China’s ride-hailing giant is getting into the electric-car business

Image: Reuters/Jason Lee
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China’s ride-hailing giant Didi Chuxing is making a bet on electric cars. It’s also betting on battery-swapping technology, which has stalled in the US but is revving up in China.

Didi has formed a joint venture with BJEV, a subsidiary of state-owned carmaker BAIC, BJEV said yesterday on its social media WeChat account (link in Chinese). The joint venture, known as BAIC-Xiaoju New Energy Auto Technology Co. Ltd, will work on projects related to ride-hailing, big data, battery swapping, and the operation of “new energy vehicles,” which include battery electric vehicles, plug-in hybrids, and fuel-cell cars in China.

“Setting up joint venture allow the parties to separate responsibilities, so likely Didi will likely leverage its platform, and auto-makers will be on managing, maintaining and providing cars,” said Toliver Ma, an automobile analyst at Guotai Junan.

For BJEV, which only manufacturers battery electric vehicles, partnering with Didi could help it develop fleet business. After all, battery swapping only makes sense if there are enough cars using the service to justify the large upfront investments necessary for such a system. BJEV estimates that there will be close to 4 million vehicles using the technology, and a big chunk of those will come from ride-hailing services. It’s natural to look at Didi, which captured as much as 90% of China’s ride-hailing trips in 2017, according to consultancy Bain & Co.

Battery swapping addresses so-called “range anxiety,” especially during the winter (link in Chinese), when drivers need to charge the cars more often (a time-consuming process for fleet cars). If BJEV builds enough battery-swapping stations, it might be able to address these concerns.

For Didi, it’s another effort to bolster its ride-sharing business at a tough time: The firm had to shut down Hitch, one of its most significant profit drivers, last year after two female passengers were killed when using the service. It’s still facing an antitrust investigation into its merger with Uber’s China operations. There is also increasingly stiff competition from traditional carmakers like BMW, which have entered the ride-hailing business in China. (Didi established a joint venture with Volkswagen last month, according to Reuters.)

Didi’s strategy is in line with China’s plan to encourage more electric cars. Some cities in China have already announced plans to phase out fossil cars entirely for ride-hailing operators. Shenzhen, China’s tech hub, now only gives new ride-hailing licenses to drivers using battery electric vehicles, while Hainan province, sometimes known as China’s Hawaii for its tropical vibe, stopped issuing these licenses for drivers using fossil-fuel cars last week (link in Chinese).

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