CAR Inc's Gathers Fresh Steam as Upgraded Services Boost Investoroptimism
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CAR Inc's Gathers Fresh Steam as Upgraded Services Boost Investoroptimism

Thursday, September 23, 2021 2:30 AM
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HONG KONG, CHINA / ACCESSWIRE / September 23, 2021 / CAR Inc. In Autumn,a perfect time for a ride CAR Inc, China's leading auto rental service provider, is embarking on a new journey. The company launched a new promotional event in early September with themes about new cars, new membership, new cities and new free deposits -in a bid to offer its customers with brand-new service experience.

To consolidate its leadership , CAR Inc has taken a series of consumer-centric actions this year, from expanding the fleet size to improving user-friendly experience. With the support of its new shareholders after completing privatization in early July,CAR Inc has accelerated its pace of readjusting its business strategy and is eager to conduct more operational moves to surprise the market.

China's car rental market is experiencing a new round of recovery as the spread of COVID-19 pandemic is generally in control, and the whole sector is expected to usher into a new era of rapid growth after experiencing the exploration and start-up periods. Analysys, a Beijing-based market research consultancy, estimated that the size of China's car rental market will amounted to 84.92 billion RMB in 2021, up 32.8 percent on a yearly basis. The volume is expected to top 100 billion RMB to reach 106.156 billion RMB till 2022, soaring 25 percent over 2021.

As a leading company in this sector, CAR Inc is also catering to the consumption preference and personalized demand of the generation Z, or Gen Z, to seize the best opportunity for achieving rapid and sustainable development in the car rental sector. In the meantime, the improved industry environment is also promoting the recovery of CAR Inc's business performance.

News services create business boom in the industry.

Since its privatization, CAR Inc has adopted a number of measures to enhance its market share. As a leading company in the car rental market, the company has built a strong presence with business coverage in a large number of cities across China, and owns a considerable amount of vehicles. According to the corporate data as the first half of 2021, CAR Inc has become the first and only domestic car rental company with over 10 million consumers.

With the new promotional event on new cars, new membership, new cities and free deposits, these comprehensive transitions strongly show that company has not only upgraded service content, enriched users' experience, and lowered their rental threshold, but also highlighted its determination of providing more customized services to both business clients and private customers.

The company's comprehensive renewal of the vehicles, service scope, user experience, and non-deposit demand service has sent a signal to the market that CAR Inc has sufficient funds to invest in the market, as well as its willingness to support the growth of China's fast-growing service sector.

According to the credit commentary released by CMBI and HSBC, CAR Inc has gained car rental revenue of RMB 2.0 billion, up18% year on year, and Adj. EBITDA reached RMB 1,083 million with a 33%year-on-year growth. After a year's suspension of vehicle procurement, the company has recovered fleet expansion in the second quarter this year, with 7,333 vehicles added for RMB 914 million.

The analysis report from the HSBC also estimated that the biggest positive surprise comes from the operating statistics as utilization rate and hence RevPAC in 2Q21 rose to the highest since 3Q17 and 2Q19.

The confidence of capital market is restored after the new owner injected fresh vitality

Yan Jinghui, a member of expert committee at Beijing-based China Automobile Dealers Association, said that affected by many factors, CAR Inc's cash flow and business operation were once under pressure. Benefiting from the involvement of MBK Partners, a leading private equity firm in Asia, its capital resources has provided CAR Inc more support for its future growth. With the further recovery of tourism sector, the company has not only gained new vitality from operational perspective, but also created confidence for the capital market.

MBK Partners, the new shareholder of CAR Inc, is one of the largest private equity firms in Asia, with over USD 24.5 billion in capital under management. Particularly, it also has a strong track record in investing in the car rental industry and leading industry-wide consolidation. It has already invested in well-known companies including Shanghai-headquartered eHi Auto Service Ltd and KT Rental, the largest car rental company in South Korea.

According to public data, during its 16-year history, it has made 51 investments and distributed a total of $14.4 billion in proceeds to LPs and co-investors in 29 divestments. The private equity firm said the proceeds were the largest among Asia-based investment firms.

