Uber, the transport app provider, has set up its own fully owned car rental company here, a world's first for the San Francisco-based company.
Lion City Rentals has been running for three months now, drawing a steady stream of customers. But it is not targeting the typical individual who wants to rent a car for the weekend.
The Straits Times understands that it is a new way for Uber to recruit drivers and, in turn, give people an affordable way to own a car. With high certificate of entitlement (COE) prices and restrictive loan rules, a buyer has to pay tens of thousands in cash as downpayment to own a car.
Uber requires only a deposit of $1,000 and its rates are far below those of taxi rentals, which hover at around $130 a day.
With rates as low as $47 plus taxes per day, or nearly 20 per cent lower than the average market rate for car rentals, it has attracted users who want access to a car and extra income by offering paid rides.
Customers need to set up a company, should not have been in jail for more than seven days, and must undertake 40 Uber trips a week.
Uber spokesman Karun Arya said: "Uber carries out experiments around the world in our quest to create innovative solutions to specific market requirements." This is the first such exercise it has undertaken.
Lion City Rentals was set up in mid-February, with a paid-up capital of $100. So far, it has attracted scores of prospects, according to sources.
Uber is said to be exploring tie-ups with other rental firms to expand its search for drivers.
But the director of one leasingcompany, which also offers paid rides, questioned if Uber's operating model was legal.
Requesting anonymity, he said: "We hire all our drivers, we pay them a salary, CPF. What they (Uber) are doing may be considered as sub-renting. I'm not sure if it's allowed."
Asked if Uber's practice was legal, the Land Transport Authority would only say that "business entities who lease such cars must ensure that the leased vehicles are covered with adequate insurance for its intended purpose".
Transport industry watchers expect Uber's new strategy to heat up competition for taxi operators and even car dealers.
Park Byung Joon, an urban transport management expert at SIM University, said: "This is one step closer to a taxi operation, and with a very low entry barrier." Dr Park said the development creates an uneven playing field for the taxi industry.
"Uber has been very good at finding grey areas," he said, adding that the regulator should be "concerned".
But as far as Lion City customer Anesh Muniyandhi is concerned, the firm gives him access to wheels. "I just scrapped my car and I was looking for a cost-effective solution to have another car," said the 43-year-old, who is in the IT hardware business.
He rented a 2006 Honda Civic for $55 a day. "I save around $1,500 a month by not buying a car," he said. But the rental car was not well-maintained - it had a number of flaws, including worn brake pads. He had to take it to a workshop, which meant downtime and lost income.
"If the repair takes less than eight hours, they will not waive the rental," Mr Muniyandhi said. "And if I fail to do 40 trips a week, I've to pay a 15 per cent rental surcharge."
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