China’s transport networks accelerate towards a tech-driven future
Ride-hailing technology in China is transforming its cities, which for years lacked transportation infrastructure fit for their rapidly-expanding populations.
Take Didi Chuxing. The Beijing-based firm currently dominates the sector, claiming about 80 percent of China’s market share, with services ranging from taxis to carpooling and bus-sharing.
Before Didi, “many cities suffered from insufficient numbers of taxis – a consequence of taxi-license quotas not being raised in line with demand,” says Warner Brown, Associate Director in JLL’s China research team. “And before the ride-hailing apps appeared, riders who couldn’t find taxis had to make do with sketchy ‘black cars’ that cruised the streets offering rides for bargained, elevated rates.”
The rise of taxi-hailing companies is a part of an on-demand economy that’s booming in China, where a technologically-savvy generation has grown up around mobile phones and access to the Internet. The country has 731 million internet users. A study by the Consumer Technology Association showed China has the highest percentage of self-reported early tech adopters at 59 percent.
The on-demand economy has been largely driven by Chinese consumers’ enthusiasm for technology and experimentation, which is a key factor for the rise of Tencent’s WeChat and Alibaba’s Taobao, Brown says.
“China’s large migrant labor force is a natural fit for the gig economy,” he says, pointing out that “before regulations were put in place limiting who was allowed to be a driver, approximately 97 percent of Didi’s drivers in Shanghai were from outside the city.”
According to JLL’s report China12: China’s Cities Go Global, the Chinese on-demand economy is influencing the flow of people, vehicles and goods across cities, changing everything from office demand to logistics networks.
Didi Chuxing was valued at US$56 billion in 2017, and its rapid expansion outside major cities could help it to grow to $73bn (500bn yuan) by 2020.
And while Didi might have vanquished Uber in China, other Chinese companies are joining the fray, with Alibaba-owned mapping firms AutoNavi and Beijing-based Meituan Dianping launching their own ride-hailing platforms.Didi is considering pivoting to become a “smart transportation provider,” offering 20 Chinese cities products such as smart traffic lights and reversible lane.
“This technological race can only be good for Chinese cities, which still lack the transport infrastructure to cope with a rapidly expanding population,” observes Brown. “In addition, there’ll be a spill-over effect on other transportation providers. Mobike and Ofo now offer –on-demand dockless bike services. These all help Chinese cities link up new and existing infrastructure.”
Didi’s latest venture into autonomous vehicles through a tie-up with Volkswagen and its recent permit to test the technology in Silicon Valley are causing global ripples too.
Industry experts are anticipating more transport and on-demand innovations as China pushes for dominance in the sharing economy and its corresponding technology which can be exported to other countries. It ties into the country’s wider plans to transform into service-oriented economy.
“I believe we can expect to see more innovations coming out of China in the years ahead, and its major cities will be key laboratories where they are hammered out,” predicts Brown. “These cities represent a unique intersection of rapid economic and population growth –necessary for creating demand for new transport methods –while possessing the enthusiastic support for the technology and innovation necessary to discover those methods.”
And with the likes of Didi Chuxing rapidly expanding whether by acquiring and investing in high-tech firms overseas and or by entering into partnerships with foreign players, the journey is just getting started for China’s ride-hailing technology.