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The following report on China's smash repair industry has been prepared by David Marchand, principal consultant, automotive and transportation, Frost and Sullivan and global management consultancy, Arthur D Little.

FACTS & FIGURES

• China is a fast growing market that will become almost as large as United States by 2020

• By 2020 more than 34 million cars will be sold in China every year

• Vehicles in operation in China will increase by 11.6 per cent each year from 151 million units in 2015 to more than 262 million units in 2020

• The Chinese automotive aftermarket is expected to double in size within the next five years

• The total Chinese aftermarket size will increase by almost 15 per cent every year from 2015 to 2020

• Germany, UK and France aftermarket value combined will be five per cent smaller than the Chinese aftermarket by 2020

• China has more than 360,000 accredited car service shops

• 4S shops are the main service channel, dominating 53 per cent of the market

• There were 129 different vehicle brands distributed in China in 2015

• More than 1,158 models of car were present on the road in 2015

• ‘Independent aftermarket operations that are not growing by close to 27 per cent every year might have difficulties to keep momentum’

MARKET OVERVIEW

Taxi-hailing platforms in China have been in the spotlight with the merger of Kuaidi and Didi creating more than 250 million users and launching a chauffeur service that two years ago was only known through Uber outside China. In addition to these impressive figures, a mobility revolution is under way in China, enabled by digitalisation and a unique ecosystem.

Mobility services help individuals to plan, book or pay for journeys or use of passenger vehicles. A key difference between these services is whether the vehicle is owned or operated by a company (B2B/B2C) or by an individual (P2P).

China has been very quick to develop a comprehensive set of mobility services around taxi-hailing platforms, chauffeur
services, ride sharing, car sharing, and P2P car sharing. These are linked mostly to the initiatives of local companies developing business models specific to China – though they are sometimes inspired by models in other markets.

Why China might be the first large-scale market for new mobility

Many factors favour the development of such services in China, ranging from regulation through customer usage to technology penetration. An increasing number of cities are implementing plate restriction systems and other car limitation policies. In addition, authorities are recognising new mobility services as ways to encourage more effective car use and limit the increase of private car ownership in cities.

China’s customer mindset is changing in large cities

Urban citizens are open to the usage of these mobility platforms in addition to or as an alternative to car ownership. According to Arthur D Little’s global survey, 42 per cent of Chinese citizens would consider getting rid of their own cars, compared to an average of 21 per cent of their European counterparts.

Integrated smartphone and mobile payment solution

The smartphone is not only a way to conveniently book and localise a vehicle; it also enables seamless payment through
existing mobile payment platforms Alipay or WeChat Pay. For the Chinese government, it is also a reassuring way of controlling the purposes of the activities and avoid tax evasion.

China’s internet giants in mobility services

Digitalisation enriches the service platforms of web giants as much as it leverages their customer bases. There are more than 500 million users of WeChat in China, now the largest social media platform. Users can book taxis or chauffeur services and pay electricity bills through the same application. Mobility is definitely part of the strategy of WeChat, as it also provides location-based services such as restaurant booking and cinema ticketing.

A large talent and finance pool to develop state-of-the art services

As part of their strategies to expand their service portfolios, the same Chinese internet companies are also financing many of the start-ups. For instance, 51 Pinche, a ride-sharing service, is backed by Baidu, and Jiewo is backed by Alibaba.

Regulation and lobby hurdles

As in London, Berlin and Paris, incumbent services such as the state-owned taxi companies and other groups are lobbying to limit or eliminate the reach of these services. Other roadblocks are the lack of regulation of safety insurance and legal liabilities linked to these services.

What will be the pace of growth for these services?

Taxi-hailing platform and chauffeur services already count over 200 million users in China, and ride-sharing platforms might
follow this trend if service is confirmed and further encouraged by authorities. All in all, the new mobility services had around
300 million users at the end of 2015. The user base may top 400 million by 2020.

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