China’s Beijing Automotive Group (BAIC) is expanding its partnership with the country’s largest ride-hailing platform Didi Chuxing on a car-leasing platform for consumers, a move aimed to revive business in a flagging market amid the global Covid-19 outbreak.
Why it matters: BAIC’s attempt to embrace shared mobility comes amid weak demand in new car sales—particularly in major cities—after decades of super-charged growth.
- China’s total car sales fell in 2019 for a second straight year, sliding 8.2% to around 25.8 million vehicles after declining 3% in the previous year. The central government early last year introduced subsidies to boost trade-ins nationwide and new car sales in rural areas, Nikkei reported.
Details: Daimler partner BAIC on Saturday announced a car-leasing program in partnership with Didi’s auto service division Xiaoju along with other industry players. The aim is to exceed 100 million car trips using 100,000 vehicles over the next three years.
- BAIC will initiate more than RMB 10 billion ($1.41 billion) in lines of credit available to customers, and plans to open brick-and-mortar shops in 100 domestic cities with industry partners by the end of 2022.
- State Grid EV Service, battery supplier CATL, and the Postal Savings Bank of China are among the bigger players involved in the deal.
- The companies see great potential in the country’s nascent car-leasing market, where “hundreds of millions” of customers hold driving licenses without owning cars, Chinese media reported citing Li Yixiu, director of BAIC’s sales and marketing committee.
- Didi has been a long-time partner to BAIC. The 2018 in 2018 formed a RMB 400 million joint venture with BJEV, a BAIC EV unit, to develop electric vehicles, car connectivity systems, and fleet operation solutions for next-generation shared mobility.
- The ride-hailing giant forged similar alliance last year with BYD, launching a car-sharing service with a fleet of 200 EVs and a network of 60 service stations in Shenzhen. A Didi executive in January said its fleet of 500,000 vehicles had been in service 80% of the working hours as of last year.
- BAIC on Thursday reported a 15% year-on-year increase in revenues to more than RMB 175 billion in 2019, with nearly 90% of sales coming from its joint venture with Mercedes Benz.
- However, sales for its self-made electric vehicles fell 4.7% on an annual basis to around 150,000 units last year. It has sold a mere 3,008 EVs in the first two months of 2020, a 60% drop from the same period a year ago due to outbreak.
Context: The novel coronavirus is accelerating an already rapid downward trend in China’s auto sales.
- Credit-rating firm Moody’s Investors Service on Friday slashed its annual car sales forecast to a 14% decline for the global market in 2020, much worse than its predication made last year of a 2.5% decrease, according to a Reuters report.
- Moody’s expects China’s auto sales to drop 10% by volume this year, and placed BAIC on negative credit watch along with four other automakers, and in July cut the credit rating to Baa2 with the possibility of further downgrades.