Mobility in China is going through impressive evolution. The e-hailing market is booming so fast that companies like Ctrip, Tencent, and Alibaba are now exploring the market’s potential
China has recently emerged as the largest mobility market in the world. New technologies, e-commerce, and the latest innovations in the automotive sector are now increasingly merging. Once again, there is the Dragon behind this brand-new urban mobility revolution.
Chinese consumers are so willing to try digital innovations that they are completely changing the way people conceive transport. The point is no longer which mode of transport to use, the key now is how to get to the destination in the most cost-efficient and hassle-free way by using the mobile phone.
According to a report from consulting firm Bain & Company, China’s market for e-hailing – ordering transport pick up via mobile device – now totals about $30 billion, more than the rest of the world combined. And it could more than double in size by 2020.
© Pexels. Given the success of e-hailing, a mobility revolution is underway in China, enabled by digitalization and a unique ecosystem.
Taxi-hailing platforms in the PRC already were in the spotlight when Kuaidi and Didi merged in 2015, launching a chauffeur service that before was only known through Uber outside China. Four years later, the result is that now even Ctrip is adding ride-hailing to its business.
Last July, China’s largest online travel agency announced it has integrated ten ride-hailing services worldwide into its app to offer various mobility services in 785 cities, covering the US, Southeast Asia, Europe, West Asia, North Africa, and some South American countries.
Given that Ctrip is mainly used by the Chinese, this move is strategic to attract and facilitate Chinese tourists traveling abroad. According to a press release, in fact, the Ctrip app also provides online translation to help users communicate with local drivers, while also enabling payment in RMB.
This recent partnership with ten ride-hailers from all around the world could represent a threat to Didi Chuxing, China’s largest ride-hailing platform. Indeed, just like Ctrip, Didi is trying to expand globally and to forge relationships with other startups that cater to overseas Chinese tourists.
Ctrip and Didi are not the only Chinese giants to explore the opportunities offered by the mobility market. Obviously, the Chinese behemoths Tencent and Alibaba cannot exempt themselves from investing in the sector.
Recently, Alibaba, Tencent, Suning, and Chinese carmakers such as Chongqing Changan Automobile have set up a $1.5 billion ride-hailing venture. In March, Chongqing Changan Automobile said it has invested about $238.36 million in the Nanjing-based investment company alongside the mentioned partners together with state-owned First Automotive Works and Dongfeng Motor.
This move could test the dominance of Didi. Indeed, for the last two years, Didi Chuxing has been the dominant ride-sharing force in China, and its success has led to the emergence of numerous competitors among internet companies and carmakers.
Backed by SoftBank Group Corp, Didi held 90% of all ride-hailing bookings made in China until now. But in addition to the joint venture of Alibaba, Tencent, and the others, now even BMW, SAIC, and Geely alongside other tech firms such as Meituan Diamping had also launched their ride-hailing service as an effort to grasp a share of the world’s fastest-growing e-hailing market.
For what concerns Alibaba and Tencent, it is not so common to see the e-commerce giant and the social media leader co-invest. Although they are both Didi investors, their bond came through the merger of Didi and Kuaidi, which were separately supported by the two companies. Moreover, before being partners, Alibaba’s Ant Financial has already backed one of Didi’s major competitors, Hello TransTech – formerly Hellobike – while Tencent-backed Meituan Dianping is now taking its first forays into the ride-hailing sector.
© Didi Chuxing. China is home to the world’s largest ride-hailing market, of which Didi Chuxing takes 90% of all bookings.
So why are China’s big companies investing in mobility right now?
As mentioned above, China represents the world’s largest mobility market. Taxi-hailing platforms and e-hailing services already count over 200 million users among Chinese consumers, who already lead most other countries in digital adoption and who are thrilled to try the new options the market has to offer. Indeed, according to Bain & Company’s study, contrary to other countries like Germany or the US, Chinese consumers use bike-sharing and e-hailing services largely and are less likely to use traditional mobility solutions as car rentals.
Being the PRC an established mobile-driven society, the success of this mobility revolution is, therefore, partly due to the popularity of mobile payments. Moreover, road congestion in Chinese big cities is a relevant factor in consumers’ preference for e-hailing services.
In this framework, already as many as 50% of all e-hailed rides are ordered from popular platforms such as WeChat, AliPay, and Meituan. And this percentage still leaves room for competition among e-hailing players.
However, one of the most significant changes in China’s personal mobility market in recent years is that young consumers now choose on-demand mobility service over car ownership. They no longer regard car ownership as a symbol of identity and the evidence lies in the fact that the gap between car ownership and the number of people who have a driver’s license is widening year after year. Moreover, Chinese millennials are more willing to plan their travel in the most convenient way.
Today, young Chinese consumers use smartphones to plan their trips, and they are no longer satisfied with single point-to-point travel. They demand, instead, personalized, multi-modal and high-quality mobility services.
Another factor to enter the shared mobility sector is the government’s push towards sustainability and automation. In a national shift towards a high-value and sustainable economy, Beijing is vigorously promoting electric vehicles (EVs) with government subsidies. This is partly contributing to the boost in sales of EVs, which reached over 1.2 million in 2018 and is expected to reach 1.6 million in 2019.
China’s large metropolitan areas aim to build cities with low emissions and low energy consumption, which means that the electrification of all public and personal transportation has become the top priority. Therefore, over the years, domestic companies have accelerated their shift towards the electric and at the same time, rushed to launch car-sharing programs to promote their EVs.
Based on these factors, the proportion of shared mobility is expected to rise and such a model will play a crucial role in the development of a sustainable urban transportation system in China.
© Unsplash. Ofo bikes in Beijing. The market for unlocked shared bikes is an example of the mobility revolution in China. It was nonexistent in 2014 but now totals 120 million monthly active bikes.
Nevertheless, although the e-hailing market is growing at a rapid pace in China, it is becoming more obvious that the mobility ecosystem requires alliances and partnerships among Chinese enterprises. Automation and big data are just two of the factors re-shaping the Chinese mobility sector. While by partnering with companies like Baidu, Alibaba, and Tencent, for example, a Chinese player could get access to a vast amount of consumer data, the upcoming introduction of autonomous vehicles will require other kinds of technological skills.
The partnership between private and state-owned players, in fact, aligns with China’s mission to build a smart mobility ecosystem by combining the data capability of its technology partners with the manufacturing know-how of its automakers.
Therefore, not only is investing in China’s mobility sector important for the country’s giants but partnering with different kinds of enterprises or startups allows local players to answer Chinese consumers’ demand while also coordinating with the national plans.
Not to mention the fact that, although at its early stages, the e-hailing market has enormous potential. According to data, it grew from $5 billion with 30 million users in 2014 to $30 billion with 217 million users in 2017. Bain & Company estimates that e-hailing volume will grow eleven-fold from 2015 to 2020 to total $72 billion. A forecast that Chinese companies do not intend to ignore.
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