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March 21, 2017

Car share start-ups struggling in China

A report in the China Daily newspaper says that high cost, low fees and a limited user base are among the factors providing headwinds for mobility start-ups in China.

A report in the China Daily newspaper says that high cost, low fees and a limited user base are among the factors providing headwinds for mobility start-ups in China.

The report said that Chinese companies in the car time-sharing business are facing the risk of insufficient cash flow as they take on debts to install vehicle fleets.

The newspaper noted that one of the players in the field, Uucars, recently ceased operation and announced that users will receive their returned deposits.

Firms in China have been inspired by car-share firms in the West, such as Zipcar, which have created a market for car hire by the hour in metropolitan areas. However, the sector in China has attracted a large number of entrants and business models have been hampered by the need to service debt, some firms resorting to charging users heavy deposits – which have been unpopular. The over-supply of car share services has kept fees for users low.

Strategy&, a subsidiary of PricewaterhouseCoopers, noted in a report that "almost all car ride providers' books remain in the red, with each car losing 50 to 120 yuan a day," in its recent research report, the China Daily said.

However, long-term prospects for car share firms in China are forecast to be bright following a period of industrial restructuring and consolidation, the China Daily noted.

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