Lentuo International Inc. (NYSE: LAS) (“Lentuo” or the “Company”), the largest non-state-owned automobile retailer in Beijing as measured by new vehicle sales revenue, today announced that it plans to expand into the vehicle leasing market in Beijing.
Lentuo has obtained 1,181 new license plates from the Beijing municipal government that it can use for leased vehicles. This number of vehicles will account for about 5.7% of the total market share in Beijing’s auto leasing market. The Company expects that it will receive a volume-based discount from automobile manufacturers on vehicles it purchases for leasing purposes and will generate repair, maintenance and other service revenue, primarily financing and insurance commissions, from its leased vehicles. The Company also expects to generate used vehicle sales revenue after the one- to two-year leasing period.
Lentuo expects to begin leasing vehicles to customers by the third quarter of 2011 and estimates that its leasing business will contribute about RMB 200 million (US $30.8 million) in revenue for the year 2011. In December 2010, the Beijing government implemented traffic control measures limiting the number of new car license plates issued in 2011 to 240,000. Lentuo’s leasing program provides an alternative to new vehicle purchases for consumers who are unable to obtain a license plate under the new licensing system. A customer in Lentuo’s leasing program can use the new vehicle according to the leasing arrangement. If this customer obtains a license plate through the new lottery-based licensing system, the Company may transfer the title of the leased vehicle to the customer, and the original license plate of the leased vehicle can be reused by the Company for other customers.
The Beijing government issued a regulation on December 26, 2010, stating that it will not issue any new operating licenses for auto leasing companies and will evaluate the performance of existing leasing companies annually to determine if these companies are qualified for further license plate approval. Lentuo obtained its operating license for auto leasing prior to the announcement of the new regulation.