Huge market potential exists for shared mobility solutions in China and India, reports Shamik Ghosh. [Mob.Ghosh.2016.07.28]

The latest report, What’s Ahead for Car Sharing from Boston Consulting Group (BCG) released in February 2016 reads: ‘By 2021, 35M users will sign-up for 1.5Bn minutes of driving time each month and generate annual revenues of €4.7Bn’ (£4.05).

The report also noted that in terms of fleet size and customer base, Asia-Pacific (including the ANZ region) has the largest market share with 2.3M users and 33,000 vehicles.

So, what makes Asia a hot-spot for the on-going excitement around shared mobility? Gang Xu, partner and managing director of BCG China and one of the authors of this report said: “Asia is definitely a ‘not-to-be-missed’ market for any organisation aiming to seize the multi-billion dollar opportunity of car sharing.”

The cost of ownership and congestion are the major driving factors that will favour a high penetration of car sharing in Asian countries. Also, in countries with a large urban population where the per capita incomes are relatively lower than the developed economies and transportation infrastructure is under-developed; the car sharing market will grow manifold in coming years. This includes China, Japan, India, Singapore, South Korea and Taiwan.

Susan Shaheen, co-director of the Transport Sustainability Research Center at University of California-Berkley agreed: “The Asian market is unquestionably more dynamic and is driven more aggressively by technological innovations. The high-density, mixed-use neighbourhoods within a city that have access to public transportation enable users to live either ‘car-free’ or ‘car-lite’. This fact alone renders Asia the vantage point in the global shared mobility landscape,” she adds. 

China and India: the behemoths

Car sharing is a recent phenomenon in China establishing an industry only back in 2007-08 and gaining a significant boost in 2012-13. Some of the most popular car sharing schemes worldwide, i.e. BMW’s Drivenow, Daimler’s Car2Go etc., have already started testing their services in China with local partners. Also, the big announcement came in May 2016 when Apple invested $1Bn in the Didi Chuxing, the local transportation giant.

“This could well be Apple’s ‘The’ move in Asia, and in particular, the connected car segment as I don’t expect them to be mere financial investors in this game,” said Xu.

Xu explained the cultural dynamics of China that anyone entering this region should consider beforehand.

The Chinese market, unlike Europe and North America, is quite heterogeneous where users can be categorised into several layers, such as Tier-1, Tier-2 up to Tier-6. “Tier-1 cities like Beijing, Shanghai and Guangzhou, where ownership is not important for individuals any longer and the cost of obtaining a license is high, provide leverage to car sharing services. In lower tier cities, however, the car is still a potent status symbol and traditional taxi services are already well established,” he added. “Anyone moving into China has to take into account these very factors to avoid ending up like Uber,” he cautioned. Recently, Uber sold its $8Bn local business unit to Didi Chuxing marking its official exit from China. On the political front, Xu believes that China’s regulatory environment does not stifle innovation and is “conducive” for all the connected mobility initiatives.

India only got under way in 2013 so certainly even younger in the realm of car sharing. The largest player Zoomcar, founded by two UPenn alumnus in Bangalore, offers self-drive (chauffer-less) car sharing services in several Tier-1 cities and now operates a 6,000-vehicle fleet. In terms of the business model, Zoomcar took significant inspiration from the West where car sharing is already prevalent. However, the company had to customise its overall business model to account for the local cultural, socio-economic and infrastructure tendencies and most importantly, the regulatory obligations. 

Greg Moran, CEO of Zoomcar said: “Coping with local regulations is still a fairly draconian process and it certainly inhibits certain smaller operators from scaling in India.” For example, the 1989 Rent-a-Cab law from Ministry of Road Transport  & Highways requires a company to own at least 50 vehicles to obtain an original license. “Add to this the cumbersome inter-state tax policy which makes it tricky to grow beyond a young company's home market,” Moran added.

Foregone ownership, a problem?

The BCG report estimates 462,000 foregone private sales by 2021 as a result of people relying more on shared mobility options. What does this mean for OEMs? “This is an ocean of opportunity for OEMs disguised as a threat. They see the risk part of this game and are preparing to offset the decline in private vehicle sales by selling mobility vehicles in fleet format,” said Xu. “The ultimate result is a drop of merely 1-2% in vehicle sales which will further diminish as fully autonomous vehicles kick in by 2025,” he predicts.

Shaheen agreed: “A reduction in private vehicle ownership does not substantially translate into a reduction in vehicle sales. Additionally, the life of fleet vehicles will be shorter than private vehicles as they tend to be used more intensively,” she adds.  This implies a more frequent replacement of mobility vehicles thus nullifying the overall decline in vehicle purchases.

In the near foreseeable future, the Asian carmakers may as well start aggressively setting up new mobility divisions following the footprints of their counterparts in the developed world or at least work closely with operators. “Those not doing it will be seen as mere ‘hardware’ manufacturers,” added Xu.

Moran believes the local OEMs will start investing now to avoid being side-lined in the mobility game ten years down the line. “The Indian carmakers [Maruti, Mahindra and Tata] are all focused on long-term mobility initiatives. This means not only selling fleets to us but also work closely on after-sales support to create a robust ecosystem to ensure the car is always in absolute top notch health,” Moran concluded.

Going forward, with the convergence of electric mobility and vehicle autonomy with car sharing initiatives, Asia will probably surprise many in the shared mobility ecosystem. 

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