Zip Car to China Marketing from A Global Perspective EXPANSION TO CHINA Zip Car to China Marketing from A Global Perspective April 20, 2010 Andrew Haas Julio Rios Julia Crofts Hyeon Seong Jeong

The Facts “Expanding car ownership, heavy traffic and low-grade gasoline have made autos the leading source of air pollution in major Chinese cities.” In 2007, “only 1% of China’s 560 million city dwellers breathe air considered safe by the EU.” 160 million people are licensed to drive cars nationwide yet private car ownership only amounted to 30 million in 2009. nytimes.com Chinese car factories are working 24/7 yet they still fail to reach demand - China Daily Beijing local government recently raised vehicle taxes by 2.5% and increased parking fees by 20% - eBeijing.gov EXPANSION TO CHINA

EXPANSION TO CHINA

What is Zipcar? A streamlined car rental service for individuals, businesses and universities Zipcar is located in 50+ cities across North America and the USA A Zipcar can be rented for as little as one hour and up to an entire day A large variety of cars are available to rent: luxury, hybrid, trucks Cars can be booked through website and mobile phones and are picked up and dropped off in local neighborhoods EXPANSION TO CHINA

How Does Zipcar Work? Drivers apply online and are usually approved in 24 hours A zip card is issued to the approved driver, which is the equivalent of a car key RFID technology is used to open and close the rented car at an appointed time and place Cars can be rented at an hourly or daily basis Gas and insurance is included in the original price and the car can be driven up to 180 miles a day EXPANSION TO CHINA

Benefits and Growth Zipcar users report an average savings of $500 per month Every Zipcar takes 15-20 cars off of the road 10% of the population is expected to adopt car sharing over the next 5 years In 2009 Zipcar reported sales of a 120 million dollars, this number is expected to grow to 1 billion in the next decade An IPO is planned for 2010, and an average of 7,500 new members join each month EXPANSION TO CHINA

Market Entry Strategy Objective: Within one year, establish market share through building new consumer base among young professionals by providing an affordable and convenient rental service. Joint Venture: BYD Auto Leading Chinese car and battery manufacturer F3 sedan China’s best selling car in its class Fully electric with zero emissions Range 200 miles Mutually Beneficial Help alleviate China’s congestion and pollution problems Zipcar will benefit from local knowledge of BYD Auto BYD Auto will have access to US market EXPANSION TO CHINA

Target Market Young Professionals University Students Young families Under 30 years of age Seeking status of owning a car without income to purchase one Greater awareness of environmental issues Aren’t as concerned with car as “status” Goal: To cultivate new consumer trends University Students 18 to 22 years of age Cosmopolitan and aware of foreign trends Value of brand loyalty in long-term Enjoy the freedom of driving, but can’t afford it Young families Need extra space for young children Ability to shop at stores further from house (i.e. Wal-Mart) EXPANSION TO CHINA

Beijing EXPANSION TO CHINA

Beijing-Economic Overview During the 1990’s industrial GDP grew 20% a year GDP/capita was twice that of other possible test markets--ability to rent from Zipcar Source: China City Statistical Yearbook 2006; McKinsey Global Institute Analysis; Starmass Consulting EXPANSION TO CHINA

Beijing-Advantages Largest city in China Local government favors enterprises to improve selling networks Large metropolitan area, public transportation can be inconvenient Large population of target market- i.e. young professionals Traffic congestion and air pollution particularly troublesome Source: McKinsey Global Institute Analysis EXPANSION TO CHINA

Short-term Competition Personal car ownership Public transportation Taxis and other chauffeured cars eHi’s FastCar in Shanghai Requirements: valid drivers’ license & 3,000 RMB deposit Online reservations 40 RMB per hour or maximum of 320 RMB per day (includes insurance but not fuel) EXPANSION TO CHINA

Long-term Competition Hertz Partnered with China National Automobile Anhua International Trade Company to enter Chinese rental car market “Connect by Hertz” recently launched in New York, London, and Paris $50 annual membership including insurance, fuel, roadside assistance, maintenance, universal key card $10 per hour rental fee Anji Car Rental and Leasing Company Joint venture between Shanghai Automotive Industry Corp and Avis Europe “Free traveling, unbounded city” Currently in 30 locations in 19 cities including Shanghai, Beijing, and Guangzhou Projected growth to 110 locations by 2012 “Renting a car when people need it might be a better choice to help the climate and the planet,” said Pascal Bazin, CEO of Avis Europe EXPANSION TO CHINA

Challenges Faced Contracts with insurance providers must be obtained A verification system must be developed to ensure new Zipsters have an approved drivers license Barriers to entry for foreign firms in China Registration as a rental car company Resources: US Consulate, AmCham Local Government Contracts with insurance providers must be obtained. A verification system must be developed to ensure new Zipsters have an approved drivers license.   Zipcar will be required to obtain registration as a rental car company, which has required partnership with a Chinese Owned company for other western car rental companies.   The US consulate and AmCham are two resources available to help pre-qualify potential Chinese partnership companies. Additionally, it would be advantageous to begin developing a relationship with Deputy Governor Ding Zhejun. EXPANSION TO CHINA

Government Motivation Demonstrate to the World China’s green initiative Shanghai Expo 2010 Push for private-owned business More business = greater prosperity Alleviate some of Beijing’s most pressing problems Source: http://www.devnet-shanghai.org/en/news_detail.asp?myid=51 At a meeting of Government Leaders of Cangnan and the Organizing Committee of International Development Information Network Association for the Expo 2010 in Shanghai, Deputy Governor Ding Zhenjun said he hopes the expo will help bring new industry to Cangnan. Additionally, the Cangnan Government and enterprises have been encouraged to bring in advanced technology to promote rapid growth of business and to build Cangnan into a more vigorous place for private-owned enterprises and a more prosperous home for all its citizens. EXPANSION TO CHINA

Benefit for Beijing & China? Future transportation challenges Early start on quality system More business = more prosperity A long-term plan Example for the rest of China Source: http://www.devnet-shanghai.org/en/news_detail.asp?myid=51 With the push for growth in Cangnan, the future may hold many of the transportation challenges that Shanghai faces to the North. Approaching the local government with preventative options such as Zipcar early on can help develop Cangnan with a positive image around transportation and attract more business to the city. Improving the lives of Cangnan’s citizens by adding an additional transportation choice and helping to prevent a rapid increase in congestion and automobile related pollution. Working with the local government for a long term including Zipcar in their future transportation planning Leverage the opportunity to show the rest of China the intelligent transportation planning and improved quality of life. EXPANSION TO CHINA

Conclusion TBD Questions With the push for growth in Cangnan, the future may hold many of the transportation challenges that Shanghai faces to the North. Approaching the local government with preventative options such as Zipcar early on can help develop Cangnan with a positive image around transportation and attract more business to the city. Improving the lives of Cangnan’s citizens by adding an additional transportation choice and helping to prevent a rapid increase in congestion and automobile related pollution. Working with the local government for a long term including Zipcar in their future transportation planning Leverage the opportunity to show the rest of China the intelligent transportation planning and improved quality of life. EXPANSION TO CHINA