Brakes applied to China's shared mobility market shows Bain breakdown

21 August 2019 4 min. read
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Bain & Company has forecast a 15 percent reduction in China’s shared mobility market growth against earlier expectations – but says the bumpy domestic ride can deliver lessons for other APAC players.

Management consultancy Bain & Company has released its 2019 APAC Mobility report, and with it, a rather stark assessment of China’s once flourishing shared mobility market. Where until recently the collective market – including e-hailing, bike sharing, business-to-consumer car sharing and instant mobility – was on track on reach a size of $72 billion by 2020, Bain now projects slower growth of $60 billion by 2021.

The story is a similar one as to elsewhere around the world; massive and rapid scaling prior to regulatory crackdowns and/or public scrutiny over high-profile safety incidents. Two such incidents in China last year, the rape and murder of two female passengers within the space of three months, saw Didi Chuxing (which commanded a ride-hailing market-share upward of 80%) suspend its carpooling service Hitch.

Long the most aware enthusiastic adopters of shared mobility services – with a survey from last year finding that over 60 percent of Chinese respondents had used a ride-hailing service over the previous three months, nearly double the figure of the next closest markets – the number of active monthly users according to Bain fell by 5 percent in China last year, with growth dropping to 25 percent. Bain now anticipates growth of less than 5 percent in 2019.

Falling growth in China shared mobility market

Bain however believes it’s more of a case of hard-braking rather than a complete stall, with momentum to return based on restored consumer confidence. “Despite the challenges, we see a route to profits for the mobility industry, not only in China but throughout Asia’s developing markets – from Indonesia to India,” said report co-author Raymond Tsang, who jointly leads Bain’s Performance Improvement practice in APAC.

While shared mobility leaders will need to make tough decisions and acknowledge that success won’t happen overnight, restoring customer confidence in the operational excellence of the company is essential, says the firm. Here, some movement is already afoot, with enhanced safety features such as emergency contacts, real-time location sharing, and audio recordings of rides already being implemented.

Regardless, there’s still the issue of an ongoing lack of profitably to confront for providers, due to stiff competition and then both low fares and ‘take rates’ – the company’s share of the fare. The average operating loss per ride at Lyft currently hovers at around 45 percent according to Bain’s analysis, and this issue is particularly pronounced in China, where the price of shared car services is relatively low alongside cheap local taxi rates. 

Operating losses of ride-hailing companies in China

Yet, in a highly regulated market such as China, improving fare levels and take rates is not always possible; companies, Bain says, will need to get creative on the back end to improve efficiencies and drive down costs. Investing in electric vehicle fleets is given as one possible example (China currently leads the globe in EV sector development), where a potential 65 percent reduction in fuel costs could easily offset the rise in rental costs to improve overall take rates.

Bain also suggests other measures toward profitability, such as a focus on regional density, platform expansion to adjacent markets, and innovation in the area of data monetisation, but one sizeable factor still looms on the horizon – with the highly disruptive shared mobility market set for its own disruption with the advent of autonomous vehicles; an area in which China once again leads the world for both development and consumer acceptance.

Autonomous vehicles will give rise to a complex cast of new stakeholders and a shifting of power among them, concludes Bain. “Early movers will put themselves at a significant advantage. Becoming a relevant player in the future mobility ecosystem calls for making strategic decisions now and forming the smart partnerships and alliances that will be key to success. It could mean the difference between writing mobility’s future and being written out of it.”