China's driving school industry has entered a period of restructuring as the number of newly issued driver's licenses fell to its lowest level in a decade.
China issued about 20.51 million new driver's licenses last year, down 1.75 million from a year earlier, local media including China.com reported on the 16th. A report on the country's driver-training industry, published by the China Communications and Transportation Association, found that intensifying competition among schools is lowering service quality across the industry, as smaller schools face shortages of instructors and facilities and cut training hours. On top of that, new driver-education rules announced in May by the State Administration for Market Regulation require schools to adopt new-energy vehicles, or electric cars, and to replace aging vehicles. As a result, schools are struggling to lower tuition even as enrollment falls, because of the cost of replacing their vehicles.
The root cause of the falling demand is demographics. China's total population stood at 1.4046 billion at the end of last year, down 3.39 million from a year earlier, according to the National Bureau of Statistics. It was the fourth straight year of decline, and the number of births last year fell to 7.92 million, the lowest since the founding of the People's Republic. The trend tracks a shrinking population of 18- to 25-year-olds, the main group seeking driver's licenses. Indeed, according to a report by Economic Observer that analyzed data from local statistics authorities, the resident population of 20- to 29-year-olds in Beijing fell by nearly half over the decade, from 4.618 million in 2015 to 2.489 million in 2024. Over the same period, the age group's share of the total population fell to 11.4% from 21.3%.
Changing spending habits also play a part. Generations born from the 2000s onward prioritize practical spending, and a growing number are delaying or giving up on getting a license altogether. A perception has also spread that driving oneself is less necessary than before, as subway and bus networks expand in major cities. One Guangzhou resident was quoted as saying that after recently selling an SUV, taking the subway or a taxi was cheaper than maintaining the vehicle.
Youth employment conditions are also cited as a factor weighing on demand. China's urban unemployment rate for 16- to 24-year-olds excluding students stood at 16.5% in December, the lowest since June, according to Trading Economics, but it remains high by historical standards. With the cost of preparing for a job weighing heavily, getting a license falls down the list of priorities.
The industry's outlook is not bright either. Cui Dongshu, secretary-general of the China Passenger Car Association, projected that weakening demand for driving schools would peak around next year before supply and demand reach a balance after 2030. In that process, the market is expected to shrink by 25% to 35%, with a shakeout that favors larger players accelerating. In response, schools are cutting costs by adopting AI-based training systems and are trying to attract younger students by making tuition more transparent and improving service, the media reported.
Beijing has rolled out policies to counter the population decline, including longer marriage leave, cash support, consumption vouchers and easing of regional restrictions on marriage registration. But economists and demographers warn that a shrinking workforce could lead to lower productivity, higher pension and medical costs, and prolonged weakness in domestic demand.
