China’s Ride-Hailing Decline Hurting Car Sales, Bernstein Says

(Bloomberg) -- The use of ride-hailing apps is declining in China as operators scale back incentives for drivers, contributing to the slowdown in car sales in the world's biggest auto market, according to a Sanford C. Bernstein report.

Total daily active usage across ride-hailing apps in the third quarter fell 6.3% from a year earlier, marking a fifth consecutive quarterly drop, Bernstein said, citing TalkingData figures. Didi Chuxing, which accounted for 93% of total daily active users in the last 12 months, saw rider and driver app usage slide by 5% and 23%, respectively, according to the report.

“Driver density is a key determinant of user wait times and the perceived convenience ride hailing services offer,” Bernstein analysts including Robin Zhu wrote. “The simplest explanation for declining driver usage is the lower incentives paid by the ride-hailing platforms, and the meager levels of take-home pay drivers stand to make once costs like fuel, maintenance, and vehicle depreciation are deducted.”

The report highlighted Didi, noting that the world's biggest digital-hailing service blamed driver incentives as a main reason for losses of around 11 billion yuan ($1.6 billion) last year. “Were Didi's efforts to reduce losses what's impacted driver numbers? Could the ride-hailing industry be ‘disrupted' by the lesser availability up of cheap capital, before it can ‘disrupt' car ownership?” it said.

Making money from ride-hailing is difficult given the challenges operators face in differentiating the service of getting people from A to B in relative safety and comfort, the report said. To counter the contraction, automakers may beef up ride-hailing services of their own electric vehicles to help boost sales and meet EV credit requirements, it said.

To contact Bloomberg News staff for this story: Tian Ying in Beijing at ytian@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Will Davies

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