China Auto Rental Holding Inc to offer 11 Million ADS in an Early Stage of Development

By Pucong Han
Columbia Journalism School
Reporter at People’s Daily Online

China Auto Rental Holdings Inc. (NASDAQ: CARH), a leading car rental company in China, expects to offer 11 million American Depositary Shares (ADS) at a price between $10.50 and $12.50.

The company estimates that it will receive net proceeds of approximately US$112.5 million from this offering after deducting the underwriting discounts, commissions and estimated offering expenses. China Auto Rental plans to spend US$90.0 million received from this offering for vehicle acquisition to further expand their rental fleet.

The services of China Auto Rental include short-term rentals, long-term rentals and leasing. As of December 31, 2011, China Auto Rental had a customer base of over 450,000. Their fleet is comprised of 25,845 vehicles in 520 service locations covering 66 cities in all provinces of China.

“China’s car rental industry dates back to the Beijing Asian Games in 1990, when it was launched to cater to the transportation needs of foreign reporters and the employees of foreign diplomatic missions,” according to the Study of Automotive Landscape 2025 by Roland Berger. China Auto Rental derives revenues primarily from short-term car rentals. In the study, short-term chauffeured car rental services are almost unique to China and currently account for about 12% of the industry.

According to the SEC F-11 form, a filing with the Securities and Exchange Commission (SEC) required for the registration of certain securities by foreign issuers, although the revenues of China Auto Rental increased from RMB143.0 million (US$22.7 million) in 2010 to RMB775.8 million (US$123.3 million) in 2011, it incurred net losses of RMB43.3 million (US$6.9 million) in 2010, and RMB151.4 million (US$24.1 million) in 2011.

In the SEC F-11 form, China Auto Rental clarified that the company does not expect to pay dividends in the foreseeable future, and not until it declares dividends on its ordinary shares.

China’s car rental industry is currently concentrated in four cities – Beijing, Shanghai, Guangzhou and Shenzhen – due to higher purchasing power and higher car ownership and usage rates in these localities. According to Roland Berger, total revenues in China’s car rental industry grew from approximately RMB5 billion in 2005 to approximately RMB17 billion (US$2.5 billion) in 2010 and are expected to further increase to approximately RMB39 billion (US$6.1 billion) in 2015. Although China’s car rental industry has experienced substantial growth in recent years, it is at an early stage of development.

(Pucong Han is an intern reporter at People’s Daily Online. He is from Columbia Journalism School. Pucong can be reached at: puconghan@gmail.com)

This work has been published at: http://english.people.com.cn/90778/7795651.html