China turns to electric taxis as oil price buffer

China's rapidly growing fleet of electric taxis and ride-hailing vehicles is providing an increasingly effective buffer against global oil price volatility, helping shield consumers from higher fuel costs while accelerating the country's transition away from petroleum-based transportation, Reuters reports.

Government data shows that taxi and ride-hailing demand has continued to climb across Chinese cities. In May, passengers made 3.05 billion trips, with usage rising 6% compared with the same period last year following the outbreak of the Iran conflict at the end of February.

Analysts attribute the surge to a unique combination of factors: falling ride fares despite rising gasoline prices. An influx of new ride-hailing drivers in China's slowing economy, coupled with the widespread availability of affordable electric vehicles (EVs), has intensified competition, pushing fares lower and encouraging more commuters to opt for taxis instead of driving their own petrol-powered cars.

A part-time ride-hailing driver in Beijing, identified only by his surname Li, told Reuters that fares have declined significantly since he entered the market.

"Competition is intense," the 36-year-old said at an electric vehicle charging station, adding that fares have fallen 10% to 15% over the past six months.

Consumers are also adjusting their travel habits. Social media users have increasingly noted that taking a taxi has become more economical than driving as fuel prices climbed earlier this year.

"Especially when gas prices are high, I'd rather take a taxi to places that are too far to bike to. That way, I don't have to look for parking or pay for gasoline," said Yang, a 45-year-old petrol-car owner.

The shift highlights the growing resilience of China's transport sector to oil market disruptions, including potential supply shocks linked to the Strait of Hormuz. According to China's Ministry of Transport, roughly half of the country's 1.3 million taxis are now electric, while in many major cities nearly the entire taxi fleet has transitioned to EVs.

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 approximately 75% of total mileage driven on the platform.

The electrification of road transport is already reshaping China's energy consumption. Despite continued growth in road freight and record travel during the May Day holiday, the country consumed 10% less gasoline and 14% less diesel in May than a year earlier.

Environmental organization Greenpeace projects that 90% of taxi and ride-hailing mileage in China will be electric by 2035.

Daizong Liu, East Asia Director at the Institute for Transportation & Development Policy, said higher fuel costs have accelerated changes in consumer behavior.

"As fuel prices have gone up, people are driving their own petrol cars less," Liu said.

"But overall travel demand is still increasing, so more trips are shifting to public transport, such as taxis and the subway."

The transition has also helped reduce China's dependence on imported crude oil. The country's oil imports fell 41% year-on-year in June, easing pressure on global energy markets without requiring significant releases from strategic reserves.

J.P. Morgan analyst Natasha Kaneva said the conflict may have reinforced an already established structural shift.

"The conflict may have accelerated behavioral changes that were already underway, leaving China structurally less dependent on oil than the market has historically assumed," Kaneva wrote in a July 2 research note.

While fuel prices have recently retreated toward pre-conflict levels, analysts expect the longer-term trend toward lower gasoline consumption to continue. J.P. Morgan forecasts that gasoline demand will decline again in 2027, although at a slower pace than this year.

Consumers are also adapting their driving habits in response to fuel price fluctuations. Zhang, a 45-year-old owner of both an electric vehicle and a hybrid car, said she typically relies on battery power when gasoline prices are elevated.

"When I saw prices had fallen recently, I went to fill up the tank for my hybrid," she said.

By Vafa Guliyeva