FOR car makers, Wu Wenbing represents the ideal target audience. The engineer is 25 years old, got his driver's license five years ago and earns enough money to afford a mid-price or even more costly sedan.

But there's a cloud in this marketing vision. This blue-ribbon consumer isn't in the market to buy a car. For the past two years, he's been content to simply rent an auto when he needs one .

Wu said rising fuel prices and the high cost of such factors as insurance and parking fees have given him second thoughts about buying a car.

"I take my company's shuttle bus to work everyday, which is very convenient," said Wu. "With a rented car, I don't need to worry about the purchase cost, maintenance fees and insurance. I only drive a car when I need to."

In addition, cars are a rapidly depreciating asset. That old saying "if it moves, rent don't buy" is beginning to catch on with consumers in China, now in their first wave of a love affair with the automobile.

Wu certainly isn't alone in his attitude toward car ownership. Many people faced with the same decision are realizing that a car can be a very expensive proposition when weighed against its daily usefulness.

That's bad news for car sellers but a bright spot in China's emerging car-rental market.

"The fast-expanding vehicle population has nurtured a large number of customers for the car-rental industry," said Shen Jun, vice president of consulting firm Roland Berger China. "In the next five years, we expect to see the auto-leasing market continue very high growth."

The expansion of an industry that began barely five years ago is fed by improvements in the credit system, in services in the after-sale market and in the insurance industry.

Many are finding that rentals relieve them of financing costs and the need to worry about insurance, annual checks and maintenance. Renters can also enjoy the flexibility of changing models any time they like.

Companies can reduce the costs of rentals by investing in fleets, which gives them economies of scale.

The car-rental market is blossoming just as governments in China are trying to cope with increasing urban traffic and pollution. In some cities such as Beijing, limits were placed on new car registrations this year.

"We have seen orders for rental cars on work days increase by as much as 15 percent in Beijing," said Chris Zhang, marketing director of eHi Car Services Ltd, one of the largest auto-leasing firms in China. "The overall car-leasing industry has entered a fast lane since last year."

Roland Berger's research shows there are between 5,000 and 10,000 car-leasing companies in China, with an aggregate fleet estimated at about 140,000 units.

The business is highly focused on big cities such as Beijing, Guangzhou, Shanghai and Shenzhen. Among the big operators are Beijing Shouqi, China Auto Rental, Yongda Auto Group and Topone Car Rental. The trend is also picking up in second-tier cities such as Xiamen and Chengdu.

The consulting firm is predicting China's car-rental market will experience annual growth of about 25 percent for the next five years, reaching 38 billion yuan (US$5.81 billion) in revenue by 2014, with a national fleet size of 400,000.

The huge potential in this capital-intensive industry has drawn interest from investors, helping to accelerate expansion.

Last year, Shanghai-based eHi Car Services secured US$70 million in investment from a consortium led by Goldman Sachs and existing shareholders in the likes of Qiming Venture Partners, CDH Ventures, Ignition Capital and JAFCO Asia.

Business of scale

"The car-rental business is a business of scale," eHi's Zhang said. "Fleet expansion allows us to better control risks and reduce costs, while network development helps to spread our reach to more customers and enhance brand loyalty."

Founded in 2006, eHi now offers more than 70 models and its car pool is reportedly more than 7,000 units. Zhang said the company plans to double its staff to 3,000, mainly adding employees at service centers across the nation this year.

And eHi isn't the only rental company benefiting from outside help.

Japan's Mitsubishi reached agreement with Zhejiang Cheyou Auto Leasing Co to invest US$20 million to form the Haina International Auto Leasing Co venture.

Beijing-based China Auto Rental received a 1.2 billion-yuan investment from Legend Holdings, parent of the Lenovo Group that bought IBM's PC division a few years back. The 51 percent stake makes China Auto Rental the sixth major subsidiary under Lenovo's corporate umbrella.

China Auto Rental now operates a fleet of about 6,000 units with service outlets covering more than 100 cities and regions across the nation.

Lu Zhengyao, chairman of the company, earlier estimated that the car-rental market would grow to 500,000 units by 2015. China Auto Rental is aiming for a 20 percent market share by then, with operations covering 150 cities.

The market is certainly a tantalizing one.

In China, more than three-fourths of individuals who rent cars do so for weekend outings, and the number of recreational users is growing.

Still, the core business is commercial rentals, which account for about 70 percent of leased cars in China. Operators are keen to expand short-term leasing by offering more low-cost models to individuals.

"Focusing on short-term leasing will bring more profit to companies in the future," Shen noted.

Zhang agrees. About 90 percent of rental business related to tourism is in city-to-city leasing to popular scenic destinations such as Sanya and Kunming.

"But the major target audience for auto leasing should be inner cities, not airports," Zhang said. "Considering the size of urban populations, a million-vehicle market player will someday emerge in China."

Dreams are big, but at present, China's car-rental business is still in its infancy.

China has yet to map out national regulations to control the industry and deal with legal disputes.

China Auto Rental recently suspended its chauffeur service after it was considered illegal.

The chauffeur service, which allowed car rental companies to provide drivers along with the rented car, should not have been included in the business scope of a car-rental company as it competes with taxi services.

In addition, some small car-rental companies register their cars in nearby cities and team-up with small-scale insurance companies to lower costs. But this could cause trouble for out-of-town touring and consumers would also find it hard to have their compensation realized if an accident happened.

In addition, the car-rental market also suffers from industry fragmentation.

Roland Berger's research showed that 50 percent of car-leasing companies have fewer than 50 vehicles, and about 80 percent of those operate with 20 units or fewer.

Unlike market giants such as Avis and Hertz, the top 10 car-leasing companies in China account for less than 10 percent of the market. Even the biggest auto-leasing firm, Beijing Shouqi, had only a 3 percent share.

Furious competition in such a fragmented industry usually leads to price wars. The lack of a solid franchising business model means a lack of standards in service and gaps that entice illegal operators.

"Chinese consumers are also very price-sensitive and show relatively weak brand loyalty," said Zhang. "Low-quality service will damage the public's perception of the industry and harm its long-term development."

Roland Berger analysts predict a round of industrial consolidation in the next five years, with small, lower-margin operators being gradually squeezed out.

How To Rent A Car In China:

Car-leasing companies usually require renters to provide proof of an ID card and driver's license.

The minimum age is usually 18, though some companies won't rent a car to anyone under 20.

A credit card is very important. After signing a leasing contract, an auto-rental company will freeze a certain sum of money on the card, ranging from several hundred to 3,000 yuan, to cover any possible vehicle damage, breach of time periods or traffic fines that may accrue. The money is unfrozen after the car is returned with no additional charges pending.

City-to-city leasing allows customers to pick up a car in one place and drop it off in another.