Shared Mobility in Practice

How ride-hailing has gone from nonexistence to a mammoth industry in the space of a few years in the People’s Republic of China

By Emma Latham-Jones and Will Duncan

Along the Champs-Élysées of Shanghai, Huaihai Road, a woman is hovering on the pavement’s edge with her smartphone in hand, as she glances from her screen to the road and back again. Suddenly an anonymous car pulls up. A name is shouted out from the driver’s seat, which is received with a nod and a smile. The passenger seat door opens and closes again, and the car seamlessly continues on its journey.

Only a decade ago, no one had heard of app-based ride services. Today, ride-hailing is valued at USD 61.3 billion globally. By 2025, that number is expected to almost quadruple. So what’s causing this explosive growth in shared mobility?

The place to start looking for an answer is the giant of Asia, China. A stunning 62% of Chinese regularly hail a ride with their smartphone, according to a recent survey by Bain & Co (PDF). China’s operator DiDi alone carried out 10 billion rides with 550 million users in 2018.

No surprise, then, that the People’s Republic is the world’s largest ride-hailing market. Valued at USD 23 billion, its market is bigger than those of the rest of the world combined. America’s Uber counted a comparatively modest 95 million users worldwide in 2018 and is valued at just over USD 40 billion – DiDi’s global operations are now worth roughly USD 58 billion.

So what is it about China that makes it such fertile ground for app-based ride-hailing?

Firstly, Chinese city dwellers are rapidly changing their attitude to cars. Once thought of as a status symbol, less than half of China’s urban residents now see owning a car as a form of social progress, according to the Bain & Co survey.

China still has comparatively few cars. Only 118 cars per 1 000 inhabitants were registered in 2016. With car penetration in China at roughly 12%, compared to 74% in North America, or 53% in Europe, China has not developed the same culture of private car ownership as in the West.

The taxi features more heavily in the transport systems of big Chinese cities than in most Western agglomerations, making empty passenger seats less common. Car occupancy is significantly higher in China than in Europe: On average, 2.3 Chinese share a car ride, while the figure is only 1.6 in Europe (and as low as 1.2 passengers in some Western cities).

“China already had a culture of carpooling. With higher than average occupancy rates and lower vehicle ownership, Chinese users are more open to ride-hailing services or car sharing,” explains Jari Kauppila, Head of Quantitative Policy Analysis and Foresight at the International Transport Forum.

Incomes in China have risen steadily over the past decades. The emerging middle class is adaptable and very open to new services and products – which helped ride-hailing to quickly become mainstream.

The wild popularity of app-based payments also helped. WeChat Pay, a service offered by China’s internet giant Tencent is used by a striking 900 million people each month – a different league from Apple Pay’s 127 million users worldwide. Growth in e-hailing is, therefore, part of a broader trend across China’s cities.

A third factor is the cost of a private car in China. From taxes and insurance to parking fees, owning a car in China has become increasingly expensive, putting off many of China’s urban residents from buying their own vehicle.

Critically, the authorities have put a cap on the number of new cars that can hit the streets of Shanghai, Beijing and other cities. To own a car, you need a license. These are allocated via auctions, putting a heavy price tag even on the right to ownership.

“Car ownership in many Chinese cities is very restrictive”, explains Wei-Shiuen Ng, Advisor for Sustainable Transport and Global Outreach at the International Transport Forum.

“The price and quota associated with getting a license to own a car have quite significantly reduced vehicle growth and congestion levels, especially in the short term.”

Nevertheless, ten Chinese cities make the list of the 25 most congested cities in the world, according to the 2017 TomTom Traffic Index. Many Chinese urbanites can think of better ways to spend time than waste it in traffic jams. Hence the car is rarely their first choice for running errands and commuting to work. Instead, they order a car when conditions make that a good choice and let someone else do the actual driving, look after maintenance and bear the fixed costs.

A further element is the changing landscape for investments. China’s mobility market is strikingly dynamic. It’s full to the brim of eager-eyed competitors looking to experiment with new ride-hailing ventures: from delivery app, Meituan Dianping, and mapping service, Gaode, to traditional carmakers, such as GAC. During the three years from 2014 to 2017, this market was powered by an astounding USD 50 billion in investments. It didn’t take long for DiDi, China’s biggest ride-hailing company, to raise staggering amounts of money: indeed, in just six years DiDi has managed to raise a total of USD 20.6 billion in funding over 17 rounds.

Everyone wants a piece of the pie. Manufacturers in particular are looking to find new revenue models as car sales decline. They are setting their sights on the emerging high-end ride-hailing market, which is not yet as crowded as mainstream ride-hailing. In December 2017, BMW launched its ReachNow service in Chengdu showing that it is ready to take on the Premium ride-hailing service segment.

But European car manufacturers have Shenzhou, Shouqi, and DiDi Premium to compete with. Western companies battling it out in China’s tier-one cities somewhat resembles the Uber versus DiDi struggle of 2016, which ended in DiDi acquiring Uber China in August 2016 in a USD 35 billion deal.

“Part of DiDi’s success was that it was so familiar with the domestic market, the culture and local consumer preferences,” explains Wei-Shiuen Ng.

This article is part two of a series on Shared Mobility in Practice, which looks at how cities around the world are incorporating innovative transport solutions in real life, today. Part one examines how L.A. is harnessing data for transport innovation. Shared mobility is one of the central transport disruptions explored in the 2019 ITF Transport Outlook. It is also one of the ITF’s key research areas. More information on the ITF’s work on this subject can be found here: www.itf-oecd.org/itf-work-shared-mobility

Shared Mobility in Practice

By Emma Latham-Jones and Will Duncan

An urban transport revolution is underway in Los Angeles, the epitome of a car-reliant city – and it revolves around data.

Los Angeles, California’s largest city, has long been infamous for its traffic. But now app-based services revolving around shared vehicles are taking off. The city government is embracing these new services as a way to reduce the number of polluting cars clogging its gridded streets. To regulate — and benefit from — shared mobility, L.A. has found that data transparency and data management are essential. 

The way in which Los Angeles was planned and built has made it a car-dependent city. Throughout the 20th century, L.A. grew outwards rather than upwards; residents preferred suburban-style neighbourhoods to tall apartment buildings – and urban sprawl with low population density has precipitated a car-centred lifestyle.

“The city layout is very challenging,” says Wei-Shiuen Ng, Sustainable Transport Advisor at the International Transport Forum. “It’s just not planned in a way that public transport can thrive.”

Eighty-four per cent of Los Angeles’ commuters drive – that is double San Francisco’s percentage. Meanwhile, only 5% walk or cycle. This car dependency is causing serious problems: poor air quality, constant traffic congestion, and increasing obesity. The government estimates that owning and operating a car in L.A. costs its citizens an average of USD 9 122 per year.

The promise of shared mobility

But it’s not all bad news. Los Angeles is rising to the challenge and has quickly become a North American leader in rethinking urban mobility. Mobility options enabled by new technologies are reshaping how people navigate L.A.’s 7 500 miles of streets— whether they use free-floating shared bicycles and e-scooters or ride-sharing apps like Uber Pool or Lyft. L.A. is one of three US cities to earn the perfect score on the Shared Mobility City Index (SMCI), which evaluated 20 cities. This reflects the wide range of new shared vehicles and on-demand transport services available.

“New shared mobility tools are helping our residents realise that they have choices about how they move around our city,” explains Seleta Reynolds, General Manager of L.A.’s Department of Transportation (LADoT).

The L.A.’s Department of Transportation recogonises the potential of shared mobility to reduce congestion, improve the city’s environment and enhance access to jobs and services for its less well-off citizens. In 2016, L.A. released Urban Mobility in a Digital Age: a ground-breaking playbook for transport in the digital age that charted specific strategies to be implemented by the city (available here with its implementation plan here). In 2018, it teamed up with environmental organisation NRDC and with the input from transport, technology and other experts, released the Los Angeles Shared-Mobility Climate and Equity Action Plan (available here). Another L.A. first, the Action Plan aims to leverage shared mobility as a tool to address climate change and inequitable access to transport.

