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China’s rush of aspiring gig drivers reflects weak labor market

Written by Nikkei Asia Published on   4 mins read

The glut could touch off a domino effect, undermining the economy.

The surge of people scrambling to become gig drivers in China hides the soft underbelly of a weak labor market and the potential for excess competition with serious economic repercussions.

One man in Shenzhen wanted to become a driver for a ride-hailing app but was unable to secure a spot online to take a qualification test. Frustrated, he filed a complaint with the city in early March.

“There was absolutely no way to book a spot,” said the man. “I want them to do something about it.”

To become a gig driver, a person must possess a valid driver’s license as well as a permit issued by a local government authority. The drivers must have access to a vehicle and register them on an online platform.

Shenzhen normally sets aside around 1,000 to 2,000 spots each month for qualification tests to be cabbies or other types of drivers. Responding to the uptick in demand, the city will offer about 8,000 slots each in April and May. Authorities promised to open up those registrations sometime this month.

The vehicles registered are often the ones the drivers personally own or obtain from leasing agencies. Charges for leasing vehicles have been on the rise as of late.

One dealer in Guangzhou now charges RMB 3,500 (USD 508) a month to lease a Chinese-made electric vehicle, up from RMB 3,300 yuan prior to the Lunar New Year break.

“The demand has recovered rapidly,” said a manager at the leaser. “It looks like we’re not going to have enough vehicles.”

One factor fueling the rush to become gig drivers is the increase in demand for ride-hailing services. In February, bookings jumped 18% from a year ago to 652 million, according to China’s Ministry of Transport.

Bookings in January and February dipped 2% from a year earlier, but compared with trends through December, the numbers suggest that the decline has bottomed out. The use of ride-hailing apps has rebounded after the government ended zero-COVID policies and citizens became more mobile.

The return to ride-hailing is a sign of consumption rebounding. However, it would be premature to interpret the influx of labor to the gig-driving industry as evidence of an economy on the mend.

The unemployment rate in urban areas stood at 5.6% in February, according to the National Bureau of Statistics, up 0.1 points from a year earlier. Factory output has stalled, meaning the manufacturing industry is not hiring. This has contributed to job seekers turning to gig driving.

In the industrial city of Dongguan, a man surnamed Qin in his 30s began his new job as a gig driver in February. He was on track to pull in RMB 7,000 (USD 1,017) in income during his first month, more than he would make at nearby factories.

“I can make my own hours and I work independently,” Qin said. But he feels the intensity of the competition, as he has registered on multiple ride-hailing platforms and looks for passengers every day.

Young workers in recent years have been increasingly drawn to on-demand gig work, whether it is transporting passengers or delivering food. In major cities, 40% of the drivers were born in the 1980s, while another 30% were born in the 1990s, according to the China Urban Public Transport Association.

Like the driver in Dongguan, these gig workers cite the attraction of flexible hours, the promise of steady pay every week, and the lack of workplace politics.

Leasers have targeted these young aspiring drivers, who often have little money to spare. Last year, 560,000 new certificates for ride-hailing vehicles were issued, equivalent to about 10% of new energy vehicles sold in a full year.

Leasing companies borrow money from lenders to mass purchase new vehicles from car manufacturers. The dynamics among the three underpin the increase in gig drivers and gig vehicles.

Although bookings are on the upswing, the rush of drivers into the gig industry carries the risk of oversupply. If drivers find they are earning less, the lease payments will become harder to cover.

This could touch off a domino effect where drivers are forced to return vehicles, leasing companies lose business, and lenders struggle to recover debt.

“This job sucks up my time,” said a 50-year-old surnamed Xu who has been driving for four years. He said he now needs to put in 10 hours a day instead of eight, due to frequent discounts offered by the apps as well as cutthroat competition for passengers, and worries the influx of new drivers would only worsen conditions for all.

The Chinese government appears wary of the potential risks posed by this rush. Parking lots at leasing companies overflowed with cars after China’s zero-COVID policy brought daily life to a standstill in many cities last year.

In February, transportation authorities in Guangdong province warned that the surge in vehicles used for ride-hailing services was pressuring related industries, and urged workers to make “logical” decisions when choosing jobs.

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.


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