companies in Europe—entered a commercial partnership with Chinese counterpart Shouqi Car Rental, a part of state-owned Beijing Tourism Group (BTG). For Shouqi, the explicit purpose of the partnership is to tap into the global car rental market, a market for which Chinese tourists are of increasing importance. The partnership puts Europcar’s fleet of rental cars directly at Shouqi’s customers’ disposal through its various digital booking platforms. For Europcar’s customers, on the other hand, the partnership provides few tangible benefits. Europcar customers will be able to rent cars belonging to Shouqi’s fleet in China, but remain subject to standard regulations—barring people without Chinese driver licenses to drive in China.

    While Chinese law makes it almost impossible for visiting tourists to rent cars in China, many overseas destinations welcome Chinese self-drive tourists with open arms. Places such as the United States, France, Germany, Thailand, and New Zealand count to the number of popular destinations for Chinese self-drive tourists. However, some destinations, such as Japan, remain restrictive for Chinese driver’s license holders.

    As Chinese tourists are increasingly inclined to travel independently of tour groups, self-drive tourism offers the geographic flexibility of tour buses without limiting the flexibility of freely choosing your itinerary items. The result is a boom in self-drive tourism in destinations frequented by Chinese free independent travelers (FITs) that are geographically vast, and perhaps underserved by convenient public transportation options.

    Both Chinese investors and the Chinese government seem to be taking note: a growing number of deals like the one between Europcar and Shouqi are underway, and capital is flowing into Chinese companies connected to the car rental market. Preceding the move to partner with Europcar, Shouqi finished a funding round in December 2016, receiving 2.15 billion Chinese yuan (US$315 million) in funding—with market expansion cited as one of the main purposes of raising the capital. Among Shouqi’s many backers are companies either fully owned or partially owned by the Chinese government, underlining the importance the Chinese government sees in securing a stake in China’s tourism growth—whether it’s in tour groups or FIT travel.

    The move is only one of many in the increasingly important car rental and ride-hailing industries in China. Didi, Uber’s former Chinese rival that it’s now merging with, has been aggressive with its international expansion in both car rental and ride-hailing around the world. It remains a large investor in Uber-rivals around the world, and inked a partnership agreement with U.S.-based Avis, allowing Didi users to rent Avis cars across its 175 markets.

    While Chinese investors and many car rental companies have started placing big bets on the future of Chinese self-drive tourism, it might also be time for tourism boards around the world to put more focus on the self-drive market segment in China. According to a survey conducted by Mafengwo, the leading Chinese travel forum, and online car rental platform Zuzuche, self-drive tourists rank at the top in terms of annual income, and primarily come from affluent first-tier cities in China. As the overall growth of Chinese tourism has slowed below the double digits in the last few years, cashing in on the more profitable market segments is becoming a matter of importance to more established destinations for Chinese tourists. For attractive destinations without any direct flights with China, it also presents an opportunity to receive a larger number of independent Chinese travelers, otherwise largely concentrated in major cities. Self-drive tourism, it would seem, is one of the market segments worth paying attention to.

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