Data management: cities’ new toolkit

So how can L.A.’s elected leaders stay in control while novel shared mobility services enter its transport market? The city government has found that the answer lies in data. On the one hand, access to the data generated by the service providers enables LADoT to gain a comprehensive picture of how shared mobility is used in L.A.. On the other hand, the technical capacity to handle data enables authorities to communicate with service providers in real time and use digital language to enforce rules and regulations. 

“We’re leveraging the innovative spirit that has defined our city for generations,” says Ms. Reynolds. “We’re using it to plan 21^st century streets for all Angelenos, with a focus on creating more options and more access.”

In 2018, L.A. unveiled the Mobility Data Specification (MDS), a data and API standard that allows the city to gather, analyse, and compare real-time data from shared mobility operators. Realising the need to go beyond L.A., MDS is now governed by the Open Mobility Foundation (OMF), a multi-city-led governance body. MDS has now been taken up by more than 80 cities around the world.

“The genius of MDS is that it allows cities to put out machine-readable regulations,” says Philippe Crist, Innovation and Foresight Advisor at the International Transport Forum. “This allows much better control of these app-based platforms by public authorities. Imagine it like information from a street sign but in a more instant digital form.”

Using algorithms to manage mobility services has a lot of potential to improve cities’ ability to better enforce rules. For example, digitally-coded instructions can help ensure that e-scooters are parked properly and do not become obstacles. They can also declare certain roads off-limits to vehicles in the event of road works, a demonstration, or an on-going emergency.

“We have to create a digital set of management tools,” Marcel Porras, Chief Sustainability Officer at LADoT, told Smart Cities Drive in a recent interview: “Our Mobility Data Specification provides the foundation for [it].”

Shared mobility can do more than take pressure off the city’s roads, the L.A. Department of Transportation believes. It can also bring meaningful equity benefits. Porras describes this as a critical question for cities when it comes to managing shared mobility: “How do we equitably distribute resources?”

Access to data is the first step, as it can make the needs of citizens more transparent. The second step involves ensuring innovative transport services are not only made available to customers with deeper pockets than others. Again, algorithmic regulation may be able to help ensure that ride-hailing operators serve all of the city’s neighbourhoods, not just the more prosperous or safer ones. For example, a city government of the – perhaps not so distant – future could require a specified minimum number of automated shared vehicles to serve select geographic areas.

ITF’s Philippe Crist thinks it is likely that “machine-readable regulations could require operators to meet certain equity-based key performance indicators”. This kind of regulatory environment “requires different, and digital, building blocks than those we are used to,” Crist explains. “And all of this is ultimately in the hands of cities.” 

This article is part one of a series on Shared Mobility in Practice, which looks at how cities around the world are incorporating innovative transport solutions in real life, today. Shared mobility is one of the central transport disruptions explored in the 2019 ITF Transport Outlook. It is also one of the ITF’s key research areas. More information on the ITF’s work on this subject can be found here: www.itf-oecd.org/itf-work-shared-mobility

More than 190 governments will meet in Santiago de Chile in December 2019 to agree how to make the objectives of the seminal 2015 Paris Climate Agreement a reality. More than ever, transport will be the focus of attention: it contributes nearly a quarter of man-made CO₂ and its share is still rising. Emma Latham-Jones talked to Pierpaolo Cazzola, a renowned expert on the links between energy and mobility, on what needs to happen to clean up transport.

Climate change is threatening the fundamentals for human life on earth

If we don’t prevent runaway climate change, what will be the effect on lives around the world?

Pierpaolo Cazzola: There is a broad consensus that human activities are causing changes in the climate that lead to major risks. These include droughts, rising sea levels that threaten low-lying regions, extreme and less predictable weather, and loss of biodiversity with potential impacts on human health, food security, water supply and economic development.

