Full Speed Ahead:China is On Track To Become The World’s Largest Mobility Market_CANNEWS

Full Speed Ahead:China is On Track To Become The World’s Largest Mobility Market

2018-05-17 11:34  Author:  Source:CANNEWS

 New Bain &Company research suggests that as the country’s mobility market expands,original equipment manufacturers must alter their current business models tocapitalize on new opportunities

Chinais outpacing the rest of the world to become the largest mobility market,spurred by Chinese consumers, who lead most other countries in digital adoptionand are willing to try new mobility options at a record pace.  As a result, China is almost single-handedlychanging the definition of mobility with bike sharing and e-hailing – orderingcar rides electronically from a mobile phone—leading the way.

Bain& Company surveyed nearly 2,000 Chinese consumers in Tier-1, Tier-2 andTier-3 cities to understand the dimensions of this huge shift and its potentialimplications across industries.  Theresults, published in a new report, China’sMobility Industry Picks Up Speed, find that 60 percent of respondentsincreased their mobility frequency in the past two years, with new mobilityservices accounting for a significant part of that increase. 

“Chineseconsumers adopt new practices as soon as they are introduced and bring theminto the mainstream,” said Raymond Tsang, partner with Bain & Company and aco-author of the report.  “Withtechnology integration, government support and the emergence of new optionssuch as B2C car sharing, China’s mobility industry is likely to continue on itsupward trajectory.”

Whilebike sharing, the most popular solution, was used by 73 percent of respondents,e-hailing was second— 62 percent of respondents used this growingalternative.  As an indication of howprevalent these two mobility solutions have become in China, Bain & Companyconducted similar studies of consumers in Germany and the U.S.  Findings show that only 29 percent of Germanshad used e-hailing and just 9 percent tried bike sharing.  In the U.S., 23 percent relied on e-hailingand a mere 8 percent used bike sharing.

Accordingto Bain’s estimates, bike sharing has grown more than fivefold and e-hailingfourfold in the last three years.  Thecountry’s market for e-haling ordering car rides electronically from a mobilephone—now totals about $23 billion, more than the rest of the world combined,and is expected to maintain its robust growth, fueled by $50 billion ininvestments from 2014 to 2017.  

Partof that explosive growth is due to the popularity of mobile payments. Chineseconsumers began paying with mobile phones in earnest in 2014. Today the valueof mobile payments made in China is 60 times more than in the U.S. The otherforce contributing to the rise in mobility solutions: the major traffic delayson roads and highways in China’s top-tier cities. In fact, when we askedconsumers to name their top travel pain points, time spent on the road toppedthe list.

“Givennewly available transportation options, the formidable traffic congestion andthe financial costs of car ownership, more Chinese consumers are turning theirbacks on buying cars,” said Pierre-Henri Boutot, a Bain & Company partnerand a leader in its Performance Improvement practice.  “Once equated with social status in China,less than 50 percent of survey participants now feel that owning a car improvesone’s social status – a dip from a similar study Bain conducted in 2014 – andnearly the same amount indicated that owning a car has actually decreased as astatus symbol in the past five years.”

TheBain & Company survey revealed that the availability of very easy mobilityservices would lead 23 percent of car owners and 21 percent of potential carowners to avoid purchasing a car.

AsChina’s mobility ecosystem expands, it is likely to change its shape.  A number of factors could alter thatsituation, everything from the emergence of local and regional players to aconsolidation among traffic portals to a rise in the use of such options asWeChat and other social commerce platforms. Already, as many as 50 percent ofall e-hailed rides are ordered from platforms such as WeChat, Dianping andAlipay. This opens up the opportunity for competing e-hailing players to catchup if they form the right partnerships with these or other lifestyle portals.

Anothermajor change: the coming introduction of autonomous vehicles. Among the surveyparticipants, 26 percent said they expect autonomous vehicles to be asignificant urban mobility solution within three years.

Asthe industry achieves scale and the market becomes rationalized, Bain &Company envisions a scenario in which profit pools could shift away fromoriginal equipment manufacturers (OEMs) to downstream services, such as mobilityplatforms and customer interfaces. As a result, OEMs must rethink their currentbusiness model. Long accustomed to keeping product development and othercapabilities in-house, OEMs will need to partner with service providers andothers in the value chain—to capture their share of the growing profit pool byfinding new revenue streams to compensate for slower growth in car sales.

E-hailingand car sharing services also need to prepare for the many ways they are likelyto be affected by the mobility ecosystem as it evolves. As an example, the e-hailingbusiness, which now depends on individual drivers, will become completelytransformed with the expected arrival of autonomous vehicles. Like OEMs, theseplayers could adapt their business model to leverage the explosive growth ofconsumer data to deliver location-based advertising.

“Forall players, getting ahead of these shifts means not only understanding how anexisting business model is affected and how to mitigate the risks, but alsoevaluating the potential opportunities,” said Tsang.  “In the world’s largest mobility market, nocompany will be able to win alone.”

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