Risks and Opportunities of Betting on Ride-hailing
COVID-19 and China

Chinese new car manufacturer SITECH (新特汽车) announced the completion of a Series B funding round and revealed its "Xindian Chuxing" (新电出行) ride-hailing platform plan on May 16th. This round of funding led by an industrial investment fund of Changshou District in Chongqing.

Xpeng Motors, one of China's three biggest new car manufacturers announced its plans to zooms into the ride-hailing market on March 16. Its ride-hailing platform “Youpeng Chuxing” (有鹏出行) officially completed its internal trial operation on May 14.

Due to the comprehensive strength and scale of the new car manufacturers are not as large as the traditional car manufacturing giants, the layout of the mobility market is relatively rare for new car manufacturers. It is risky for these new car makers to deploy ride-hailing services without having built up user scale, brand public praise and cognition.

New Car Manufacturers Now Target Ride-hailing

Founded on September 1, 2017, SITECH is an independent brand focusing on the research and development and manufacturing of new smart electric vehicles. The company is valued at over CNY 10 billion by now, almost reaching unicorn status. The amounts of the capital raised and more details about the latest financing round will be announced at an upcoming funding conference.

At present, it has set up R&D and manufacturing center, enterprise capital center, vehicle R&D center, Internet of vehicles and intelligent driving R&D center and styling design center in Guian new area, Beijing, Hangzhou, Silicon Valley of the United States, Turin of Italy and other places.

The company unveiled its first peer electric model, the DEV1, which is priced within 100,000 yuan and has a range of 320 kilometers last April. Since SITECH does not have the qualification to produce new energy vehicles, it is now cooperating with FAW and DEV1 is manufactured by FAW Mazda (一汽马自达) production line.

As early as March 20, SITECH has obtained the national online ride-hailing qualification, and on April 30 and May 13, it successively obtained the online ride-hailing license of Guian new area and Chengdu. The first batch of its ride-hailing vehicles of the company also will land in Guian, and Chengdu.

“This series B financing will mainly be used for new product research and development, further sinking channels, and the promotion of its mobility brand "Xindian Chuxing" and new ride-hailing business, ”said SITECH.

The transition from manufacturer to operation service provider

Youpeng Chuxing is positioned as an Internet travel platform based on the development of high-quality new energy smart cars. At present, it has recruited online car-hailing drivers through the website.

The current model in operation is the Xpeng G3, which was officially launched in last December, but it is different from the regular version delivered to private customers. The ride-hailing model has been modified to a certain extent. In terms of appearance, the customized version G3 is uniformly equipped with latte art to improve the identification.

Many traditional car companies in China have started to transform from manufacturers to operational service providers, and it is common to lay out the mobility market, such as Caocao Chuxing (曹操出行) of Geely Holdings and Xiangdao Chuxing (享道出行) of SAIC Motor. Now, new car companies are starting to enter the market.

Previously, another new car manufacturer in China called WM Motor launched its travel platform, GETnGO, which mainly provides travel car rental and time-sharing rental services in Hainan and parts of Shanghai. The difference is that Xpeng Motors and SITECH are directly targeting the ride-hailing market.

Youpeng Chuxing has been questioned

Guangzhou Municipal Government issued the "Interim Measures on the Management of Guangzhou Online Taxi Booking Service" on November 18, 2016. It is stipulated that new energy vehicles to be engaged in ride-hailing business shall meet the requirements of "length of the body not less than 4600mm or wheelbase not less than 2650mm". Due to Xpeng G3 has a body length of 4450mm and a wheelbase of 2610mm, it was once suspected that Xpeng did not meet the requirements for the registration of Guangzhou’s ride-hailing system.

In response, LI Pengcheng, general manager of public relations of Xpeng Motors, said in an interview that Guangzhou Municipal Commission of Transport issued a "notice on accelerating the promotion and application of new energy taxis" in March this year.

It is stipulated that the length of the three-compartment model pure electric taxi is not less than 4600mm or the wheelbase is not less than 2650mm. For the pure electric taxi of hatchback vehicle, the car length shall not be less than 4300mm or the wheelbase shall not be less than 2550mm. Xpeng G3 is a hatchback vehicle and conforms to the requirements of laws and regulations.

Risks and Opportunities 

"Our vision is to be an intelligent driving and driverless travel operating service provider for future urban scenes. The purpose of launched ride-hailing business is to collect data and feedback through the mobility business, so as to promote the upgrade and iteration of autonomous driving and in-car intelligence." LU Xianwen, Youpeng Chuxing's head of business said.

In addition to collecting data, the more immediate benefit is increased sales. With the introduction of the new energy subsidy policy, the selling price of Xpeng G3 has also increased. The adjusted national unified selling price is CNY 155,800 to CNY 199,800, which is the largest increase of CNY 34,000 compared with the initial selling price of CNY 135,800 to CNY 165,800.

HE Xiaopeng, founder and CEO of Xpeng Motors, said in April that the company aimed to deliver 10,000 units G3 by the end of July and 40,000 units by the end of the year. They delivered just 2,200 units in April so Xpeng may have been looking to secure the delivery of the G3 by deploying ride-hailing.

In the author’s opinion, the layout of the ride-hailing market is bound to be other potential risks.

Once the vehicle breaks down, or the user is not satisfied due to the driver, scheduling, app experience and other services or operations, the satisfaction of the public will be affected to some extent. Follow-up will be a great test of these car manufacturers' ability to operate.

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