Rules for short-time car rental market will help drive it forward

the Ministry of Transport and the Ministry of Housing and Urban-Rural Development co-issued a draft regulation on propelling the development of the short-time car rental industry to solicit public opinions. Beijing Youth Daily comments:

The car rental industry in the regulation mainly refers to the newly emerged carsharing industry, and the draft spends many large paragraphs talking about the business model.

Actually, the idea of short-time car rentals emerged earlier than that of the booming bike-hiring industry. However, within two years, short-time bike rental services have already taken off not only in metropolises such as Beijing and Shanghai, but also in a majority of second and third-tier cities. The total number of bicycles offered for shared use now exceeds 20 million and is expected to reach 50 million by the end of this year.

In comparison, short-time car rentals remain essentially a business idea. That’s mainly because the business model has yet to solve some key issues. For example, a user can just leave a rented bicycle by the roadside and the company that owns it will collect it, but anybody living in Beijing or Shanghai knows how difficult it is to find a place to park a car.

Besides, the cash pledge required to rent a car even for a short period of time is much more than the deposit required to hire a bicycle, which has limited the development of the short-time car rental industry. Other problems include protection of users’ information, road safety, as well as insurance. It will take time to solve all of the issues involved.

That’s why the draft regulation of the two ministries is timely. With the authorities making the regulations early for the industry, it sends a clear signal to the market that there will be rules to follow. That’s both a warning to potential investors that they should keep a cool head and a move to boost their confidence in its future prosperity.

By introducing the regulations now, the two ministries have also shown the market that they will shoulder their responsibility to regulate the industry. There are ample reasons to believe the short-time car rental industry will prosper.