EXPANSION TO CHINA

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

EXPANSION TO CHINA

What is Zipcar?

EXPANSION TO CHINA

• 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?

EXPANSION TO CHINA

• 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

EXPANSION TO CHINA

• 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

EXPANSION TO CHINA

• 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

EXPANSION TO CHINA

• 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

EXPANSION TO CHINA

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

EXPANSION TO CHINA

• 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

EXPANSION TO CHINA

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

EXPANSION TO CHINA

• 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

EXPANSION TO CHINA

• 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?

EXPANSION TO CHINA

• 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