Business· Manufacturing

China’s ride-hailing may slow in 2019, cooperation with carmakers could boost growth

minutes 2019/08/21 07:45:53
ride-hailing, electric vehicle, autonomous vehicle, Didi

Aug 21, 2019 (China Knowledge) - China's online-hailing market is expected to grow less than 5% this year, compared with a 25% increase last year, according to the 2019 APAC Mobility report released by Bain & Co. The global consulting firm also lowered its forecast on the size of China's online ride-hailing market of USD 72 bln by 2020.

Safety concerns and stricter regulations have dragged down the growth in the car-hailing sector. The market is also losing appeal to venture capital. Total investment and financing in the country’s car-hailing industry slid by 90% from USD 10 bln in 2017 to USD 1 bln last year. Moreover, car-hailing penetration in first-and second-tier cities has already reached the saturation point. However, ride-hailing companies are still finding ways to explore opportunities in smaller cities, and partnering with auto-makers.

Toyota (TM) invested USD 600 mln in China’s ride-hailing giant DiDi Chuxing in July, one of the few recent financing deals in the industry. Didi, making up 85% of China’s ride-hailing market, has yet turned to profitability as the company offered substantial discounts and incentives to attract more customers and drivers. Whereas, joining hands with Toyota will be a breakthrough in revenue growth for Didi.

Cooperation between car-hailing companies and auto-maker is a win-win strategy. The Chinese government has cut down subsidies for electric vehicles (EV), making it harder for automakers to expand in the sector. Meanwhile, people get used to the idea of car-sharing as ride-hailing platforms have been popular in recent years. Carmakers have found themselves struggled to sell more cars to make profits but can earn money by putting them into use, for example, helping car-hailing firms to build EV fleets and autonomous vehicles. EV could shrink fuel costs by 65%, which is cost-effective option for car-hailing companies.

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