How to do an Uber-like car rental business in China?

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img: Yongche.com

Uber-like services won’t be banned by local regulators in China like what Uber encountered in the U.S.; however, they have their respective problems. Zhou Hang, founder of Yongche and serial entrepreneur, gives some color about doing such a business in China.

Yongche, founded in 2010, was one of the first Uber-style car rental services in China. It’s funded by ZhenFund, Morningside Ventures and Qualcomm Ventures.

Opportunities

Zhou Hang saw opportunities in over ten thousand car rental companies in China. Most of them are small- or mid- sized and operated in a traditional way – providing big companies with long term rentals. As they rely on social connections for orders, their business cannot scale up, Zhou said.

Now the vehicles available on Yongche are from small-sized rental companies the company reached partnership with. The platform covers twenty first-tier cities with several thousand limousines in service.

Mistakes   

At the beginning, Yongche expected the users to be businessmen older than forty, among whom they thought apps wouldn’t be widely adopted. So they did marketing in traditional ways, visiting companies in office blocks to promote membership cards or give away coupons. Yongche also assumed those users couldn’t be price-sensitive.

It turns out the 70% of the total users are in the 26 – 40 demographic and 60% orders are from apps (the rest are from phone calls and its website) — its first app was launched in 2011 and more were developed later on.

The reality also helped Yongche lower initial prices to what, one and a half to two times of the taxi rates, is acceptable with users who are indeed price-sensitive.

New Service Standards

To establish a successful online-to-offline business, Zhou concludes that “you have to create new rules and improved user experience for an old business so that yours can lead the market. Our idea is to make the improved experience the industry standard by creating rules and connecting users and drivers through apps.”

Speaking of O2O, Zhou thinks rating & review service is a better model over group-buying. Group-buying services cannot do anything when complaints that participating parties like restaurants don’t serve customers well flood in. But most restaurants cannot ignore user feedback on Dianping and may improve service accordingly. According to Zhou, the latter has the power to have the offline services in control.

When it comes to the car rental business, to make sure standards are met, a driver with Yongche can only get commission after a mission is completed as required: the driver picks up customer(s) on time, doesn’t smoke during the journey, doesn’t chit chat with customer(s) or people on the other end of his/her phone, etc. Yongche developed a system to monitor every trip. User ratings would also remind drivers to abide by rules.

What doesn’t sound like an Internet business is Yongche even trains drivers. Now you should expect a driver to hand you an umbrella in rainy days. Anyway, everything Yongche did was to, as its founder put it, set a new standard to make sure of the offline riding experience.