Although China's car rental market is dominated by domestic companies, Volkswagen Financial Services AG from Germany has found a way to tap into the booming sector - by focusing on corporate customers first.
It has begun leasing in China through the recently established Volkswagen Leasing (Beijing) Co and Volkswagen Leasing (Shanghai) Co.
"Volkswagen Financial intends to fully enter the Chinese market with its advanced operational concepts and advantages in business resources," said Peter Tempich, general manager of Volkswagen New Mobility Services Investment Co, parent of the two newly established leasing companies.
"There will be great growth in the Chinese auto leasing market.
"We will have 14 offices by the end of 2013 and more than 30 branches and subsidiaries nationwide in the coming years."
The largest car leaser in Germany and one of the leaders in Europe, the company has a fleet of more than 969,000 vehicles.
"We have rich experience in serving global corporate clients," said Tempich.
"Our unique competitive advantage is based on a wide scope of services, experience in customer care and an advanced fleet management system."
China overtook the United States as the world's biggest auto market in 2009, but the car leasing business is still in its infancy with a market penetration of less than 5 percent, said Tempich.
It is also fragmented. The biggest companies, both local and foreign-funded, have less than 20 percent of the market. The big share is in the hands of small and medium-sized local companies.
"So we will start our leasing business in China by offering services to corporate clients," said Tempich.
He disclosed the company will consider leasing to individuals in the future, but no timetable has been set.
All VW Group cars
According to Roger Yeo, general manager of the back office at Volkswagen New Mobility, his company leases all cars made by the auto group including premium brands like Porsche.
"And we make sure the cars are in their best quality condition," he added.
"We provide corporate customers tailor-made leasing services based on terms and mileage.
"By doing so we offer them a flexible leasing scheme to lower the cost," said Yeo.
In addition, Yeo said the company's insurance and 24-hour roadside assistance offer added value for clients.
"Our third-party liability is 1 million yuan compared to the 300,000 yuan normally provided by other leasing companies," he said.
But even though China's auto leasing market is growing and has great prospects, both Tempich and Yeo admitted it is not an easy market to crack.
"Leasing is a new business concept in China.
"People are still used to owning a car instead of just using a car.
"When it comes to leasing, the customer expectations are different from those in Europe. For example, a lot of corporate customers not only want to rent cars, but also need chauffeur services," Tempich said. "Also there are administrative challenges.
"In Beijing and Shanghai, there are restrictions on license plates for leasing businesses," added Yeo.
"We are adapting ourselves to local demands by adjusting our products, services and process.
"But we have also hired a lot of local employees who are very experienced in the market," said Tempich.
"By combining their local knowledge and our international experience, we are confident we will meet the challenges."