China's vision for transportation

24 March 2021

China is determined to transform the global automobile industry. Leveraging autonomous driving technology and sharing economy, China hopes to leapfrog the competition. The following articles from Nikkei and the Economist look at how China is attempting to beat the West at their own game.

China guides its self-driving startups into the fast lane

Over the past decades, China has become the world’s largest car market, producing millions of cars every year. However, domestic producers still lack behind the industry leaders from the U.S., Japan, and Germany. China sees autonomous driving technology as an opportunity to turn the tables and transform the automobile industry. Among the leaders in this space are Softbank’s Didi, a ride-hailing service, and Alibaba’s AutoX. Just 4-year-old, the former became the first Chinese company to test fully self-driving technology on open roads last December.

The Chinese government has been a major driving force behind this rapid transformation. It recognises the industry’s strong demand for testing in a real-time traffic environment. Following the push from the central government, local policymakers have been providing generous subsidies and favourable policies to attract companies. A top-down approach also means that Chinese companies are closer to the technology’s commercialisation than their North American competitors, who suffer from the lack of a federal regulatory framework. Higher public support for the technology is another reason why Chinese companies may outpace their foreign competitors.

Read the full article on the Nikkei website

Why China’s Didi can succeed where Uber has struggled

While ride-hailing is an American invention, it is in China where the service has reached its full potential. Last year alone saw $32bn of transaction value, more than double the figures from 2017. The reasons behind this mind-boggling growth go beyond the market size. First, ride-hailing services heavily rely on densely populated cities. A quarter of Uber’s revenue come from 5 metropolitan areas; China has 14 of those. Second, in an attempt to reduce road congestion, the authorities significantly restrict the supply of number plates. Each month, just a few thousand winners obtain a number plate, leaving millions of disappointed applicants for ride-hailing firms to cater to. Third, high urban density means that parking space is a luxury few can afford. Together with low prices, these factors make ride-hailing a preferred mode of travelling for over 300m Chinese customers.

The most to gain from this phenomenon is Didi, a Beijing-based ride-hailing firm. The Chinese titan is looking to go public this year at a valuation of $60bn. Unlike Uber, the main question for Didi is not whether it can break even, bur rather how well it can maintain its near-monopoly position without angering the authorities. On the one hand, its competitors are steadily growing their market share thanks to differentiation and smart strategic alliances. On the other hand, the government is becoming increasingly wary of big tech, drafting stricter rules for ride-hailing every year. Despite these obstacles, however, many believe there is plenty of road left in China for ride-hailing to run.

Read the full article on The Economist website

Other stories in this edition of Asia Echo: