NAGOYA, Japan -- Toyota Motor has launched a car rental business for tourists in China as the local market grows due to wider use of mobile payment services.
Toyota Financial Services, a Nagoya-based subsidiary of the Japanese automaker, and Toyota's Chinese arm have set up a new company to run the business, together with local dealers.
The car rental service will start out in Hainan, a tropical island in southern China popular with tourists, and may be expanded later to other tourist destinations and large cities. Toyota hopes to capitalize on growth in the Chinese car rental market, driven mainly by the rapid spread of smartphone-based payment.
The new company, Toyota Hainan Mobility, marked the start of operations in mid-January with a ceremony in Hainan. Toyota Financial Services owns 33% of the new company, while Toyota Motor (China) Investment holds a 32% stake. The remaining 35% is held by two Chinese car dealers.
Rentals can be booked through a Chinese travel website. Mobile booking and payment service will be offered in the future.
Seven popular Toyota models will be available for daily rentals. Electric vehicles will be added to the lineup later. Rates are about half those in Japan. A Lexus ES, a luxury sedan, for instance, can be rented for 1,000-1,200 yuan ($144-$172) per day. A RAV 4 crossover SUV rents for 500-600 yuan. Higher fees apply during peak tourism seasons, such as Lunar New Year.
The company will also provide a pickup and drop-off service using Lexus cars to take customers to and from the airport to hotels in Hainan.
Hainan Island is known as China's Hawaii. In 2018, the Chinese government designated the entire province as a pilot free trade zone, with relaxed regulations on financial services and commerce.
The move is seen as improving the investment environment for foreign businesses in such areas as tourism, services and high tech. There is strong demand for mobility services in the province, where tourism is the main industry.
China's car rental market in big cities is fiercely competitive, with profit margins squeezed by a proliferation of low-cost services and rampant vehicle theft. But the spread of mobile payment services and ubiquitous security cameras are helping to stamp out these problems.
The market has also received a big boost from the tourism boom in China, driven by the country's economic growth. China's car rental market is forecast to be worth $9.6 billion in 2020, reaching $10.8 billion by 2023, according to research specialist Statista. That would put it on a par with Japan, where the rental car market is estimated at around 1 trillion yen ($9.1 billion).
Toyota's new car rental business in China fits with the automaker's long-term goal of becoming a "mobility company" that provides a wide range of mobility products and services, in addition to making and selling cars.
Europe is already a mature and highly competitive market for mobility services. But the Chinese market is still in an early stage of development and offers opportunities for newcomers. Toyota believes the lower-end of its car subscription service in Japan offers a good model for Chinese consumers, and it is considering launching a similar subscription service in the country.