April 11, 2016，China Car Rental disclosed its 2015 annual report。Report shows: leasing revenue reached 4.4 billion in 2015 (all below are in RMB)，53% year-on-year growth；Net profit 1.4 billion，221% year-on-year increase。April 12，The official website of the New OTC Market has posted the "UCAR Public Transfer Instructions"。Same day，China UCAR confirmed to complete a new round of financing on February 29，36.The total financing of 800 million includes 2.8 billion from Alibaba。

China Car Rental and China UCAR, whose businesses are closely connected and hold shares in each other, are a "double star"，You might as well get to know the people who are specializing in cars、China Car Rental in the transformation of de-Lenovo and Alibaba。

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2012 to 2015，China car rental revenue increased from 1.6 billion to more than 5 billion，Cumulative growth of 211%，The average compound annual growth rate is 46%。Hertz car rental business revenue increased from 71% during the same period.USD 5.3 billion increased to 84.US$3.4 billion，Cumulative increase 17.9%，The average compound annual growth rate is only 5.64%。2012，The total revenue of China Car Rental is equivalent to 3% of Hertz.6%，This ratio increased to 9 in 2015.5%。

According to their respective revenue growth rates in the past four years，China Car Rental will surpass Hertz in 2021，Of course this is just a hypothesis。

China Car Rental’s leading position in China’s car rental field is very stable，I’m afraid Yihi Car Rental can only be the “second child in a thousand years”。2012，EHI Car Rental’s revenue is equivalent to 28% of China Car Rental。2013、EHI Car Rental’s revenue in 2014 was equivalent to 21% and 24% of China Car Rental respectively。After landing in the US capital market，EHI Car Rental revenue growth accelerated significantly，But the gap with China Car Rental remains at the level four years ago (2015 revenue was 29% of China Car Rental)。

Super high gross profit margin

China Car Rental revenue includes used car sales。For example, 2015，Total revenue is 5 billion，Second-hand car sales revenue is 600 million，Accounting for 12%。

Hertz revenue includes equipment rental，For example, Hertz equipment rental income in 2015 was 15.USD 200 million，14% of total revenue.4%。

Hertz car rental business is divided into two parts: the United States and overseas。2015 US segment revenue 62.USD 900 million，Accounted for 74% of total car rental revenue that year.6%。

In order to compare the profitability of each main business，We only study the car rental business in China、Hertz’s U.S. Car Rental Division。

2012 to 2015，China leasing business gross profit from 4.900 million increased to nearly 2.1 billion，Cumulative growth of 328%，The average compound annual growth rate is 162%。Hertz Car Rental U.S. division’s gross profit fell instead of rising，12 in 2012.USD 7.5 billion，9 in 2015.US$5.7 billion。

2012，China Car Rental’s gross profit is equivalent to 6% of Hertz Car Rental’s U.S. division.1%，This ratio increased to 35 in 2015.1%。

China Car Rental’s car rental business revenue is less than one-tenth of Hertz，The gross profit is more than one-third of Hertz，The gross profit margin is staggeringly high。Meanwhile，EHI Car Rental’s gross profit margin also exceeds Hertz，reached 22%。

The gross profit margin of the car rental business depends on vehicle life cycle management and direct operating costs。

The gross profit margin is higher than Hertz, why?

1. Vehicle life cycle management

Depreciation is the largest expense for a car rental company，Buy price is low、The selling price is high or the service period is long，Both mean lower depreciation burden，Critical to car rental company performance。

The ratio of depreciation to rental income of a car rental company is a comprehensive indicator of vehicle management，For example, bargaining power when purchasing a vehicle、The ability to increase occupancy rates and rental income、The ability to recover funds from handling used cars。

Unexpectedly, the ratio of Shenzhou Car Rental’s depreciation to rental income is lower than that of Hertz Car Rental’s U.S. division and is on a downward trend: 34% in 2012、21% in 2015，No rebound during the period。Same period，The ratio of Hertz US division increased from 19% to 25%。

The purchase price of each car minus the residual value (funded as a second-hand car) divided by the number of months in service，Get the monthly depreciation amount。In other words，Depreciation is based on the purchase price、Determined by three values: service life and sales price。

How small is the ratio of car rental depreciation to rental income in China，Because the cost of buying a car is lower than Hertz？Some people may think that “China Car Rental purchases thousands of vehicles directly from the manufacturer，Big discount。This is the advantage of large rental companies。”Please，Don’t call Hertz a large-scale purchase，Hertz has 700,000 vehicles and the brands are very concentrated。Take the US branch as an example，Nissan、Toyota、Chrysler、General、Ford’s five major brands account for up to 75%。So，It would be great if the discounts you can enjoy when renting and buying a car in China can be as good as Hertz。

