According to McKinsey, China’s middle class is expected to balloon from 256 million in 2013 to 357 million by 2022,according to McKinsey. That’s larger than the entire population of the US.
Moreover, this middle class wealth tends to be concentrated in China’s dense suburbs. In China, urbanization is still ongoing. The same Mckinsey report notes that an increasing number of China’s middle class — about 70% — will be located in China’s second- and third-tier cities in about six years. Car ownership rates in these cities are almost uniformly lower than ownership rates in New York City, but they likely have even worse public infrastructure and equally low taxi penetration rates than the US. Lower car ownership plus poor public infrastructure equals prime conditions for ride-sharing adoption.
To make things concrete: Uber has begun expanding aggressively in Sichuan, which has a population of 80 million people, more than the entire population of France. In November 2015, it launched in Mianyang, which is home to 5.4 million people, and a registered taxi count of 1,747. Los Angeles, meanwhile, has a population of 3.8 million people and 2,361 taxis.
There are hundreds of cities like Mianyang in China, which are small by Chinese standards but large by global standards.
While the Chinese government has eased its stance on peer-to-peer ride-hailing, it has not become more lenient towards foreign tech companies. Uber deserves more credit than it has received for playing its cards right in China. But the deck is still stacked against it.
Utterly fascinating report. Uber managed to get further in China than any other foreign tech company before by localizing operations and investments (bringing local wealth on board the Uber ship helps with lobbying). The Chinese market is a huge opportunity even for the number two in the P2P transportation sector.
The most interesting aspect: The different situation the Chinese middle class is in compared to the West might mean it will leapfrog car ownership and go straight to services and ride-sharing; like the move straight to mobile, leapfrogging the desktop.