Caixin
Dec 20, 2018 05:45 AM
BUSINESS & TECH

China’s Biggest Carmaker Rolls Into Ride-Sharing Market

SAIC Motor launches ride-hailing service Xiangdao Chuxing. Photo: VCG
SAIC Motor launches ride-hailing service Xiangdao Chuxing. Photo: VCG

SAIC Motor Corp., China’s largest automaker, became the latest conventional automaker to roll into the burgeoning ride-hailing market in search of a new source of growth.

SAIC Motor unveiled its ride-hailing brand, Xiangdao Chuxing, on Tuesday. The company will put 1,000 vehicles in service starting in Shanghai and expanding into more cities next year, according to the Shanghai-based automaker.

The SAIC Motor move followed a number of other major Chinese automakers tapping into the ride-hailing business, a market currently worth about $23 billion a year, according to consultancy Bain & Co.

Carmakers are counting on the massive potential of the market for new growth. Annual transactions in China’s ride-hailing market will more than triple to $72 billion by 2020, said Wu Bing, chief executive officer of SAIC Motor’s ride-hailing unit.

“The market will become a crucial battlefield and cradle of new brands,” Wu said. He called ride-hailing the widely recognized future for auto manufacturers.

SAIC Motor obtained a ride-hailing license in Shanghai in September and started a trial business in mid-November, Wu said. Over the past month, the service has attracted 600,000 registered users and provided more than 300,000 rides.

Xiangdao Chuxing will recruit its own team of drivers and work with professional fleets, offering services targeting the higher-end segment of the market, Wu said.

China’s ride-hailing market is bigger than that of the rest of the world combined, according to Bain & Co. But 82% of the market share is controlled by leading player Didi Chuxing, which was hit by several setbacks this year because of security concerns after multiple riders were raped and two were murdered by drivers.

Industry analysts said smaller players and newcomers will continue to chip off pieces of the market and will gradually reduce Didi’s share to around 70%. Ministry of Transport data showed that as of July 31, 49 ride-hailing companies were operating in China.

Slowing auto sales are pushing carmakers into ride-hailing and mobility services. In November, car sales in China declined 13.86% from a year ago as the market moves toward its first annual drop in 28 years.

SAIC Motor reported a 10.4% sales decline in November from the previous year, the third consecutive monthly decrease.

SAIC Motor in 2016 launched a timeshare rental operation unit to diversify its business. The service currently operates 38,000 vehicles in 40 Chinese cities.

Rival Shouqi Group started a ride-hailing service in 2015 and expanded to 60 cities. Private carmaker Geely Holding Group’s ride-hailing unit Caocao is the second-largest ride-hailing provider after Didi, according to Transport Ministry data.

In October, Daimler AG and Geely agreed to set up a 50-50 joint venture to offer ride-hailing services. Earlier this month, state-owned automaker Dongfeng Motor Corp. said it won a ride-hailing business license in Wuhan, Hubei Province.

Cai Bin, general manager of SAIC Group’s mobility service department, said the younger generations of consumers, who are more adapt at internet technology, will prefer ride-hailing services over car ownership more than older generations. By 2020, the ride-hailing market will grow elevenfold from 2015, Cai said.

Contact reporter Han Wei (weihan@caixin.com)

You've accessed an article available only to subscribers
VIEW OPTIONS
Share this article
Open WeChat and scan the QR code
GALLERY
Copyright © 2019 Caixin Global Limited. All Rights Reserved.