Car Clubs enters the fast lane

Car Clubs, a Hangzhou-based car rental operator, has a similar goal: to make its vehicles available anywhere and at anytime. 

The two-year-old company last week received a Series A round of funding, worth several million renminbi, from local VC investor Incapital and Tobon VC, a government-managed fund. The capital will be put towards growing its number of operation stations to 200 and enlarge its fleet to 400 cars, up from 100 at present.

"The company is expected to raised several rounds of funding later to scale up its business. Once operations reach a critical mass, it will start establishing a brand name in the market," says Rongjun Liu, investment director at Incapital, which first backed Car Clubs last October.

Formerly known as Evnet, Car Clubs' fleet initially comprised electric cars but these were soon replaced by gas-powered vehicles. A customer makes a reservation online and collects his vehicle from any self-service station; rental fees are charged by the hour and settled automatically by scanning a membership card.

The minimum cost of renting a Car Club vehicle in rush hour is RMB50 - less than a one-hour taxi ride, although fewer miles are usually covered. Much like the bicycle rental system, Car Clubs is expected to help reduce traffic congestion and air pollution.

"The business strategy is in line with government policy to promote a green city," Liu says, "The local government has initiatives to provide subsidies for start-ups. Their investment is capped at 30% of a VC firm's commitment and the capital doesn't' have to be returned if the business is making losses. If it reports a profit, the government share can be bought back."

Tobon VC was launched in 2008 by Caikai Investment Group, which is owned by the Hangzhou provincial government. It has registered capital of RMB30 million.

Car Clubs will spend no more than RMB100,000 on each of its new vehicles, which means it won't match the Mercedes-Benzes and Audis offered by China Auto Rental, the country's largest car rental provider. China Auto Rental has also received PE backing and plans on expanding its 55,000-vehicle fleet to more than 100,000 by 2018. As of June, the company had nearly 600 service locations covering 66 cities and 52 airports.

Though keen to enter new cities, Car Clubs' ambitions are more modest. "I think the approach of China Auto Rental is too aggressive and the business expansion has been off the balance sheet," Liu says. "We will control Car Clubs budget for expanding in the early stages."

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• Topics
• Greater China
• Venture
• China
• automobiles
• Venture