The main factor is the long service life of the vehicle，China car rental is for 36 months、Hertz is 20 months。A vehicle must serve 80% longer in the hands of China before it can be "retired"。

Finally, Shenzhou Car Rental has strong second-hand car processing capabilities，To put it bluntly, the price is high。2014 China Car Rental Processing Used Cars 1.020,000 vehicles，Recover funds 6.5.4 billion，Unit price 6.40,000 yuan/vehicle。2015，Sold 9284 used cars and got 6.03.5 billion，Unit price 6.50,000 yuan/vehicle。

It’s surprising that the ratio of car rental depreciation to rental income in China is much lower than that of Hertz，It is a joke to say that Hertz, which has been in the car rental business since 1918, lacks experience in vehicle life cycle management，The bigger reason is probably the national conditions。

First，The rescue costs of China and the United States are not of the same order of magnitude。With the extension of service period，The probability of vehicle failure is getting higher，The leasing company must not only provide rescue but may also involve financial compensation。Secondly，The United States has a developed second-hand car culture，The buyer’s condition of the vehicle、Better performance and lower bids。20 months is definitely not determined by Hertz，It is the best service period that has been explored for a long time。The failure rate is very low、You can get relatively high prices when dealing with second-hand products。

2. Direct operating costs

Direct operating costs (including wages、Store、Insurance、Repair、Fuel and other expenses)。Direct operating costs of car rental in China in the table below，Unit million yuan。

2013、2014 and 2015，The direct operating 188bet online sports betting costs of Hertz Car Rental’s U.S. division are equivalent to RMB 21.4 billion respectively、24.2 billion and 23.4 billion yuan，Approximately equivalent to 60% of rental income during the same period。

The ratio of direct operating costs of China Car Rental to rental income has been reduced to 31%。The ratio of eHi Car Rental also dropped from 59% in 2012 to 46% in 2015。

Car rental is an important service，Requires a lot of manual labor。Therefore, the ratio of Hertz’s direct operating costs to rent is much higher than that of China、Yihi is mainly due to national conditions。

Despite the ratio of depreciation and direct operating costs to rent, China Car Rental、Ehi Car Rental beats Hertz，But they still have a lot to learn from Hertz、Reference。Based on 2015 annual report data，35% of Hertz U.S. vehicles come with a manufacturer buyback agreement，59% of the vehicles in the overseas division have repurchase agreements。2015，Vehicles not included in the U.S. Division buyback program，42% direct auction (77 directly operated used car sales points in the United States)、36% is handed over to the brokerage company、22% are processed by Rent2Buy (Note: for vehicles approaching the end of use，Rent2Buy gives car rental users a three-day test drive opportunity，If the tenant decides to buy the car，Three days of rent can be exempted and the transfer procedure is extremely simple)。

Specialized vehicles, not China’s Hertz

“China’s XX” is the business card that many Chinese companies show to overseas investors，“XX” can be Microsoft、Apple、Google...China Car Rental once wanted to be China’s Hertz。

As of the end of 2015，Hertz, which has been engaged in car rental since 1918, owns 700,000 cars，Lease income 84.US$3.4 billion。Fleet size、The rental income is Shenzhou Car Rental 7.7 times and 10.5 times。The gap is not small，But it is shrinking rapidly，But China Car Rental is already aiming for a better future，I no longer intend to follow the same path that Hertz has taken for a hundred years。

1. Hertz was not the master of China at first

The initial role model for China Car Rental was not Hertz。Lu Zhengyao returned to China in 2005，Founded the United Automobile Club (UAA) to try to fill the gap in the automotive after-service market。The owner fills in basic personal and vehicle information，Putting a yellow "UAA" logo on the butt of your car counts as a member。Members wash their cars at United Auto Club’s partner merchants、Repair、Maintenance、Enjoy discounts when purchasing car supplies。United Automobile Club opened in August 2005，Developed 250,000 members in Beijing that year and received investment from Lenovo。There was no “asset-light” at that time、"Automotive Aftermarket"、The concepts of “automotive O2O”，Lu Zhengyao belongs to the earliest wave of practitioners in China。

Although there are many UAA members, it is difficult to realize them，Unable to obtain capital market recognition，Lu Zhengyao、Liu Erhai finally made up his mind to enter the car rental market。With the continuous financial support from investment institutions such as Lenovo，The fleet size of China Car Rental has been expanding。As of the end of the third quarter of 2014，China Car Rental owns 5 vehicles.80,000 vehicles，Looks like "China Hertz"。

