Beijing – May 16, 2018 – China is outpacing the rest of the world to become the largest mobility market, spurred by Chinese consumers, who lead most other countries in digital adoption and are willing to try new mobility options at a record pace.  As a result, China is almost single-handedly changing the definition of mobility with bike sharing and e-hailing – ordering car rides electronically from a mobile phone—leading the way.

Bain & Company surveyed nearly 2,000 Chinese consumers in Tier-1, Tier-2 and Tier-3 cities to understand the dimensions of this huge shift and its potential implications across industries.  The results, published in a new report, China's Mobility Industry Picks Up Speed, find that 60 percent of respondents increased their mobility frequency in the past two years, with new mobility services accounting for a significant part of that increase.

“Chinese consumers adopt new practices as soon as they are introduced and bring them into the mainstream,” said Raymond Tsang, partner with Bain & Company and a co-author of the report.  “With technology integration, government support and the emergence of new options such as B2C car sharing, China's mobility industry is likely to continue on its upward trajectory.”

While bike sharing, the most popular solution, was used by 73 percent of respondents, e-hailing was second— 62 percent of respondents used this growing alternative.  As an indication of how prevalent these two mobility solutions have become in China, Bain & Company conducted similar studies of consumers in Germany and the U.S.  Findings show that only 29 percent of Germans had used e-hailing and just 9 percent tried bike sharing.  In the U.S., 23 percent relied on e-hailing and a mere 8 percent used bike sharing.

According to Bain's estimates, bike sharing has grown more than fivefold and e-hailing fourfold in the last three years.  The country's market for e-hailing ordering car rides electronically from a mobile phone—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 in investments from 2014 to 2017.

Part of that explosive growth is due to the popularity of mobile payments. Chinese consumers began paying with mobile phones in earnest in 2014. Today the value of mobile payments made in China is 60 times more than in the U.S. The other force contributing to the rise in mobility solutions: the major traffic delays on roads and highways in China's top-tier cities. In fact, when we asked consumers to name their top travel pain points, time spent on the road topped the list.

“Given newly available transportation options, the formidable traffic congestion and the financial costs of car ownership, more Chinese consumers are turning their backs on buying cars,” said Pierre-Henri Boutot, a Bain & Company partner and 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 improves one's social status – a dip from a similar study Bain conducted in 2014 – and nearly the same amount indicated that owning a car has actually decreased as a status symbol in the past five years.”

The Bain & Company survey revealed that the availability of very easy mobility services would lead 23 percent of car owners and 21 percent of potential car owners to avoid purchasing a car.

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

Another major change: the coming introduction of autonomous vehicles. Among the survey participants, 26 percent said they expect autonomous vehicles to be a significant urban mobility solution within three years.

As the industry achieves scale and the market becomes rationalized, Bain & Company envisions a scenario in which profit pools could shift away from original equipment manufacturers (OEMs) to downstream services, such as mobility platforms and customer interfaces. As a result, OEMs must rethink their current business model. Long accustomed to keeping product development and other capabilities in-house, OEMs will need to partner with service providers and others in the value chain—to capture their share of the growing profit pool by finding new revenue streams to compensate for slower growth in car sales.

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

“For all players, getting ahead of these shifts means not only understanding how an existing business model is affected and how to mitigate the risks, but also evaluating the potential opportunities,” said Tsang.  “In the world's largest mobility market, no company will be able to win alone.”