A Chinese carmaker has launched a vehicle sharing service in Shenzhen by offering a special deal on rental prices that works out cheaper than bike sharing.

GoFun, a car-sharing platform backed by state-owned Shouqi Group, said has put 300 new energy vehicles into service in the southern Chinese city, considered to be China’s Silicon Valley.

The rental cost is just one yuan (US$0.16) per kilometre plus 0.1 yuan per minute, which works out at about half the cost of using Chinese ride hailing service Didi Chuxing. However, new customers can take advantage of a special deal of one yuan for three hours of driving, which is even cheaper than bike-sharing services in the city.

“It is a common strategy for technology companies to use low prices or even free services to attract new users,” said Zhao Ziming, a senior analyst at Beijing-based consultancy Cyzone. “The price will go back to normal when the companies gain a certain market share.”

Carmakers like Shouqi Group are looking to develop vehicle sharing services based on the assumption that future consumers would rather make short-term use of those assets than owning them outright. In February, Didi Chuxing teamed up with 12 Chinese carmakers to develop an electric-vehicle sharing platform.

Shenzhen has a high demand for shared vehicles because only one in 300 people with driving licences can obtain the hard to get licence plates needed to purchase vehicles, said Tan Yi, chief operating officer of GoFun.

After launching vehicle-sharing operations in more than 40 Chinese cities, GoFun now has 1 million monthly active users. Jack Liang, a 30-year old teacher in Beijing, said he prefers using the car-sharing service at railway stations or airports because there is always long queue for a taxi.

“But in my daily life, I prefer using car-hailing service, not driving the shared vehicles by myself,” he said. “It is difficult to find an available car as well as parking. However with a car-hailing service I can get out wherever I want.”

To ensure Shenzhen doesn’t have the same problem, Shouqi said it will have 1,000 vehicles on the road in the city by the end of this year and will rent more dedicated Go Fun parking spaces.

A report from DongXing Securities said the sharing-vehicle business requires high initial investment and operating cost, so most players won’t make a profit in the current environment.

“These who can lower the vehicle production cost or who have cutting-edge technology are more likely to win out ” said the report, which expects the shared vehicle market in China to be worth 9.28 billion yuan in 2020, up from 820 million yuan in 2017.

Unlike China’s ride hailing market which is dominated by Didi Chuxing, there is currently no strong leader in vehicle sharing.

“Vehicle sharing is a niche market and the service, to a large extent, is complementary with the car hailing business,” said Zhao.