2. Private car service "Hitchhiking"

In 2011, CCTV exposed the “driving service” of EHI Car Rental，In fact, almost all car rental companies explicitly or covertly provide driving services。China Car Rental immediately stopped its driving service，A group of hard-earned big customers were given up，Including Shell、LG and other Fortune 500 companies。EHI Car Rental has only stopped 188bet app driving services for individuals，The business chauffeur service (Car service) for enterprises and institutions is still in progress。

Yidao Yongche is born、Uber enters China and Didi、Kuaidi launches private car service in the name of "sharing economy"，The Explorer’s repeated challenges have finally loosened the city’s taxi management policy。

In January 2015, the Ministry of Transportation released a statement，I’m sure private car service is an innovation，But it is strictly prohibited to put private cars into special car operation。This is a huge benefit to China Car Rental, which has a large fleet。Lu Zhengyao, who gave up the driving business because he was "cowardly", quickly took action to regain the private car business。28th，China Car Rental announced the launch of private car service in 60 major cities across the country；29th，China Car Rental issues US$500 million in bonds in Hong Kong。

Exploration of Yidao Yongcar、The persistence of Yihi Car Rental、Didi Kuaidi’s fanfare，Finally, the competent authorities recognized the legality of driver-driven car services that were common in traditional car rental companies in the past，China Car Rental regained its professional business because it hitched a ride with its “little friends”。

3. Distribution of “special car bonus”

Yao Junhong, executive vice president of China Car Rental, said: "Self-driving rental cars can only be rented once in 24 hours，Driving service generally has a time limit of 8~9 hours for an order，Can do 3~4 orders every day，Therefore，The difference in one-day income between self-driving and agency driving is 3~4 times。”

The "driver" in Yao Junhong's words is today's "special car"。In January 2015, we started to enter the private car industry in a big way，1 at the end of the year.980,000 long-term rental vehicles (accounting for 89% of the total number of long-term rental vehicles) and 10,000 short-term rental vehicles are operated by China Private Car (China UCAR)，The average daily income of car rental bicycles in China should be doubled。

But 2015，The average daily bicycle income of short-term rental vehicles in China is the same as in 2014，Still 170 yuan/day；And when 89% of long-term rental vehicles are put into special car operation，The average daily bicycle income only increased from 136 yuan/day to 148 yuan/day，Increase of 8.82%。

(Note: The average daily income of short-term rental vehicles in the table comes from China Financial Report；The average daily income of long-term rental bicycles is calculated from the revenue and the number of vehicles at the end of the period，There are some errors)

Where has the legendary “3 to 4 times income” gone?

China car rental refers to the average daily bicycle income in previous years，Long-term rental for NT$150、Short-term rental of the vehicle to UCAR for 170 yuan (estimated value)。The latter does not have to spend billions to buy a car and carry the burden of heavy assets、No need to mention depreciation、No need to pay interest，Obtain a vehicle for less than 200 yuan/day，Earning 600 yuan a day is fine、800 yuan is fine，Deduction of driver wages and fuel expenses，The rest are from UCAR，Not related to China Car Rental！

In this case，Why China Car Rental’s performance can be significantly improved？Because there is another bonus to switching from self-driving to driving—saving direct operating costs。

The self-driving business needs to set up as many stores as possible to facilitate the rental and return of cars，The house facing the street is for rent、Need to recruit personnel，We still need to solve the problem of parking、Preventing car loss, etc.，The private 188bet Online Sports Betting and Casino car service is much simpler (all the responsibility is by the driver)。2015，10,000 short-term rental cars have been put into special car operation，Under the condition that the average daily bicycle income remains unchanged，Saved a lot of operating expenses。Direct operating expenses as a percentage of lease revenue fell from 35% in 2014 to 31% in 2015，Saving nearly 200 million yuan。

Overall，The distribution of "private car business bonus" between China Car Rental and China Car Rental is relatively reasonable: Car Rental is responsible for handling the car (the daily income of the bicycle will not be reduced but direct operating expenses can be saved)，Special car is responsible for special car operation (platform construction、Marketing and business operations)。China UCAR’s life is not easy either，Loss of 3.7 billion in 2015！If it weren’t for the nearly 30,000 cars provided by China Car Rental at low prices，China UCAR suffered even worse losses。

The ancient business of car rental，Started very late in China，But it’s not necessarily a bad thing。Times have changed，Today there is not only mobile Internet，The management ideas of governments of various countries towards taxi operations have also changed。China Car Rental can use mobile Internet technology to operate special cars efficiently，There is no need to learn to walk behind Hertz。

