In spite of no clear timetable for profitability, ride-hailing companies could significantly reduce costs from investing in electric vehicles fleets, as growth continues to decelerate in China’s mobility market, according to a recent report by management consultants Bain & Company.

Why it matters: After booming for three years, China’s ride-hailing market has entered a sharp and unexpected downturn amid rider safety concerns and growing regulation from local governments. Bain expects the downward trend would continue over the next two years.

  • China’s ride-hailing sector witnessed a substantial decrease in annual growth, from 39% to 25%, with a gross merchandise volume of $40 billion in 2018.
  • Bain estimates that year-on-year growth will be further lowered to less than 5% in 2019, and then regain momentum ranging from 10% and 15% in 2021 with the potential return of carpooling services.

Details: Ride-hailing companies could see as much as a 65% reduction in fuel costs by switching to electric vehicles, according to the report.

  • The benefit is also expected to more than offset a 15% increase in rental costs, resulting in a $380 increase in monthly income for a driver who travels distance between 200 and 300 kilometers each day.
  • The cost reduction would make a direct contribution to profitability, though it depends on how platforms and drivers “divide the cake,” said Helen Liu, principal of Bain & Company.
  • China also boasts the world largest charging infrastructure with over 1 million installed EV chargers as of the end of June. Beijing has already set a target of 4.8 million charging piles by 2020.
  • As regulations tighten, Bain suggests ride-hailers create standardized operations for improving efficiency and pursue growth in lower-tier cities.

Context: China’s once red-hot mobility industry is shifting to a lower gear. Ride-hailers are struggling to find ways to break as stiff competition and government control restrict market leaders’ flexibility in pricing.

  • Ride-hailing giant Didi Chuxing is accelerating its EV push in tie-ups with China’s largest electricity provider State Grid and UK energy giant BP. The company now has more than 600,000 electric cars operating on the platform and Didi CEO Cheng Wei hopes to expand that number to over one million by next year.
  • The ride-hailing markets in first-tier cities are highly saturated. Lower-tier cities are the next growing market. That is why Chinese OEMs make a foray into the business in these cities, said Liu, who anticipates a renewal of street fights like the earlier ones seen among Didi, Kuaidi, and Uber.
  • China’s mobility market is growing slower than expected, as Bain anticipates a market size of $60 million by 2021, compared with the previous estimate of $72 billion by next year.
  • Only the instant delivery sector increased steadily by 40% last year, while the annual growth of bike rentals plummeted from 700% to a merely 12% in terms of GMV.

Jill Shen is Shanghai-based technology reporter. She covers Chinese mobility, autonomous vehicles, and electric cars. Connect with her via e-mail: or Twitter: @yushan_shen

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