After more than a decade of development, the shared travel industry is about to welcome its first listed company - Didi Chuxing, which focuses on ride-sharing and smart taxi services.
Recently, Didi Chuxing passed the listing hearing of Hong Kong Stock Exchange. According to the prospectus, the number of ride-hailings and transaction amount of ride-hailings of Didi Chuxing's in 2023 are about 130 million and 8.6 billion yuan respectively, with a year-on-year growth of 38.3% and 41% respectively.
It is worth mentioning that, relying on its unique light-asset business model, Didi Chuxing is the only profitable ride-hailing platform in the travel market for five consecutive years (2019-2023), with total revenue, gross profit, net income and net cash flow of 820 million yuan, 230 million yuan, 610 million yuan and 230 million yuan respectively in 2023, with a year-on-year growth of 43.2%, 166.3%, 41.6%, and 114.4%, respectively.
Behind the first share of the shared travel, it is also the recognition of capital and all parties for the positive economic value and social value of the new business model of ride-hailing, as well as the future growth potential. After ten years of development, the ride-hailing industry itself is also entering a new stage.
Private passenger car numbers continue to increase, ride-hailing provides an innovative solution for sustainable transportation.
The Chinese automobile passenger transportation market includes three main modes: ride-hailing, taxi, and online car-hailing. According to the F&S report, the total transaction value of the Chinese automobile passenger transportation market is expected to increase from 722.7 billion yuan in 2024 to 1.2389 trillion yuan in 2028, with a compound annual growth rate of 14.4%.
At the same time, as of December 31, 2023, the number of private passenger cars in China is 275 million and is expected to reach 378 million by December 31, 2028.
Despite the large scale, China's private passenger car penetration rate is much lower than that of other developed countries. In 2023, China has 195 private passenger cars per thousand people, while the United States has 705. At the same time, China's sales of 26.1 million new private passenger cars in 2023 ranks first in the world in terms of the number of new vehicles sold.
However, the rapid growth of motor vehicles will cause high vehicle density in major cities, increasing congestion. In 2023, the number of motor vehicles per square kilometer in China's first-tier cities is about 4,097, higher than other major cities such as New York (about 3,349) and Tokyo (about 2,559). In 2023, drivers in China's first-tier cities spend an average of about 48% of their commuting time (or 40 minutes) on traffic congestion during their daily commutes.
One of the reasons causing traffic congestion in China is the underutilization of existing transportation capacity. According to the F&S report, the average occupancy rate of small private passenger cars is only 1.4 people in 2023, and the utilization rate of all 1.216 billion available seats is low, about 30.3%. In addition, in 2023, the daily empty driving rate of Chinese taxis usually ranges from 30% to 40%.
Therefore, there is still untapped potential for the digital transformation of the ride-hailing or taxi industry to improve the utilization rate of existing vehicles and reduce empty driving rates. As a mutual aid transportation method for car owners to share empty seats while driving on the same route, ride-hailing not only does not add to road congestion and additional emissions but also enables both drivers and passengers to save travel costs. At the same time, it realizes efficient quality transportation that is point-to-point direct and flexible negotiation, providing innovative solutions for sustainable urban transportation.
Multiple bullish factors: Ride-hailing will have wider space for development, with a compound annual growth rate of 29.4% in the next five years.
According to the F&S report, benefiting from the improvement of the macroeconomic environment, the increase of the urbanization rate, the continuous growth of the number of private cars, and the introduction of more favorable policies, ride-hailing will become the fastest-growing sub-market in China's automobile passenger transportation market, and the size of user groups will continue to expand. Its total trading volume is expected to reach 103.9 billion yuan in 2028, with a compound annual growth rate of 29.4% from 2024 to 2028. The ride-hailing penetration rate based on travel distance is also expected to increase from 0.36% in 2024 to 0.80% in 2028.
The F&S report believes that the rapid development of ride-hailing will benefit from the following four factors:
The macroeconomic environment in China continues to improve, with China's Gross Domestic Product and disposable income increasing steadily over the past five years, and China's urbanization rate rising from 61.5% in 2018 to 66.2% in 2023.
The volume of automobile passenger transportation (especially the number of private cars) continues to increase, providing more available seats to share.
3. Favorable government policies encourage and support the development of ride-hailing to make full use of existing vehicle resources and reduce carbon emissions. In recent years, various levels of Chinese government departments have issued various policies and guidelines to deal with traffic congestion and carbon emissions, including promoting ride-hailing travel under a sound regulatory framework. These include the "Outline for Building a Strong Transportation Country" issued by the Central Committee and the State Council in 2019, which aims to build a smart, safe, green, and shared transportation network to alleviate urban traffic congestion. In 2020, the Ministry of Transport and the National Development and Reform Commission issued the "Action Plan for Creating Green Travel" to urge local departments to promote and adopt environmentally friendly travel methods and reduce the total flow of cars.
