EXPANSION TO CHINA

Andrew HaasJulio Rios

Julia CroftsHyeon Seong Jeong

Zip Car to ChinaMarketing from

A Global Perspective

April 20, 2010

The Facts

EXPANSION TO CHINA

• “Expanding car ownership, heavy traffic and low-grade gasoline have made autos the leading source of air pollution in major Chinese cities.”

• In 2007, “only 1% of China’s 560 million city dwellers breathe air considered safe by the EU.”

• 160 million people are licensed to drive cars nationwide yet private car ownership only amounted to 30 million in 2009.– nytimes.com

• Chinese car factories are working 24/7 yet they still fail to reach demand

- China Daily

• Beijing local government recently raised vehicle taxes by 2.5% and increased parking fees by 20%

- eBeijing.gov

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What is Zipcar?

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• A streamlined car rental service for individuals, businesses and universities

• Zipcar is located in 50+ cities across North America and the USA

• A Zipcar can be rented for as little as one hour and up to an entire day

• A large variety of cars are available to rent: luxury, hybrid, trucks

• Cars can be booked through website and mobile phones and are picked up and dropped off in local neighborhoods

How Does Zipcar Work?

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• Drivers apply online and are usually approved in 24 hours

• A zip card is issued to the approved driver, which is the equivalent of a car key

• RFID technology is used to open and close the rented car at an appointed time and place

• Cars can be rented at an hourly or daily basis

• Gas and insurance is included in the original price and the car can be driven up to 180 miles a day

Benefits and Growth

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• Zipcar users report an average savings of $500 per month

• Every Zipcar takes 15-20 cars off of the road

• 10% of the population is expected to adopt car sharing over the next 5 years

• In 2009 Zipcar reported sales of a 120 million dollars, this number is expected to grow to 1 billion in the next decade

• An IPO is planned for 2010, and an average of 7,500 new members join each month

Market Entry Strategy

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• Objective: Within one year, establish market share through building new consumer base among young professionals by providing an affordable and convenient rental service.

• Joint Venture: BYD Auto• Leading Chinese car and

battery manufacturer• F3 sedan China’s best selling car in its class• Fully electric with zero emissions

• Range 200 miles

• Mutually Beneficial• Help alleviate China’s congestion and pollution problems• Zipcar will benefit from local knowledge of BYD Auto• BYD Auto will have access to US market

Target Market

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• Young Professionals – Under 30 years of age– Seeking status of owning a car without income to purchase one– Greater awareness of environmental issues– Aren’t as concerned with car as “status”– Goal: To cultivate new consumer trends

• University Students– 18 to 22 years of age– Cosmopolitan and aware of foreign trends– Value of brand loyalty in long-term– Enjoy the freedom of driving, but can’t afford it

• Young families– Need extra space for young children– Ability to shop at stores further from house (i.e. Wal-Mart)

Beijing

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Beijing-Economic Overview

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• During the 1990’s industrial GDP grew 20% a year

• GDP/capita was twice that of other possible test markets--ability to rent from Zipcar

Source: China City Statistical Yearbook 2006; McKinsey Global Institute Analysis; Starmass Consulting

Beijing-Advantages

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• Largest city in China

• Local government favors enterprises to improve selling networks

• Large metropolitan area, public transportation can be inconvenient

• Large population of target market- i.e. young professionals

• Traffic congestion and air pollution particularly troublesome

Source: McKinsey Global Institute Analysis

Short-term Competition

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1. Personal car ownership2. Public transportation3. Taxis and other chauffeured cars4. eHi’s FastCar in Shanghai

– Requirements: valid drivers’ license & 3,000 RMB deposit– Online reservations– 40 RMB per hour or maximum of 320 RMB per day (includes

insurance but not fuel)

Long-term Competition

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• Hertz– Partnered with China National Automobile Anhua International Trade

Company to enter Chinese rental car market – “Connect by Hertz” recently launched in New York, London, and Paris– $50 annual membership including insurance, fuel, roadside assistance,

maintenance, universal key card– $10 per hour rental fee

• Anji Car Rental and Leasing Company– Joint venture between Shanghai Automotive Industry Corp and Avis Europe– “Free traveling, unbounded city” – Currently in 30 locations in 19 cities including Shanghai, Beijing, and

Guangzhou– Projected growth to 110 locations by 2012

“Renting a car when people need it might be a better choice to help the climate and the planet,” said Pascal Bazin, CEO of Avis Europe

Challenges Faced

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• Contracts with insurance providers must be obtained

• A verification system must be developed to ensure new Zipsters have an approved drivers license

• Barriers to entry for foreign firms in China

• Registration as a rental car company– Resources: US Consulate, AmCham– Local Government

Government Motivation

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• Demonstrate to the World China’s green initiative – Shanghai Expo 2010

• Push for private-owned business

• More business = greater prosperity

• Alleviate some of Beijing’s most pressing problems

Source: http://www.devnet-shanghai.org/en/news_detail.asp?myid=51

Benefit for Beijing & China?

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• Future transportation challenges• Early start on quality system• More business = more prosperity• A long-term plan • Example for the rest of China

Source: http://www.devnet-shanghai.org/en/news_detail.asp?myid=51

Conclusion

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• TBD• Questions