Lion City Rentals has been running for three months now, drawing a steady line of customers. But it is not targeting the typical individual who wants to rent a car for the weekend, reported The Straits Times.

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 fork out a lot of cash for a down payment to own a car. Uber requires a deposit of only $1,000, and its rates are far below taxi rentals, which hover at around $130 a day. With rates as low as $47 plus taxes per day, or nearly 20 percent lower than the average market rate for car rentals, it has attracted users who want access to a car and also an extra income by offering paid rides.

Customers must set up a company, 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. It has attracted scores of prospects, say sources. Uber is said to be exploring tie-ups with other rental firms to expand its search for drivers.

The Director of one leasing company, 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 say only 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 competition to heat up for taxi operators and even car dealers. Dr. 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." It 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'.