Car rentals in China soared 167% in 2023 to a record high, driven by more Generation Z drivers and millennials hitting the roads, according to a new report by online travel platform Fliggy.
The growth spurt isn’t just a return to pre-pandemic levels as the number of car rental orders in 2023 was 10 times higher than in 2019, signaling a longer-term shift in behavior.
Consultants and industry experts think the rise in rentals will continue as more people can afford to take road trips and are keen to spend time on leisure travel.
“The domestic car rental industry has entered a new stage of rapid growth,” said Zhang Ye, head of the car business at Alibaba Group’s Fliggy.
Trains, Planes and Automobiles
China is built for leisure travel; it has the world’s biggest population of car owners, the longest stretch of highways, and the most extensive high-speed rail network.
Demand for convenient and flexible car rentals has swelled as GDP per capita has risen. The volume of car rental orders tripled between 2012 and 2019, with private consumption overtaking orders from the public sector, consultants at Boston Consulting Group calculated.
The consultancy sees China’s car rental market continuing this steep trajectory as more Chinese turn from car ownership to the sharing economy. It forecasts volume doubling to about RMB158.5 billion ($22.2 billion) in 2025 from RMB87 billion in 2020, with a compound annual growth rate of about 13%.
Car rental agencies are benefitting from the upswing. Over 70% of the 2,000-plus agencies on Fliggy’s platform doubled their order volume in 2023.
“The rapid expansion of consumers with driver’s licenses and the scale of the car rental market spell tremendous opportunities for platforms and car rental merchants,” Fliggy’s Zhang said.
Road Less Traveled
In 2023, domestic car rental customers tended to be younger. Rentals taken out by those born in the 1990s increased from 35% last year to 39%, making this age group the biggest in the market. The cohort of Chinese born in the 2000s grew the fastest, jumping by over 5 percentage points in 2023.
Modern travelers are willing to mix modes of travel on their holidays, hopping from planes to trains, and then renting a car for the last leg of the journey. In perhaps a hangover from the pandemic, more people prefer to travel in their own personal space rather than on public transport.
The Chinese cities of Chengdu, Urumqi, Beijing, Sanya, Haikou, Guiyang, Hangzhou, Dali, Guangzhou and Chongqing proved the most popular destinations for people going for a drive in 2023.
Younger drivers in China tend to enjoy circular self-guided tours, where they drop the car off in the same place they hired it after a jaunt around local attractions. They are also more adventurous than older drivers, heading off-road for a long-distance adventure or touring less well-known destinations.
Made In China
Among car rental orders in 2023, models made in China were 10 times more popular than the year before. The three models most in demand were the electric compact executive sedan Hongqi E-QM5, and Great Wall Motors’ mid-sized SUVs, the Tank 300 and the Haval H6.
Electric and hybrid vehicles, as well as off-roaders, gained traction in 2023. A quarter of all rentals were SUVs during the year, becoming the second-most-popular choice after budget vehicles. Sports cars, on the other hand, were less in demand.
Overseas car rental orders in 2023 increased over 10 times year-on-year, with Los Angeles, Phuket, Bangkok, Dubai, Melbourne, Sydney, San Francisco, Langkawi, London and Auckland among the popular overseas car rental destinations.
Check out China’s broader rebound in off-line entertainment here
