A report on state broadcaster China Central Television (CCTV) on Sunday highlighted the costs of acquiring and maintaining vehicles in the car rental economy, and said that industry’s high entry barriers mean startups are struggling to make good on their investments.
While car sharing companies face the danger of cash crunches, they also fill a certain niche in the transportation market. For distances between 10 to 50 kilometers, they can be more cost-efficient than ride-hailing services. In addition, despite the growing adoption of personal cars in China in recent years, buying and maintaining a vehicle remains, as one CCTV interviewee in Sunday’s report put it, an “unrealistic” goal for students and others under a certain income threshold.
In the same program, Tan Yi, CEO of car startup Gofun, told CCTV that the average daily uses for their electric cars was under three in 2017. He added that the company has sought to upgrade their fleet to “high-endurance” type vehicles, and has “passed the profit-loss balance line.”
For 2019, Tan said, the company aims to “dispose of” its remaining, lower-quality models as soon as possible.
Unlike Gofun, however, other startups haven’t managed to break even. A separate CCTV report in late December showed users of the car rental app Togo standing outside its Beijing headquarters, preparing to join a months-long waiting list to get their RMB 1,500 ($221) deposits back.
A Togo user told reporters at the time that the enterprise was only refunding 15 deposits a day. That user expected his deposit to be returned to him in May 2019. The company’s policy, according to its in-app user agreement, is to refund deposits in seven to 15 business days, given that at least 20 days have elapsed since the customer’s last rental.
Since China’s rental economy boom, automotive ‘sharing’ companies like Ezzy or Uu have gone bust, leaving users complaining that their deposits weren’t returned. The scenes of formers customers impatient to get their deposits back echoes the troubles of bike rental startups like Bluegogo, Coolqi, and most recently, Ofo.