The Economist - USA (2021-02-20)

The Economist February 20th 2021 51

Business

Mobility in China

Trafficking dreams

“W

e invest alot of money here in

China,” proclaimed Travis Kalan-

ick, founder and then boss of Uber, at a

confab in Tianjin in June 2016. But, he add-

ed with foreboding, “we have a competitor

who is investing even more.” Two months

later the American ride-hailing giant threw

in the towel, selling its Chinese operations

to its Beijing-based rival, Didi. Uber lost

some $2bn over two years in China. Its re-

treat paved the way for Didi to grow into

China’s undisputed ride-hailing cham-

pion, which today processes over four-

fifths of all domestic orders. The Chinese

titan is widely expected to go public in the

next few months, eight years after its

launch. It could fetch a valuation of $60bn.

That Uber was willing to burn through

so much cash, at least for a time, is a testa-

ment to the size of the prize. China boasts

the world’s biggest ride-hailing market.

According to its transport ministry, 21m

trips were booked on ride-hailing plat-

forms each day, on average, last October.

That is double the figure in pre-pandemic

America, when travel was safer. Until it

sold its Chinese business, Uber received

more orders in China than in any other

country, including its home market. The

gross transaction value of China’s ride-

hailers reached 221bn yuan ($32bn) last

year, up by more than half since 2017, reck-

ons Frost and Sullivan, a consultancy.

America may have invented ride-hail-

ing. But it is in China where the conditions

are most fertile for it to flourish. The rea-

sons go deeper than the size of the market.

Didi has the most to gain. But its dom-

inance will increasingly be contested.

Ride-hailing firms depend dispropor-

tionately on customers in big cities, where

population density is highest. Around a

quarter of Uber’s gross bookings by value

in 2019 came from just five metropolises:

Chicago, Los Angeles, New York, San Fran-

cisco and London. China has 14 metropoli-

tan areas with a population of over 10m

(see map), more than any other country.

Most of these cities, keen to reduce

rage-inducing congestion, discourage pri-

vate car ownership by restricting the sup-

ply of licence plates. In Beijing’s most re-

cent bi-monthly lottery 3.6m applicants

competed for 6,370 number plates. Shang-

hai, China’s most populous city, puts a

small number of plates up for auction each

month. The average winning bid at the

auction in January was 91,863 yuan, more

than double what it was a decade ago and

costlier than many mid-range cars (see

chart on next page). The southern boom-

towns of Guangzhou and Shenzhen have

hybrid models whereby some plates are al-

located via lottery and the rest sold to bid-

ders. All that leaves millions of disappoint-

ed wannabe motorists for ride-hailing

firms to cater to.

Moreover, high urban density and the

absence of American-style suburban

sprawl turn parking space into a prized

(and pricey) commodity. The number of

public parking spaces per car in Beijing,

China’s second-most populous city, is a

BEIJING

To glimpse the future of the ride-hailing business, look east

→Also in this section

52 Intel’s hard reboot

54 Vivendi’s musical shares

55 Glencore’s doppelganger CEO

55 VW’s boss lays out his plans

56 Danone’s culture wars

56 South Korea’s baby Amazon

57 Bartleby: Back for good, or bad

58 Schumpeter: Red in tooth and

clawbacks

Hail forecast

China, population, 2020*, m

Selected big markets

Source: Economist Intelligence Unit

*Estimate †Chongqing city excluding

population centres outside metro area

ShijiazhuangShijiazhuang 11.111.1

GuangzhouGuangzhou 14.514.5

ZhengzhouZhengzhou 10.510.5

Chongqing†gqing† 10.410.4

Shenzhen 13.1

Shanghai

25.3

ChengduChengdu 16.916.9

NanyangNanyang 10.710.7

Baoding 11.7

Suzhou 11.8

Wuhan

11.5

Beijing 22.8

Wuhan

11.5

Beijing 22.8

HarbinHarbin 10.8

Tianjin 14.6