Another major competitor for Didi?
It’s not a good time for Didi. Under pressure from the Chinese government and rejected by social media for its poor reaction after two female passengers were brutally killed during a Didi ride, the Chinese ride-hailer is losing its tight, monopolistic grip on the Chinese ride-hailing market.
But if today’s struggle is all about image and reputation, tomorrow’s challenge will be about competition. Only last week, Tencent and Alibaba, in collaboration with some state-owned OEMs (FAW, Dongfeng and Changan) announced their take on the lucrative market. This club has the money, the experience and the vehicles.
Now, it’s Guangzhou Automobile Group Co. (or GAC) announcing a USD 149 million JV, focusing on mobility services in the South-Chinese province of Guangzhou.
GAC owns 35%, Tencent (!) holds 25% of the stakes, 30% is owned by employees and investors. The remaining 10% is in the hands of Guangzhou Public Transport – and that’s where the innovation is. Until now, only few local mobility providers have integrated public transport in their offering, which is commercially understandable as PT is not perceived very well by the Chinese consumer.
Nevertheless, in order for China to solve its mobility problems, it needs to integrate mass transport solutions. The popularity of ride-hailing services has, according to local analysts, increased the pressure on traffic: most Chinese users are looking for (and can afford) more comfortable transport modes. In other words, it’s the bus user who’s upgrading to ride-hailing, not the car owner downgrading to mobility.
The GAC brand might not be very well known outside of China, but it is pretty significant; Fiat, Honda, Mitsubishi and Toyota all operate in mainland China through a GAC joint-venture. GAC also produces a couple of Chinese brands (Leopaard, Gonow and Trumpchi). They will be delivering some 10,000 electric vehicles to the joint venture to power the ride-hailing application.
This seems to have become the model for OEMs in China: associate with mobility providers rather than becoming one, and adding major tech companies to the mix. It reflects the Chinese appetite for collaborations rather than working in silos.
GAC is state-owned and sold 535,168 units of its most popular Trumpchi brand in 2018. It is the forth state-owned carmaker to offer ride-hailing services.