China’s growing electric taxi fleet is helping cushion the world’s second-largest economy from oil price shocks as rising adoption of electric vehicles reduces dependence on petrol and diesel.
The shift towards electric taxis has accelerated as fuel prices climbed following global energy disruptions, including concerns surrounding the Strait of Hormuz. At the same time, a surge in ride-hailing drivers amid a slower economy has pushed fares lower, encouraging more consumers to choose taxis over driving their own petrol vehicles.
Government data showed people in China took 3.05 billion taxi and ride-hailing trips in May, with usage rising 6% since the Iran war began at the end of February compared with the same period last year.
A Beijing ride-hailing driver surnamed Li said fares had fallen between 10% and 15% since he started driving six months ago, citing growing competition among drivers.
“Competition is intense,” the 36-year-old told Reuters at an electric vehicle charging station.
The increase in electric vehicles has significantly changed China’s transport landscape. Around half of the country’s 1.3 million taxis are now electric, according to the Ministry of Transport, while adoption in major cities is close to 100%.
Ride-hailing giant Didi said it added another 2 million hybrid and electric vehicles to its platform last year, bringing its non-fossil fuel fleet to 8 million vehicles. Electric vehicles now account for 75% of mileage across its network.
The growing use of EVs has also contributed to lower fuel consumption. China’s petrol usage fell 10% in May from a year earlier, while diesel consumption dropped 14%, despite road freight activity increasing 2% and domestic travel reaching record levels during the May Day holiday period.
“As fuel prices have gone up, people are driving their own petrol cars less,” said Daizong Liu, East Asia director at the Institute for Transportation & Development Policy in China.
“But overall travel demand is still increasing, so more trips are shifting to public transport, such as taxis and the subway.”
The transition towards electric transport has also helped China reduce its reliance on imported oil. The country’s oil imports fell 41% in June from a year earlier, allowing it to reduce pressure on global supplies affected by geopolitical tensions.
J.P. Morgan analyst Natasha Kaneva said China’s shift towards electric mobility could represent a longer-term structural change.
“The conflict may have accelerated behavioural changes that were already underway, leaving China structurally less dependent on oil than the market has historically assumed,” she said in a July 2 note.
However, analysts expect the pace of decline in fuel demand to slow as energy prices stabilise. J.P. Morgan forecast China’s petrol demand will continue falling in 2027, but at a slower rate, with consumption expected to decline by 50,000 barrels per day compared with a larger drop of 150,000 barrels per day this year.
For some drivers, the move between electric and petrol vehicles remains dependent on fuel prices. Zhang, a 45-year-old hybrid car owner, said she usually relied on battery power when fuel costs were high.
“When I saw prices had fallen recently, I went to fill up the tank for my hybrid,” she said.
Reuters
