Trade Date B/S Qty of ADSs Price($) Consideration($)
18-Nov-14 B 2,200,000 12.00 26,400,000
12-Dec-14 B 55,000 9.1136 501,248
15-Dec-14 B 200,000 8.9826 1,796,520
12-Feb-15 B 28,500 10.2951 293,410
11-Mar-15 B 673,545 8.00 5,388,360
Chinese Government embraces Uber model in China - only rental cars are allowed to operate. The Ministry of Transportation in China announced today that UBER like car service is encouraged but the vehicles cannot be privately owned. eHi Car Service as one of the largest car rental and car service companies in China may significantly benefit from this latest development in China, the largest taxi and chauffeur service market in world. The taxi market is China accounts for about 50% of world taxi market size. China will also become the largest UBER like market in the world. Companies like eHi Car Services which owns a significant fleet size of rental cars with special license plates particularly in the major cities where license plates are limited might benefit from this latest development. Additionally, eHi is a shareholder of Kuaidi, a Uber like company in China backed by Alibaba, recently closed series D round financing, allegedly raised
According to eHi’s IPO documents, the company has already made an investment in Kuaidi. eHi presents a great opportunity for investors who are interested in the on-demand chauffeur service market since investors cannot invest in related companies such as Uber, Kuaidi and Didi directly. eHi participated in Kuaidi’s B round financing. The valuation of Kuaidi during its recent C round financing is 6-7x of that in its B round. Reputable B round investors include Alibaba and Softbank.
The recent drop in oil prices would also benefit eHi greatly by lowering the company’s operating costs further.
From the author’s point of view, eHi stock presents a great opportunity to get in and reap the long term growth benefit.
eHi Car Services raised 200 million USD from its IPO. The drastic improvement on profitability allows eHi to raise debts much easier and cheaper. As a result, eHi managed to raise 800 million RMB debts at a low interest rate. Experts believe that these changes would have a positive impact on the company’s financial performance in the near future.
eHi’s recent IPO brings the company to a higher ground. Based on eHi’s third quarter financial data this year, eHi’s revenue and fleet size both grew by about 50% while maintaining a 40% debt ratio. The low debt ratio creates more room for future debt financing. So, eHi has strong financial resources. If both eHi and Car have enough money, starting a price war and burning money will only hurt both companies, allowing others to benefit. Fortunately, both companies avoided such practices by focusing on other important aspects of the business such as fleet acquisition, operation, management and etc.
American car rental companies have been highly profitable for many years, suggesting the car rental business is indeed profitable. During an interview in 2012, Ray Zhang, eHi Car Services’ CEO, mentioned that the company was profitable at the early stage of its establishment, and then it aimed to capture a bigger share of the market, sacrificing profits. In 2012, Car Inc. attempted an IPO with a fleet of 22,000 vehicles, the same fleet size as eHi today. However, Car suffered a 300 million RMB net loss while eHi only have a loss of 100 million RMB this year. It is obvious that eHi is operating much more efficiently.
China’s car rental industry has been growing rapidly, showing great prospects. Car rental service is a great alternative to traditional car ownership. It can best satisfy people’s driving and transportation needs without creating other social problems such as traffic congestions, air pollutions and etc.
Car rental companies rely heavily on capitals to achieve economy of scale, and IPO is a crucial financing method. eHi Car Services and Car Inc.’s successful IPOs caught much attention from both investors and consumers.
China’s car rental market only had a 0.4% penetration rate in 2013. This figure is much lower than those of many foreign markets such as Japan (2.5%), U.S. (1.6%), Korea (1.4%) and Brazil (1.3%). Also, the top five car rental companies in China only represent a 14% market share combined. This figure is again much lower than those of many foreign markets such as U.S. (95%) and Germany (90%).
Based on Roland Berger’s research results, China’s car rental market is expected to grow by 14% annually from 2013 to 2018, reaching 65 billion RMB in 2018. Another report from Roland Berger also indicates that the self-drive segment will grow by 27% annually, reaching 18 billion RMB in 2018.
eHi Car Services’ IPO documents showed a net loss of 2.85 million RMB in the first quarter of 2014. The loss was decreased by 85% compared to the previous quarter, and it was decreased by 94% compared to the same period in 2013. This loss figure is the smallest in the past three fiscal years.
On December 11, eHi Car Services (NYSE: EHIC) released its third quarter financial results. In the third quarter of 2014, eHi achieved net revenue of 220 million RMB (35.9 million USD), grew by 48.4% from 148.3 million RMB in the third quarter of 2013. The net loss was 26.9 million RMB (4.4 million USD), decreased by 30.3% from 38.7 million RMB (6.3 million USD) in the third quarter of 2013. The company forecasts its net revenue in 2014 at 843 million RMB, which is 48.3%-49.2% higher than