Overlooked enabler of China’s last mile logistics success

What  are the biggest enablers of China’s ecommerce and O2O boom?

Capital, technology, (huge) consumer base, rising consumption power, and (relatively) cheap labour?

Well, they are all significant. However, there is one crucial enabler for last mile, which is often overlooked: the proliferation of electric bicycles and tricycles.

If you go to any cities in China, no matter how big or small, you see them everywhere,  zig zagging across busy streets and quiet back lanes delivering everything last mile from hot meals, parcels to on-demand services.

According to government statistics, more than 50 million electric bikes, and almost 10 million electric tricycles, were produced in China in 2016.

Clear advantages

The two wheel version often looks like a lightweight motorbike; and electric tricycle looks almost identical to the diesel tricycle.

But compared to motorbikes, diesel tricycles or even delivery vans, electric delivery vehicles have 5 clear advantages in last mile:

1) they are not expensive to acquire   

Electric vehicles are much cheaper than the motorized traditional counterparts.

The price of a new electric tricycle is about CNY 3000 (US$ 450) vs a motorised tricycle that is at least CNY 5000 (US$ 750). Similarly, price of a new electric bicycle is less than CNY 1000 (US$150) vs motorbike which is typically above CNY 3000 (US$450).

2) they are cheap to operate and maintain

According to one estimate, the energy cost of an electric tricycle is 40% of their motorised equivalents. If a delivery tricycle does 5000 kilometers a month, the savings from the electric tricycle will amount to CNY 2000.

This is quite significant especially if you run large operations of hundreds, or even thousands, of vehicles.

Besides, it does not really cost to maintain such vehicles – only the battery, electric motors and perhaps the brake need to be regularly checked and maintained.

3) they can navigate busy city traffic and narrow lanes

4) they can be parked pretty much anywhere

Cities in China are designed with fairly wide pedestrian pavements, many back lanes,  and abundant bicycle parking spaces.

Electric bicycles and tricycles are small and can be parked anywhere without actually disrupting anything.

And here the low cost comes handy again – even if it is impounded by the authorities (usually for inappropriate parking), the owner does not lose much.

5) they do not require the driver to have training or even a permit to drive

That makes it much easier for migrant workers to operate such vehicles. You have a large pool of potential operatives, and you can find replacements easily should someone decide to leave.

How about electric vans and normal bicycles?

Electric vans and trucks for last mile, however, are a different story. They are as inflexible as fuel vehicles of similar size in terms of traffic and parking; they cost more, with or without subsidies; and their batteries are not good enough – requiring dedicated time and location to charge.

Nonetheless, as companies like Tesla and all the major automakers are pushing the boundaries of battery technology for electric cars, electric delivery vehicles will sooner or later (probably sooner) enjoy a lift as well.

Also, in cities like New York and Singapore, you see delivery (mail) boys zigzagging across roads and lanes on a bicycle, delivering things from hot meals to small parcels.

Very cool, very flexible and very green, but compared to electric bicycles, this is probably not the most cost-effective option.  

First, the form factor of bicycles means you can only carry limited load each ride. Also you need a pool of  fit delivery boys, and they need to be resilient enough to keep riding.

This works well in dense cities delivering hot meals which are very time sensitive and have only a few hours of peak every day, but not courier, let alone ecommerce parcels.

As we mentioned above, it can be quite normal for a delivery vehicle to do 5000 kilometres a month. In that regard, pedal bicycles are neither fast nor enduring.

Clear regulations (or even opinions) needed

One point to note here is that city authorities (especially in developed countries) are friendlier to bicycles, but many of them do not yet have a clear opinion towards electric bikes.

Should they be encouraged, as a ‘renewable energy’ alternative to motorised vehicles?

Or should they be limited, as they pose nuisance and potential danger to normal pedestrian and motor traffic?

In a State Council (central government’s cabinet) decree on fostering delivery services, the government stated that they would issue a state standard governing the production, usage and management of electric tricycles for delivery.

The decree expects every neighborhood or village to be connected via such delivery services, and a volume of 50 billion delivery orders by 2020.

Many city governments in China have already taken steps in regulating these. In Hangzhou, hometown of Alibaba, electric tricycle licensing started in 2015.

And in capital Beijing, electric tricycles for delivery are now required to have standardised colour and each displaying a unique serial number. The government believes that these will not only make the operators more accountable, but also this city landscape more orderly and prettier.

Currently there are no regulation government electric bicycles. We believe the government is also working on finding the right balance of development and accountability, while making any standard or regulation.  

We also believe in the same potential for electric bicycles and tricycles in cities including Manila, Jakarta, Cairo, Tehran and Sao Paulo.

How to realise this potential, however, demands coherent efforts from local demand, supply chain of such vehicles as well as the government’s attitude.