China Cars Denies to Purchase a Car Rental

In the early morning of the 23rd, some users broke the news on a well-known financial website that the leading car rental industry in China, Shenzhou Car Rental (HK:0699), is negotiating with a rental car , and may acquire the latter. Affected by this news, the stock price of a rental car (NYSE: EHIC) rose by 1.48 US dollars to 9.58 U.S. dollars in the US stocks trade on Tuesday, an increase of 18.29%.

The reporter interviewed a car rental company in China for this purpose. The person said that this statement is purely non-existent. For a long time, Shenzhou Cars has adhered to the principle of “natural growth” and has continuously improved its competitiveness and expanded its scale and industry status through the optimization of its own cost structure and service enhancement. China Car Rental Company is unwavering in this strategy and has no interest in acquiring competitors.

Up to now, the car fleet of Shenzhou Car has reached 58,000 vehicles, which is far higher than the 18,000 car rental cars. The gap between the two companies' revenue size and profitability is even greater. In the third quarter of this year, the rental income of China’s car rental reached 760 million yuan, which was far more than 220 million yuan for a rental car; the adjusted EBITDA (profit before tax depreciation and amortization) was about 437 million yuan, while the rental for the same period of rental car was a net loss. 26.9 million yuan.

In the second half of this year, the two companies went public. Shenzhou Car Rental (HK:0699) was highly favored in the Hong Kong stock market. The stock price climbed up to HK$12.8, which is 51% higher than the listed issue price of HK$8.5. On the other hand, once the rental car performed poorly, it fell below the issue price of 12 US dollars on the first day, then it never surpassed 12 US dollars for more than a month, and it fell to 7.91 US dollars at the lowest level, which was lower than the listed issue price. The drop of 34% drags down the large shareholder Ctrip, which has lost more than $28 million.

Analysts believe that by virtue of its own scale advantages, Shenzhou Car Rental has established great advantages in cost and customer experience, firmly occupying the absolute leading position of the industry. In this case, the acquisition of long-term loss of a rental car has limited significance.

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