Transport is a major contributor to CO₂ emissions. How can we accelerate the transition to carbon-neutral mobility?

PC: That is a major undertaking. We can only achieve it through joint actions targeting several areas at the same time. And we must not forget to the human side in order to ensure that the transition is fair and equitable for everyone.

What are the main areas of action?

PC: I would say that there are six pillars upon which the decarbonisation of transport will have to build.

Firstly, we need to better manage travel demand. Policies that favour the development of compact cities with mixed-use buildings, for instance, reduce travel distances by cutting trip lengths and allowing more trip chaining.

Secondly, what experts call “modal shift”: Creating incentives for people to use transport modes that use less energy for the same service, such as public transport, and ensuring that it can be provided at affordable costs, promoting transit-oriented urban developments.

Thirdly, we need to maximise the capacity utilisation of vehicles. This reduces the energy needed to move each passenger or each unit of goods. Digital technologies can help to achieve this, and the right policy actions can do a lot to reduce the use of single-occupancy vehicles.

Fourthly, vehicles need to become much more energy-efficient. It is crucial that policies support the deployment of technologies that use less energy per kilometre. Policies must also seek to accelerate the transition towards technologies that produce zero emissions, in particular electric mobility.

Fifthly, the so-called energy vectors for transport need to be decarbonised. Energy vectors are the technologies that store energy and make it available for transport – e.g. liquid fuels, electricity, or hydrogen. If their generation cause emissions, not much is gained.

Finally, emissions from vehicle manufacturing and infrastructure construction also need to be minimised. This requires improvements in the design and usage phases to minimise the use of materials. It also requires greater recycling rates, along with the use of recycled inputs and a growing reliance on materials that can be manufactured through processes with low energy and greenhouse gas emission intensity.

Let me also add that the transition of transport towards zero emissions does not only need to go hand-in-hand with the decarbonisation of the rest of the energy system, but it can even contribute to foster it, through sector coupling. The latter creates mutual benefits by linking energy consuming sectors such as transport, housing or manufacturing with the power production when thinking about decarbonisation.

And how could that work?

PC: For example electric vehicles could be used as distributed energy storage for the power system. This in turn would help the energy providers to better deal with the supply imponderables associated with wind or solar power and thus encourage them to embrace renewable energy. Similar opportunities exist if hydrogen became part of the transport fuel mix. Digitalisation can be a powerful enabler for sector coupling – if policy creates the right conditions in time.

You mentioned improving energy efficiency of vehicles. But what’s the point if cars keep getting bigger and heavier?

PC: That’s a good point. We should also pay attention to resource efficiency. From a climate change perspective there is no point in making engines more energy efficient if the gain is used to propel heavier vehicles – emissions won’t fall. So the growth of vehicle size should be managed, as should the material requirements. A lot can be gained by choosing the powertrain technologies that is optimal for the use of the vehicle. Full electrification, for example, is best suited to vehicles that operate within a defined range and are used intensively, for instance taxis or urban buses.

Can we stop climate change without addressing transport emissions?

PC: Honestly, no.

So how much of an impact does the transport sector have on global carbon emissions?

PC: Transport is almost entirely dependent on oil and emits between 20 and 25% of the direct CO₂ emissions due to fuel combustion, which is the bulk of all emissions from greenhouse gases. Without immediate action, its share could reach 40% by 2030.

Transport’s contribution to CO₂ emissions is even larger from a life cycle perspective. We mustn’t overlook the emissions stemming from the production and distribution of transport fuels, resulting from the manufacturing of vehicles, and finally those caused by the construction of transport infrastructure. To give an example, this could be the cement used for roads, railways, ports and airports.

To put it bluntly, the Paris agreement can’t save the planet without the transport sector making major changes.

Will transport be a topic of discussion at COP25, the follow-up to the 2015 conference that resulted in the Paris Climate Agreement?

