For years, becoming a ride-hailing driver had been considered a last resort for many jobless people in China, but it may not be the case any more.
A growing number of local governments have issued warnings about a saturation of the market, advising caution for new joiners after millions rushed to become gig drivers in recent years amid a bleak job market.
The road authority in Jiaxing in eastern China’s Zhejiang province released a risk alert on Tuesday that ride-hailing drivers had seen their average daily orders and incomes decline due to an oversupply of vehicles, warning against “blindly entering the market”.
In the past month, at least five other cities, including the southern cities of Shenzhen and Suzhou, have issued similar alerts, suggesting the industry in many regions is approaching or has already reached a state of overcapacity.
The warnings also came as growth in demand slows amid weak economic activity and challenges from driverless taxis emerge, said analysts.
The downgrading in spending may also have contributed as car hailing services are relatively more expensive than traditional taxis and public transport
Jiaxing reported an increase in the number of orders in the second quarter, but each vehicle on average took 11.9 orders per day, with average daily revenues of 214.7 yuan (US$30) before deducting operating costs, down by 0.6 orders and 9.9 yuan, respectively, compared to the first quarter, according to the Jiaxing Public Road and Transportation Management Centre.
In Nanning, the provincial capital of the southern Guangxi Zhuang autonomous region, the average number of order per day per vehicle in the second quarter dropped by over 10 per cent from a year earlier, while the daily revenue for a full-time driver fell by about 1.3 per cent year on year, the local road authority said in a similar warning on August 1.
“The market is now starting to fall primarily because economic activity is getting weak, as demand decreases with the shutdown of businesses and unemployment of individuals,” said Tang Dajie, a senior researcher with Beijing-based China Enterprise Institute think tank
“The downgrading in spending may also have contributed as car-hailing services are relatively more expensive than traditional taxis and public transport.”
As of the end of June, there were over 7.1 million registered ride-hailing drivers in China, compared with 4.5 million two years ago, according to the Ministry of Transport.
Ride-hailing had gained popularity, especially among laid-off workers, as it only required a car and a driving licence.
With a lower-than-expected growth of 4.7 per cent in the second quarter, the world’s second-largest economy continues to be dragged down by insufficient domestic demand, a persistent property slump and elevated unemployment.
The overall urban unemployment rate stood at 5.2 per cent in July, representing the first rise since February, according to the National Bureau of Statistics, having stood at 5 per cent for the previous three months.
New technologies, including driverless vehicles, are also poised to further disrupt the traditional ride-hailing market.
A report by Guotai Junan Securities in July highlighted the success of Apollo Go, an autonomous driving ride-hailing service by search engine giant Baidu, in Wuhan, suggesting that the model could be replicated in other cities.
Noting its competitiveness in price and passenger experience, the report said, “self-driving taxis may challenge the conventional taxi and online car-hailing industry”.
The company plans to deploy 1,000 sixth-generation autonomous vehicles in Wuhan by the end of 2024, it said in May, with trial services available in 11 cities, including Beijing, Shenzhen, and Shanghai.
