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Chinese car rental service CAR Inc., more commonly known as Zuche, has rolled out a ride-sharing service UCAR Zuche Tailored Car Service (our translation), adding another competitive player to China’s booming taxi-calling industry.

The company is planning to launch the service in 60 cities around the country, according to CEO Charles Lu. He said that Zuche, which has started recruiting drivers in Beijing, Shanghai and Chengdu, has targeted adding 50 million users this year with an aggressive RMB2.5 billion (around US$400 million) subsidy plan to attract users.

As a leading car rental service in China, Zuche couldn’t have chosen a better timing for expanding into the country’s thriving ride-sharing market. China’s transportation regulator recently ordered all taxi-hailing apps operating in China to exclude private vehicles on their platforms due to security concerns. Only licensed drivers and taxi companies remained legal to provide such services. The apps using private fleets, like Alibaba-backed Kuaidi Dache, Tencent’s Didi Dache and Uber for profit are facing major setbacks.

Although widely criticized by the public, the ban is a good news for companies like Zuche (which are licensed to rent out cars) because it clears the battlefield by ruling out potential unlicensed rivals.

In fact, the company rolled out a similar service a few years ago – assigning drivers to cars rented on the platform. But it cancelled this business in 2011 due to state regulations. Unlike popular taxi-summoning apps that only connect drivers and passengers on an online platform, Zuche, an asset-heavy company that claimed to have more than 55,000 vehicles as of March last year, is more cautious towards risk, hence why it took so long to resume this business.

As the government has taken a new conciliatory tone towards the service, Zuche re-entered the field with it having been proved lucrative by industry leaders over the past two years.

Zuche wheeled out its new business in cooperation with UCar Inc., a third-party one-year startup founded by former Zuche executives. Under the deal, Zuche will lease its fleets to UCar Inc., which means the ride-sharing service will be run independently from the listed entity of Zuche.

Established in September 2007 and headquartered in Beijing, Zuche offers comprehensive care hire services including short-term rental, long-term rental and financial leasing, as well as assorted value-added services such as roadside assistance and one-way rentals. Zuche is operating in 70 major cities, serving more than 1 million individual customers and nearly 10,000 corporate clients as of June 2014. It went public on the Hong Kong stock market last year.

At the same time, Zuche’s major competitor Yongche has joined hands with Haier Group to set up a car rental and car financial leasing joint venture which expects to operate 80,000 to 100,000 cars by 2017. Another rival eHi, which pocketed US$100 million funding from Ctrip, is also beta testing its tailored car service in Shanghai.

image credit: Zuche

 

Editing by Mike Cormack (@bucketoftongues)