CHINA Auto Rental Inc. on Friday launched an up to US$468 million Hong Kong initial public offering (IPO), betting car ownership restrictions and higher spending on travel in the world’s second-largest economy will fuel demand for hire vehicles.

    The company, backed by private equity firm Warburg Pincus and Hertz Global Holdings Inc., is offering 426 million new shares, said a source with direct knowledge of the plans, citing details from a term sheet.

    The shares are being offered in an indicative range of HK$7.50 (US$0.97) to HK$8.50 each, putting the total deal at HK$3.62 billion, said the source. The IPO is set to be priced Thursday, with shares starting to trade on the Hong Kong stock exchange Sept 19.

    China’s car rental market is forecast to surge to 65 billion yuan (US$10.6 billion) by 2018 from 34 billion yuan in 2013, the company said in its draft IPO prospectus, citing estimates from industry consultancy Roland Berger.

    Long-term rentals of more than 90 days, which are mostly used by corporate customers unwilling to own their own fleet, accounts for about 60 percent of the market but are expanding at a slower pace than short term rentals.

    China’s market for short term self-drive car rentals is expected to grow at an average of 27 percent a year from 2013 to 2018, more than double the 13 percent growth in Brazil and far outpacing the 6 percent expansion in the United States and 2 percent in Japan, the company said. Long term rentals are forecast to grow 11 percent a year through the same period.

    China Auto Rental, the country’s largest auto rental firm, plans to use 70 percent of the IPO proceeds to expand its fleet. It will buy 45,000 to 60,000 vehicles, adding to the 55,000 cars it had at the end of March, according to its draft IPO prospectus.(SD-Agencies)