China’s parking problem spawns startups with big money backing

This article is co-written by Daniel Ren.

Wang Ranran took home 18,000 yuan (US$2,580) in her pay packet in November, a career-high that included a bonus twice her base salary, as manager of a car-park management company in Beijing.

Her daily routine starts at 8 am by making sure the smart parking system at Soho Tianshan Plaza displays the accurate traffic flow and parking sessions in the 1,000-bay facility in Hongqiao business hub operated by her employer, Sunsea Parking.

Photo credit: 123rf

Aided by the on-site system, the 32-year-old executive easily steers drivers to the vacant parking spots. Wang also knows she needs to find 25 new customers a month from her cold calls at surrounding offices to attract drivers, boost yield, and land her bonus targets.

It was in November 2015 that the technical secondary school graduate decided to seek her fortune in Beijing, leaving her junior role at a company near Tangshan city, China’s steel-producing capital in the northeastern province of Hebei.

“Without these car parks, I would be earning just a few thousand yuan in my hometown,” Wang said, comparing her income with her 2,500 yuan-a-month job in Tangshan. “I feel I have made the right career move.”

Wang is an example of how China’s rise as an economic powerhouse is giving its population a passport to financial success while spawning a host of related businesses seeking to profit from the shortage of parking spaces in the world’s biggest car market.

Sunsea Parking, founded in 2006, provides services including urban parking management, parking lot planning and design, and smart parking.

With about a 1% share of the market, the Beijing-based company is said to be one of the market leaders with players including Hong Kong-listed Shougang Concord International, underscoring the fragmented nature of the industry worth about 50 billion yuan (US$7.2 billion), according to a Warburg Pincus estimate.

The US private equity firm led a consortium including Red Star Macalline Group in a US$227 million fundraising for Sunsea Parking in November 2017. The aim is to increase its current portfolio from more than 200,000 parking spaces, including 3,800 at Hongqiao Airport, to 1 million in the next five years.

“When we first started looking at the sector four years ago, we believed there were a lot more opportunities here than in Europe and Japan,” said Qiqi Zhang, managing director of Warburg Pincus in China. Rising car ownership, market deregulation, and technology enhancements could fuel years of growth, he added.

“In China, management of car-parking spaces is very primitive,” said Zhang. “Most of the parks are run by developers and there is very little active management or technology application in the process. Parking operators just wait for the cars to come in and go.”

Through its investment in Sunsea Parking, Warburg Pincus hopes to infuse cutting-edge technology in its smart car-parking management system. This should translate into higher utilization rate and margins over time, Zhang said.