PC: Yes. The Chilean presidency of COP25 is organising a high-level event to bring together transport ministers at the conference in Santiago in December. This will be the first time transport ministers are invited to participate, and that is a significant, symbolic and important step. They have discussed transport and climate change at their own Summits, most recently in Leipzig in May 2019, where a group of ministers led by Sweden’s Thomas Eneroth and Chile’s Gloria Hutt agreed a statement on transport and climate change. But they have so far not been included in the wider climate change negotiations.

Do you think the debate around mitigation policies for transport is sufficiently grounded in empirical evidence?

PC: The policy debate on climate is well informed. In particular the Intergovernmental Panel on Climate Change (IPCC) has provided politicians with a solid factual basis for decision-making.

At the ITF, we also support policy action through the work of our Decarbonising Transport initiative. We provide quantitative evidence, through data analysis and advanced modelling that makes detailed projections on future transport activity and calculates the impact on transport CO₂ emissions, among many other things.

If we have the evidence, why isn’t transport already carbon-free?

PC: Liquid fuels for use in combustion engines have a high energy density. They are also cheap. Competing with these characteristics proved to be very hard. As a result, transport today relies on oil for 92% of its energy, and that makes the sector particularly hard to decarbonise. Other energy sources have only managed to establish themselves in some niches, for example electricity in rail.

But the negative side effects of fossil fuel use such as pollution were fairly evident right from the outset, weren’t they? Why did that not help to push alternatives?

PC: Problems that could have questioned the dominance of combustion technologies and fossil fuels, were addressed by treating the symptoms, rather than the causes. The local pollution generated by exhausts, for instance, was tackled by developing exhaust after-treatment technologies.

Now there are new constraints on fossil fuel use that won’t be so easily overcome, notably the CO₂ emissions from the combustion process. The availability of oil and our capacity to extract more capital-intensive oil resources fast enough will further contribute to diminishing benefits.

What opportunities are there for us to move away from fossil fuel use in transport?

PC: A good example is the combination of batteries electric motors and renewable electricity. Bioenergy presents another opportunity. Low-carbon biofuels are especially relevant for long-distance travel, where batteries are less well suited. Hydrogen could emerge as a climate-friendly transport fuel, or as an important element in the production of other climate-friendly fuels, for example ammonia or synthetic fuels. In parallel, digital technologies make it easier to share assets and use resources more efficiently – think about ride sharing.

So what exactly can decision-makers do at the national level to make the most of these opportunities?

PC: They should use fiscal levers such as carbon pricing and differentiated taxes on new vehicles. Distance-based charges will also be an important tool for steering mobility behaviour. Then, standards for fuel economy of vehicles and for the carbon-content of fuel are needed. Urban planning should favour compact cities and make using public transport easy. Providing a clear framework for shared mobility solutions will ensure that these services complement public transport and do not compete with it. If governments take action on these fronts now, we can shift transport emissions onto a solid downward path.

We talked about the COP25 conference in Chile in December. What is the host country doing to encourage greener transport?

PC: Chile has the largest fleet of electric buses in Latin America. There are more than 200 electric buses on the roads of the capital Santiago today.

All 6 000 buses of the capital’s network will be successively replaced. President Sebastian Pinera has in fact pledged to electrify the public transport system across the country by 2040 – and, importantly, also set the goal of sourcing all of Chile’s electricity from renewable energy by that date.

Thank you so much for your time, Pierpaolo.

Pierpaolo Cazzola is Advisor for Energy, Technology and Environmental Sustainability at the International Transport Forum (ITF). His interests include creating synergies between the transport and energy expert communities, life cycle emissions of urban mobility options, and the global fuel economy. Currently he is investigating how India is mitigating transport CO2 emissions as part of the ITF project “Decarbonising Transport in Emerging Economies”. Pierpaolo is the author of numerous reports, including most recently the 2019 Global EV Outlook. He has worked at the International Energy Agency (IEA), the United Nations, the European Commission and the OECD.