Behind the first share of the shared economy, there is also the recognition of the positive economic value and social value of the new business model of ride-hailing, as well as the future growth potential. After ten years of development, the ride-hailing industry itself is also entering a new stage.
In 2022, the Ministry of Transport, the Ministry of Industry and Information Technology, the Ministry of Commerce and other departments jointly revised and republished the "Interim Measures for the Administration of Business Services for Online Car-Hailing Reservation Issued in 2016" to clarify support for and encourage ride-sharing. Carpooling is not restricted by local operation permits and the number of licenses issued by online car-hailing regulations.
The demand for ride-sharing has recovered after the epidemic. In past years, the ride-sharing market has experienced fluctuations due to various factors, including the epidemic. Looking to the future, with the growth of the ride-sharing user base and the drive of the recovery of travel demand and other market factors, the total transaction volume of the Chinese ride-sharing market is expected to increase rapidly.
In the medium and long term, this trend will continue to create huge market opportunities for market participants. Mature ride-sharing platforms and taxi online ride-hailing platforms with advanced technology and good market recognition will quickly respond to changing demand, maximize user satisfaction and trust, and promote the recovery of the industry.
Under the background of consumption downgrading, ride-sharing will help upgrade private car consumption.
From the current perspective, the growth of the ride-sharing market will also benefit from the further popularization of intensive travel concepts under the background of consumption downgrading.
Currently, the global economy is facing downward pressure, and automotive consumption is an important pillar for boosting the economy and driving domestic demand. Ride-sharing can effectively reduce the cost of purchasing and using cars, thereby enhancing the willingness of potential private car consumers to buy new cars and promote the upgrading of car consumption. At the same time, as a large-scale consumption, automobiles play a huge role in driving the macro-economy. In addition, more and more passengers will use ride-sharing as a way to save travel expenses and achieve convenient and affordable travel through sharing.
According to data, the average fare for ride-sharing on the Didi Com platform in 2023 exceeded 66 yuan. In addition, according to Didi Com's big data, as of August 2023, new vehicles within 2 years accounted for more than 54% of certified vehicles on the platform, while vehicles within 5 years accounted for nearly 75%.
Unleashing efficiency and supporting sustainable urban transportation helps business to expand rapidly.
According to the F&S report, relying solely on the taxi and online car-hailing services under the commercial travel model cannot fully meet the travel demand. Considering the imbalance between demand and commercial supply during peak and non-peak hours, combining commercial travel and mutual assistance travel modes can improve the overall transportation efficiency and efficiency.
Didi Travel believes that the solution to China's automotive transportation problem lies in the combination of commercial operations and mutual assistance travel schemes, which can fully improve the existing transportation capacity efficiency and efficiency. Therefore, Didi Travel solves the unsatisfied travel demand through ride-sharing services, allowing private car owners and passengers to share travel costs and provide alternative travel methods in low-density urban areas or intercity transportation scenarios where public transportation services are insufficient.
According to the F&S report, as of December 31, 2023, Didi Travel has assisted in creating 54.6 million unused car seats, which is equivalent to approximately 4.5% of the total number of seats in small private cars in China.
As a pioneer in the Chinese ride-sharing market, Didi ride-sharing currently covers 366 cities nationwide and has about 15.6 million certified private car owners. Since its establishment, the company has provided services to about 69.4 million individual ride-sharing passengers as of December 31, 2023.
In addition, among the ride-hailing platforms currently initiating the IPO process, Didi Travel is the only one that adheres to the pure information service platform positioning, a light asset model platform. It does not own or lease vehicles, but matches car owners and passengers through intelligent technology to achieve resource sharing. This model reduces the company's large capital expenditures in vehicle purchase and maintenance, reduces operating costs, and also gives the company the ability to expand rapidly, which is more helpful in quickly entering new markets and attracting more users. Moreover, because ride-sharing is a mutually beneficial travel model in which car owners and passengers share travel costs, the platform does not need to pay a lot of subsidies to facilitate orders compared to online car-hailing.
In addition, this model improves the efficiency of transportation resources, promotes green travel, and reduces urban congestion and environmental pollution. This model enhances the company's competitiveness, and also diversifies business risks, allowing the company to focus on platform technology innovation and service upgrades.