The number of ride-hailing drivers in China has increased by over 170,000 in April, the highest month-on-month increase since anti-Covid measures were lifted. However, a drop in the number of ride-hailing orders means that the market has become oversaturated with drivers.
The transportation departments of Shenzhen and other regions have warned about this problem, with some regions suspending applications for ride-hailing business licences.
More drivers, less orders
The latest statistics from China’s ride-hailing supervision information interaction platform showed that China saw an increase of 177,000 licensed ride-hailing drivers in April, an increase of 3.4% month-on-month. This brings the total number of ride-hailing drivers in the country to 5.4 million. In the first four months of the year alone, there were over 310,000 new ride-hailing drivers in the country.
After China relaxed its anti-Covid measures in January this year, people movement has increased, leading to rapid growth in ride-hailing orders. However, the number of orders fell by 10 million in April compared with the previous month, implying that there has been an increase in drivers but a decrease in passengers in the ride-hailing market.
To ensure a balanced supply and demand, the cities of Changsha and Sanya announced in early May that they would stop issuing ride-hailing business licences. At the same time, Shenzhen, Jinan, Dongguan and Wenzhou warned that the market is near saturation point as ride-hailing orders have fallen, cautioning ride-hailing firms to make rational business decisions.
... more unemployed people have chosen to earn a living by becoming ride-hailing drivers “because of the low threshold and the few options available”. — Peng Peng, executive chair at the Guangdong Society of Reform
Peng Peng, executive chair at the Guangdong Society of Reform, told Lianhe Zaobao that the saturated ride-hailing market reflects China’s current grim economic situation. He said that more unemployed people have chosen to earn a living by becoming ride-hailing drivers “because of the low threshold and the few options available”.
With several economic indicators recently released by Chinese officials falling below market expectations, analysts are concerned that the momentum of China’s post-pandemic economic recovery is weakening. Although China’s surveyed urban unemployment rate fell 0.1 percentage point month-on-month to 5.2% in April, the unemployment rate for the 16-24 age group rose and hit a record high of 20.4%, reflecting the downward pressure on the economy.
In addition to macroeconomic trends and employment factors, Fu Fangjian, associate professor at Lee Kong Chian School of Business at Singapore Management University (SMU), believes that the saturation of China’s ride-hailing market is also due to the continued growth of ride-hailing platforms in recent years, whereby various firms are aggressively expanding their fleet size to gain market share amid fiercer competition.
The latest data show that the number of registered ride-hailing platforms in China has reached 309.
New ride-hailing platforms have mushroomed in China since ride-hailing giant Didi Chuxing was temporarily removed from app stores in 2021 following an antitrust probe. The latest data show that the number of registered ride-hailing platforms in China has reached 309.
Ride-hailing drivers lament drop in income
Guangdong Society of Reform’s Peng said that the ride-hailing market has seen “unchecked growth” in the past few years, leading to an oversupply and vicious competition in many cities across China.
Some ride-hailing drivers lament that their earnings have almost halved in recent months, and they have to work an additional five to six hours every day just to match last year’s income.
A ride-hailing driver in Shenzhen surnamed Huang said that last year he could earn around 400 RMB to 500 RMB (about US$56 to US$70) working just eight hours a day. “Now, I start driving at 7 am and sometimes don’t knock off until 10 pm. After accounting for expenses such as car rental and charging fees, I only make about 300 RMB of profit a day,” he grumbled.
Drivers’ profits have been squeezed even further amid the “price wars” between ride-hailing platforms.
Drivers’ profits have been squeezed even further amid the “price wars” between ride-hailing platforms. This reporter found that for an 18-kilometre ride, some platforms charge as low as 39 RMB, nearly 30% less than the average fare of 50 RMB, and significantly lower than the traditional taxi fare of 58 RMB.
On the other hand, many taxi drivers complain that they cannot compete with the prices of ride-hailing services, as cost-conscious passengers often choose the cheaper ride-hailing option.
A taxi driver surnamed Yi lamented, “My passenger volume has halved... You can see empty taxis everywhere on the streets in Shenzhen.”
... 82% of ride-hailing vehicles in 2022 were pure electric vehicles, more than six times higher than the 13% in 2017.
Explosive growth in electric vehicles
With strong advocacy from the Chinese government, sales of new energy vehicles (NEVs) have seen explosive growth in recent years, including the demand from ride-hailing drivers.
According to a market analysis released in May by the China Automobile Dealers Association, 82% of ride-hailing vehicles in 2022 were pure electric vehicles, more than six times higher than the 13% in 2017.
Preferential policies for NEVs in recent years and the price competition among car manufacturers have made vehicles more affordable and lowered the threshold for car ownership. SMU’s Fu said that with more people able to afford cars and charging costs generally lower than fuel costs, operational expenses of ride-hailing services have decreased significantly, attracting more people to join the industry.
Fu stressed that the saturation of the ride-hailing market is the result of multiple factors. He expects that the government will further strengthen regulation, set guidance to limit the number of drivers and platforms, and restore balance in market supply and demand, allowing the industry to sustain a healthy development.
Guangdong Society of Reform’s Peng also believes that the authorities can support large enterprises, eliminate weaker ones, and move with market trends to manage the “unregulated growth” of the industry.
This article was first published in Lianhe Zaobao as "中国多地网约车饱和 分析：就业难等多重因素叠加所致".
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