De-association, complete management buyout

Received $8 million from United Automobile Clubs，Lenovo is Lu Zhengyao’s noble man。China Car Rental was established in 2007，Received US$21 million in investment led by Lenovo the following year。The financial crisis caused subsequent financing to fail，The company was forced to carry a large number of people、Several executives resigned，Lenovo borrowed US$10 million at the critical moment。2011、Lenovo made two moves in 2012，Invest hundreds of millions to subscribe for new shares and acquire old shares of Warburg Pincus，Share ratio exceeds 60%，Lu Zhengyao becomes a professional manager。

As of before listing，China Car Rental received a total investment of approximately 2.3 billion yuan。Except direct investment，The cumulative amount of borrowings and guaranteed loans provided by Lenovo is approximately 5 billion，The pre-listing guarantee balance is 38.87.5 billion。After listing，Lenovo’s shareholding in China Car Rental was diluted to 29.2%。Warburg Pincus holds 18.3%、Hertz holds 16.2%、Holding by Lu Zhengyao’s family 14.76%。

Although Lenovo’s kindness to China Car Rental goes beyond the scope of ordinary investors towards invested companies，But the question “Whose car rental does China belong to?” will eventually have to be resolved。Liu Chuanzhi presided over the listing of Lenovo Control before his retirement and solved the exact same problem。

After China Car Rental is launched，Old shareholders gradually reduce their holdings，At the same time, policy obstacles to the private car business are gradually reduced。Lu Zhengyao, seeing the light of day, quickly seized the opportunity，Through its own control of China UCAR (the Lu family holds 28% of the shares、Holding 49 in total with shareholders acting in concert.68%) Take over the stocks sold by old shareholders，Implementing management buyout:

October 2015，Lenovo transferred to China UCAR 1.25.4 billion shares、Cash out 2.USD 200 million。Lenovo、China UCAR holds 23 shares of China Car Rental respectively.69% and 5.28%。

March 2016，Hertz transferred to China UCAR 2.035.5 billion shares，Cash out 18.HKD 600 million，The rights to rent a car in China have been reduced to 1.73%。Subsequently，Director nominated by Hertz withdraws from China 188bet app download Car Rental Board of Directors。

Latest，Lu Zhengyao will have 3 names.700 million shares of China Car Rental were transferred to China UCAR。

After a series of transactions are completed，China UCAR holds China Car Rental 29.21%，Overtaking Lenovo to become the largest shareholder。Lu Zhengyao completed a beautiful management buyout。Yesterday (April 12)，China UCAR announced the "Public Transfer Instructions" on the official website of the New OTC Market。

After listing，China Car Rental gradually repays the loan guaranteed by Lenovo。In 2015 financial report，It also specifically states that there are no new loans guaranteed by Lenovo。Although Lenovo is still the second largest shareholder of China Car Rental and retains a seat on the board of directors (Zhu Linan is one of the four non-executive directors)，But China’s de-association intention is very obvious。

Alibabaization, irreversible

The truth behind Alibaba’s investment in UCAR has been partially revealed，Alibaba did invest 2.8 billion，Accounting for 76% of this round of financing。Just when the announcement is about to be announced，Alibaba delayed disclosure and changed its investment structure due to "external forces"。

Source says，On the eve of announcing the investment in UCAR，Didi senior executives have had some contact with Alibaba senior executives，In the end, Ali decided not to announce it yet。

According to the "Public Transfer Statement" disclosed today，Alibaba Network and Alibaba (China) have transferred the 33.6 million UCAR shares they hold to Yunfeng SZ Investment and Yunling Investment respectively，The total consideration is 2.8 billion。After transfer is completed，The equity structure of UCAR is as follows:

April 1, 2016，The company and Lu Zhengyao signed the "Strategic Cooperation Agreement" with Alibaba (China) Network Technology Co., Ltd.。Both parties agreed to conduct all-round strategic cooperation in the field of "Internet + Automobile"，The scope of the first phase of cooperation includes automobile e-commerce、Big data marketing、High-precision maps and travel big data、Cloud computing application、Smart cars, etc.。

The agreement also stipulates that if Alibaba (China) Network Technology Co., Ltd. (together with its related parties) acquires the company’s shares in the future and reaches the prescribed shareholding ratio，The company grants Alibaba (China) Network Technology Co., Ltd. the right to subscribe first。simultaneously，Company、Lu Zhengyao and his spouse do not issue to specific objects、Transfer of shares will be restricted。

You can see China、Alibaba believes that in-depth cooperation is necessary，China Car Rental + China UCAR has begun to "Alibaba"，To be specific, it means entering Alibaba’s ecosystem from the business and capital levels。

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