Many analysts believe that MBK Partners' involvement, including taking shareholding in CAR Inc, is mainly driven by the latter's market position and strong market occupancy. As reported,CAR Inc,backed by a fleet of nearly 110,000 vehicles throughout China, has become one of the country's leading chain operators in car rental business, and its comprehensive strength also ranks first among its rival platforms. With a total investment of nearly $1.3 billion in equity and convertible bonds, the privatization of CAR Inc is the biggest recent investment made by MBK Partners.

After years of development, industry insiders agree that MBK Partners has gained more expertise and experience in hands-on operational excellence, and established operating arms to assist the management teams of their portfolio companies in specific areas. Meanwhile, the firm is also proficient in cooperating with portfolio companies via talent cultivation, introducing practical operational and management modes. This is a well-known story in the industry.

To achieve user experience improvement, there is no doubt that strong back-up is needed. On the other hand, CAR Inc's outstanding business performance is consistently boosting investors' confidence, and also build a solid foundation for the future growth of its new round of services and promotional events conducted on September 2.

Analysts from CMBI predicted that CAR Inc's cash balance to exceed RMB 3 billion by the end of 2021. This will help CAR Inc to repay its CARINC'22 bond of USD 370 million (approximately RMB 2.4 billion). Moreover, the company has also newly obtained approved credit facility of RMB 600 million, which is sufficient to cover its maturing short-term debt in 2H2021.

CMBI has already upgraded the CAR Inc's US dollar bond CARINC'22 from "neutral," to "OW" and forecast that CAR Inc's rating would be upgraded from "B-" to "B" before 2022, as its business operations has notably improved. Similarly, HSBC maintains "buy" rating on CARINC'22.

Major players embrace new growth space, spurred by favorable market condition.

Seven years ago, CAR Inc went public on Hong Kong Stock Exchange. During this period,both the car rental industry and internet-based transportation sectors have been changed and transformed dramatically.

CAR Inc's privatization is also being considered as a more flexible way with less burden for the company to compete in the market. Other industry players are fixedly watching this leader to take follow-up actions. At the same time, the new industry pattern has brought fresh growth momentum for CAR Inc, after it concluded a comprehensive strategic adjustment.

According to the annual comprehensive analysis of China's car rental market 2021, released by Analysys, China's car rental market is now entering into a period of fast development after experiencing an exploration stage and start-up period. The size of China's car rental market will amounted to 84.92 billion RMB in 2021, up 32.8 percent on a yearly basis, and is expected to break 100 billion RMB to 106.156 billion RMB till 2022, soaring 25 percent on a year-on-year basis.

Driven by multiple factors such as policy encouragement, consumption upgrade and technology breakthroughs, the rental car market has begun to look at multiple positive growth opportunities, especially in this special period, consumers are paying more attention to safe and private travel methods, and the concept of car rental has been widely accepted by the public, in particular during the post-epidemic era.

While small and medium-sized players continuing to be sifted out in this massive market at a valuation of about hundreds of billions RMB, players with core competitiveness continue to consolidate their market share, and have built a stable market structure. Analysys data indicates that CAR Inc has already taken a leading position within industry for many years.

Strengthened by new capital sources and strategic layout, CAR Inc will undoubtedly continue to expand its presence in China's car rental market in the context of the rapid development of the industry. Apart from securing more market share, it aims to develop more new business directions and build industry standards.

In the long-term, industry insiders believe that full integration of horizontal and vertical development will be the future trend. From a horizontal perspective, car rental business involved more industry value-chain, including catering, accommodation, shopping and other business forms. Based on user portrait and behavior performance, companies can also vertically focus on delicate operational management of horizontal industrial ecology, to stimulate the second and multiple-time consumption activities.

Under this trend, CAR Inc does not only consolidate the leading position, but also is expected to gain more incremental space and new possibilities for further growth. The market is also looking forward to seeing more follow-up actions taken by the company.

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