SHANGHAI, Dec 19 (Reuters) - Avis Europe Plc said on Thursday it would open China's first joint-venture car rental agency by teaming up with the country's largest car hire firm, Anji Car Rental Company, in an investment worth $22 million.
The European car rental giant and its Chinese partner said in a statement that the 50-50 venture, called Anji Car Rental and Leasing Co Ltd, would launch operations from a base in eastern China in January 2003 and expand throughout the country.
The venture is forecast to post 85 million yuan ($10.27 million) in sales in 2003, based on a fleet of 1,000 cars, said Zhong Lei, a marketing executive with Shanghai-based Anji Car Rental Co.
Total investment would reach $66 million by 2007, when the venture would operate 5,000 cars and 70 outlets, Zhong told Reuters.
"China's auto market is red-hot now, and we're looking at steady economic growth over the next few years," Zhong said.
"These are very conservative estimates. Looking at the market's rapid expansion, the numbers could easily be much higher by then," he said.
Anji is a unit of Shanghai Automotive Industry Corporation (SAIC), China's third largest auto group, and maintains 12 outlets on the country's booming eastern coast.
Avis and SAIC had been hammering out venture details for four years, the companies said in the statement.
Analysts, however, warn that the road to profits in China's auto rental market is strewn with potholes.
Con artists, bad drivers and often appalling road conditions mean rental cars can give out in a year, versus two or three years overseas, industry executives say.
Companies like Avis and global competitor Hertz are hoping China's entry to the World Trade Organisation will spark an influx of corporate clients, and that the 2008 Olympics in Beijing and 2010 World Expo in Shanghai will boost business.
China, however, does not recognise foreign drivers' licenses and daily rental rates of 200 to 400 yuan are expensive compared with train or bus tickets, the current preferred modes of transportation. ($1 = 8.277 yuan)