robo-cars Chinese deal highlights mobility's next big thing

The deal between China's biggest ride-hailing service and 12 carmakers sets the stage for the next generation of cars: all-electric driverless cars that are shared rather than owned.
Is this the future of car ownership?

The Chinese ride-hailing service Didi Chuxing signed a partnership deal with 12 major automakers Wednesday that may provide the blueprint for the next generation of cars – electric, autonomously driven vehicles that are shared rather than owned.

The move by Didi, which bought Uber’s Chinese business last year, seems likely to spread beyond China, given the international participation in the agreement, including the Renault-Nissan-Mitsubishi alliance which produces more electric vehicles than any other company.

The fast pace of change in the automobile industry – itself re-dubbed the e-mobility space – has pushed other carmakers to reach cooperation pacts. In Germany, for example, automaker BMW is in talks to merge its Drive Now car-sharing subsidiary with Daimler’s Car2Go service, combining to fight off powerful rivals like Uber and Didi Chuxing. At the same time, German car rental firm Sixt, which competes with Hertz, said it wants to combine several e-mobility options under one roof.

Robo-vehicle ride-hailing services are coming.

The German carmakers want to avoid the fate of computer makers, who became low-cost commodity manufacturers with razor-thin margins while software companies like Microsoft reaped billions in profits.

Didi is one of the fastest growing companies in the world, backed by investors like Alibaba, the Chinese version of Amazon, and Tencent and Baidu, Chinese social media companies. The company connects 20 million rides a day in China and has been bulking up to expand internationally.

According to market researcher Global Market Insight, car sharing is set to explode, growing from $1.5 billion in 2015 to a $15 billion annual business within a decade. Companies like Didi are hoping to use their platform to match online consumers with with car-sharing companies.

The Renault-Nissan alliance, which is the largest carmaker in the world by unit sales, said the agreement with Didi underlines its commitment to launch “robo-vehicle ride-hailing services” as part of its strategic plan.

“This cooperation fits with the alliance expansion in vehicle electrification, autonomy, connectivity and new mobility services,” Ogi Redzic, vice president for Renault’s connected vehicles and mobility services, said in a statement.

The company said it is developing 12 entirely electric vehicle models and 40 autonomous vehicles, which it will introduce by the end of 2022. Other carmakers in the Didi deal include Ford and Kia as well as BYD and Geely in China.

China is considered an early laboratory for sharing and electric vehicles because the government has set very high environmental and emissions standards going forward. Didi said it was interested in developing electric vehicles that are better suited for ride sharing, with more emphasis on passenger space and less on things like cruising speed.

Last year, Didi raised $4 billion in new capital, including investments from Japan’s Softbank. In addition to funding its global expansion, Didi wants to use the money for research into artificial intelligence that could be used to make ride sharing more efficient.

The company also hopes a breakthrough in autonomous vehicles will make self-driving cars practical for ride-sharing companies. Experts estimate that taking the driver out of the car will reduce the cost of the service by about two thirds.

Uber has signed a deal with Volvo to buy up to 24,000 Volvo XC90 SUVs that can accept autonomous technology, that will be designed jointly by the two firms. Uber has invested heavily in Uber Advanced Technologies to move autonomy closer to reality.

Markus Fasse is a correspondent for Handelsblatt in Munich and Tanja Kuchenbecker is a correspondent for Handelsblatt in France. This article was adapted into English by Charles Wallace, an editor for Handelsblatt Global in New York. To contact the authors:  [email protected] and [email protected]