By Raymond Tsang and Usman Akhtar
China has quickly become the world’s largest mobility market, as consumers embrace new digital practices arising from the convergence of innovations in automotive, technology and e-commerce. The robust growth will likely continue, fueled by US$50 billion in investments from 2014 to 2017.
This huge shift will have major implications across industries. Automakers, for example, will need to rethink their business models as China’s snarled roads and the convenience of new mobility services upend traditional notions of car ownership. 
Also, there will be openings for new players to enter the market and for novel partnerships with incumbents.
To understand and track these coming changes, Bain & Company is surveying thousands of consumers in the United States, Germany and China every three years. In our 2014 study, the mobility industry in Germany and the US outpaced China’s. Just three years later, China dwarfs those markets.
Take e-hailing: From $5 billion in 2014, China’s market for ordering car rides electronically is now $30 billion, and was already bigger than the rest of the world combined when we looked at 2016 figures, the last time comparable data was available. We estimate it will reach $72 billion by 2020. The bicycle sharing market, virtually nonexistent in 2014, now totals 120 million monthly active bikes.
Our survey of almost 2,000 consumers in major Chinese cities found a 60 percent increase in travel in the past two years. New services accounted for a significant part of that increase.
Bike sharing, the most popular solution, was used by 73 percent of respondents; e-hailing was second — used by 62 percent. Those numbers were 29 percent and 9 percent, respectively, in Germany and 23 percent and 8 percent in the US. Moreover, Chinese consumers are less likely than their counterparts to use such traditional solutions as car rentals.
With technology integration, government support and the emergence of new options such as B2C car sharing, China’s mobility industry will likely continue on its upward trajectory.
Given these newly available transportation options, the formidable traffic congestion in big cities and the costs of car ownership, more Chinese consumers are turning their backs on buying automobiles.
In 2014, almost 60 percent of our survey participants felt that owning a car improves one’s social status. In our latest study, less than 50 percent did.
Both car owners and potential car owners agree on the specific factors that will persuade them to give up their vehicles. Heavy traffic tops the list. In almost equal measure — 24 percent vs 25 percent — car owners and potential owners say they would not buy a car if China’s traffic congestion tripled in the coming years. Greater convenience in mobility services and better multimodal connectivity in public transit were other key factors cited that would further erode the lure of car ownership.
As China’s mobility ecosystem expands, its shape is likely to change. For example, Didi captures 90 percent of all e-hailing trips and 40 percent of the volume among e-hailing traffic portals. A number of factors could alter that situation, from the emergence of local and regional players, to a consolidation among traffic portals, to a rise in the use of WeChat and other social and lifestyle commerce platforms.
Already, as many as 50 percent of all e-hailed rides are ordered from platforms such as WeChat, Dianping and Alipay. This offers competing e-hailing players the chance to catch up if they form the right partnerships with these or other portals.
Autonomous vehicles represent another major change. Among our survey participants, 26 percent expect autonomous vehicles to be a significant urban mobility solution within three years. E-hailing companies and others in China’s mobility industry are likely to amass fleets of autonomous vehicles.
As the industry achieves scale, profit pools could potentially shift away from OEMs to downstream services, with mobility platforms and customer interfaces reaping margins of more than 20 percent and value-added service providers achieving more than 15 percent margins.
Slower car sales growth means automakers will need new revenue streams. By partnering with the likes of Baidu, Alibaba and Tencent, for example, OEMs could access vastly more consumer data and gain a deeper understanding of their profiles — what they like, where they dine out and so on.
It would position them to provide location-based advertising or other innovative services or products, expanding their role in the mobility ecosystem.
OEMs are already moving in this direction. Many have launched or piloted mobility businesses — Daimler has Car2Go, BMW has ReachNow, SAIC has EVCard and Ford has Chariot. Some OEMs have formed partnerships with mobility platforms such as Didi to offer customized vehicles for their fleets.
OEMs will need to get ahead of other big changes. Our study found that e-hailing consumers care most about cost, waiting time and driver ratings — and much less about the brand of car.
This has huge implications for automakers that have worked hard to build differentiated brands. Another significant consideration: With mobility platforms such as Didi and emerging corporate car sharing companies set to be a growing segment of the vehicle market, OEMs may need to customize cars for these new and important customers.
For their part, e-hailing and car sharing services will need to adapt to the evolving mobility ecosystem. For example, the arrival of autonomous vehicles will likely transform e-hailing businesses that depend on individual drivers. Like OEMs, these services could build upon the growth of consumer data to deliver location-based advertising.
Or, there may be a market for platforms that help commuters plan the most efficient travel using all modes of transportation.
For all players, getting ahead of these shifts requires not only understanding how an existing business model is affected and how to mitigate the risks, but also evaluating potential opportunities and creating the right alliances for a new and dynamic industry. In the world’s largest mobility market, no company will win alone.
China's mobility industry is growing at a dizzying pace
