Global overviewEven though the global economy experienced slowdown and recession recent years, car rental industry has been growing worldwide. The growth is expected to continue especially in developing economies such as China and India in addition to Australia and the Middle East (Tse, 2010). The industry is more organized in the US, Europe and Asia pacific countries as opposed to emerging economies (Tan, 2011). Car rental companies have in the recent past been exploring developing markets such as India, Australia, the Middle East and China due to recent economic downturn that has hit many nations in recent past.
Car rental industry in China dates back to 1990 (Beck, Klobes and Scherrer, 2005). This was during the Beijing Asian games when car rental industry was launched to carter to the transportation needs of foreigners. Currently, the Chinese car rental industry is concentrated in Beijing, Guangzhou, Shanghai and Shenzhen cities. Impact of globalization on the industryGlobalization has seen car rental providers expand their ventures from their country of origin to other countries (Tse, 2010). This has also stiffened competition within the industry with many players moving to emerging markets such as China (Tan, 2011).
As a consequence of globalization, many international car rental firms such as CAGR, the Europcar, Hertz, Alama, Budget and Avis operate in Chinese car rental market (Beck, Klobes and Scherrer, 2005). PESTELPESTLE is an abbreviation for Political, Economic, Sociological, Technological, Legal and Environmental factors. PoliticalPolitical factors that can impact on a business include current and future taxation policies; current and future political support; trade bodies, grants, initiatives and funding; and the effect of worsening relations or wars with certain countries (Tse, 2010).
In China, governmental departments prefer to hire cars rather than buying them for regular use (Lorat, 2009). This implies that the political class in the country support the use of car rentals. This is one of the reasons why the car rental industry in china is growing faster than anywhere else (Tan, 2011). Moreover, in China tourists are not allowed to take their own cars while travelling (Ijioui, Emmerich and Ceyp, 2010). As such, tourist and other foreigners visiting China are compelled to hire a car if they want total comfort.
This is also an additional factor driving the growth of the industry in the country (Beck, Klobes and Scherrer, 2005). EconomicEconomic factors entail the general economic situation; consumer spending strength, current and future government spending levels; the ease by which people can obtain loans; the current and future level of inflation, unemployment and interest rates; specific taxation policies and trends and exchange rates (Tse, 2010). The purchasing power of customers and cost of capital of the company are usually affected by economic factors (Ijioui, Emmerich and Ceyp, 2010). China is experiencing a rapid growth in the number of business class individuals (Seth, 2006).
This class of people are driving the demand for car rental high (McDavid and Echaore-McDavid, 2009). As a result, the potential for the growth of the car rental industry in China is high (Seth, 2006). This is mainly driven by growing number of business people in China. Moreover, most people in China are not able to buy their own car (Tan, 2011). The growth of the industry in China is also attributed to the booming Chinese economy (Beck, Klobes and Scherrer, 2005).