Summary of Key Points
The tourism car rental industry in Urumqi, Xinjiang, has seen a severe oversupply this year due to the high profits last year, attracting a large number of new entrants. With 21,000 vehicles available, only 3,000 are able to secure bookings daily, resulting in plummeting prices and profits (with mainstream car models experiencing a 50% or more decrease in earnings). Despite the continuing surge in tourism popularity in Xinjiang, the industry has fallen into vicious competition: businesses either have to cut prices to attract customers but still make no profit or resort to unfair practices to exploit tourists (such as charging entry fees for attractions and remotely locking cars). The industry is currently undergoing a transition from a period of profitability to one of restructuring.
1. Oversupply: 80% of Vehicles Sit Idle in Garages
This year, the oversupply in Urumqi’s tourism car rental market has reached an absurd level. Out of the city’s total of 21,000 road passenger vehicles, only 3,000 are actually in use daily, leaving 18,000 parked in garages almost every day. Even more concerning is that the additional 7,000 new vehicles added this year represent more than twice the actual demand. Local operator Mr. A noted that when the 7-seater new cars were being registered at the inspection stations, long queues formed, indicating that many owners were likely planning to sell them by the end of the year. The reason for such an abundance of vehicles is the lucrative market last summer; both individual buyers and local car rental companies, as well as national chains (with outlets in Urumqi and Yining), even businesses from other regions, all tried to enter the market, leading to a surplus that far exceeds demand.
2. Price Drops: Are Luxury Vehicles Cheaper than Rideshare Services?
The oversupply has caused prices to plummet:
- For 7-seater business vehicles, the daily rental fee used to be 1,400–1,500 yuan, with a net profit of 600–800 yuan; this year, it’s down to 700–900 yuan, resulting in a net profit of just 100–200 yuan per day—barely enough for a meal.
- Popular off-road vehicles like the Tank 300 and Prado have seen prices drop by 30%–40%, with some third-party platforms offering daily rental rates as low as 28 yuan (including insurance, which is cheaper than rideshare services in many cities).
Tourists have also noticed significant price reductions; for example, a 6,500-yuan 7-day rental order was reduced to 3,600 yuan before the trip, and prices continue to fall.
3. A Dilemma for Businesses: No Bookings Without Price Cuts, Low Profits With Price Cuts
Tourism car rentals are highly seasonal, with profits only possible from June to October in Xinjiang. Businesses rely on these months to cover annual costs such as loans, depreciation, and maintenance. However, the current situation is challenging: small and medium-sized businesses depend on platform traffic, which prioritizes lower-priced listings. If they don’t cut prices, they may go days without any bookings; if they do, their profits are minimal. Mr. B described how many owners now spend their days doing tasks similar to rideshare drivers (washing cars, returning vehicles, answering calls), only to barely break even or even lose money at the end of the month. This vicious cycle forces them to seek other ways to make a profit.
4. Tourists Facing Unfair Practices: Tricks to Make Up for Low Rental Rates
As price competition intensifies and normal rental rates become unprofitable, businesses resort to unfair tactics:
- Attraction Entry Fees: Mr. Lin, a tourist, rented a Tank 300 but was told it couldn’t be used near grasslands or lakes (even on paved roads), and an additional 200 yuan per day was required for access, making the total cost higher than using direct rental platforms.
- Remote Vehicle Locking: Some vehicles are equipped with GPS that lock the car remotely at attractions, forcing tourists to pay a hefty fee to unlock it.
- Additional Fees: High insurance premiums, fees for returning the vehicle in different locations, and excessive late fees are common. Mr. B pointed out that these practices are a result of low rental rates, forcing businesses to rely on extra charges to make up for losses.
5. The Natural Course of the Industry: Blind Following Trends Leads to Excess Supply
The problem stems from blind speculation during market booms. Last year, when tourism in Xinjiang was booming, everyone wanted to get a share of the profits, ignoring the limited market capacity. Mr. A’s observation is poignant: “It’s better for young people to work in factories, earning 200 yuan a day than buying a car on credit only to lose it. This isn’t unique to Urumqi; it happens in all tourist cities across China. If a market becomes popular this year, there will be an oversupply the following year.” Even though tourism in Xinjiang remains strong (with daily passenger counts at Urumqi Airport exceeding 100,000), a hot market doesn’t guarantee profits for everyone. When everyone tries to cash in quickly, those who enter late often end up as the ones bearing the losses.
In summary, no industry can escape the laws of supply and demand. Don’t rush into a market boom without a clear understanding of its capacity; otherwise, you may miss out on profits and even end up losing money.