The idea for Airbnb, the home rental start-up, originated in San Francisco when Brian Chesky and his friend Joe Gebbia decided to rent out their house to delegates at a conference. All the hotel rooms on the conference website were sold out. Since the two friends needed some extra cash, they accordingly decided to offer bed-and-breakfast to attendees.
The problem, Chesky told the New York Times, was that they had no beds at home, only air-pumped mattresses. “So we inflated them and called ourselves ‘Airbed and Breakfast,’” he reminisces.
The rest, as the saying goes, is history. What started out as a way to make a few dollars on the side, was recently valued at $10 billion. More importantly Airbnb established a new trend: the “sharing economy”.
The concept is inspiring copycats around the world, China included. There, four graduate students had something different in mind to finding a room for the night. In 2012 they founded PPzuche, which operates a business model similar to Airbnb but for car rental.
The company was founded in Singapore, where the four friends were studying at a graduate school in the city and decided to launch a mobile app dedicated to car rental services under the name iCarsClub (the name was later changed to PPzuche after investors complained that iCarsClub sounds like a club for car fanatics).
The founders then returned to China to make their fortunes. “The peer-to-peer car rental market in Singapore is very small because with the licencing issues some vehicles are only allowed to be driven on weekends and some only on weekdays. So we decided to move back home,” Zhang Binjun, one of the company’s four founders, told CBN.
PPzuche began operating in Beijing last October. According to an internal survey, the market potential for private car rental in China is huge – the estimate is that nearly 17% of private car owners in Beijing and Shanghai are willing to rent out their vehicles (the figure for Singapore is 19%). At the moment PPzuche has 50,000 cars available for rental (with 1,400 in Singapore), although it expects many more after adding Shanghai and Guangzhou to its business operations.
PPzuche, which means ‘peer-to-peer car rental’ in Chinese, secured $10 million in funding from investors including Sequoia Capital and Crystal Stream Capital in May.
So how does PPzuche make money? It takes a commission from each vehicle rental, a business model similar to Airbnb’s. By charging as much as 30% less than its more conventional competitors, it aspires to overtake the market’s largest traditional player, China Auto Rental (which is part-owned by Hertz, see WiC192). “I believe that in one year’s time we will surpass China Auto Rental in total transactions,” says Wang Jiaming, another of the four founders.
Peer-to-peer services like PPzuche challenge their more traditional competitors from much lower cost bases. They don’t need to invest in car fleets of their own. Plus the customer service overhead is also contained because bookings on PPzuche are completed via its mobile app. Drivers locate nearby cars that are available and then use the app for key-less entry. Each vehicle is fitted with what the company calls a ‘smart box’, a hardware device that provides GPS tracking, as well as clocking the distance for owners that want to charge by mileage instead of the number of days. Everything is digitised, from renting a car to returning it. Payment is straightforward too as PPzuche stores credit card details and charges rental fees automatically. And like Airbnb, drivers get ratings after rentals, meaning that customers who damage vehicles or drive recklessly have their membership revoked due to bad behaviour.
“If a driver is caught speeding more than three times, we will take away his membership,” a company spokesman told Global Entrepreneur.
China’s car rental market is already poised for explosive growth. Data from Roland Berger, a consultancy, shows that the business has grown over the past five years at annual compound rates of 32%, reaching Rmb6 billion ($972 million) in 2013. The consultancy expects that to reach Rmb18 billion by 2018. PPzuche will be hoping to get its own slice of the market.
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