Taxi app use is exploding, but at the end of the day, it’s still a business
Print Edition
China’s two largest mobile app cab companies are offering more individualized services as competitors nip at their heels in a hotly contested market. Where the government stands on this digital transportation revolution remains a bit of a mystery.
Alibaba Group-backed Kuaidi Taxi and Tencent-backed Didi, which provide private transportation for people who use their mobiles to get a ride, consolidated their operations in February to end a price war in the increasingly competitive market.
“In such a crowded market, it’s not likely that only one or two operators will be dominant,” said Chen Weiru, associate professor of business strategy at China Europe International Business School. “Drivers and passengers can shift from platform to platform and have nothing to lose.”
There are more than a dozen of such cab services on most mobile app stores. They are go-betweens for people wanting rides and drivers seeking passengers. App cab services are booming to such an extent that it is often hard to hail a taxi curbside during peak hours.
The Shanghai government is keeping an eye on the new service model, calling some of the providers “illegal” but having yet to totally stop them.
Kuaidi and Didi want to stay ahead of the pack. Both operators have kept their individual platforms but pooled their creative thinking.
One innovation gives women the option of choosing a female driver. That comes amid some concerns about inappropriate behavior by male drivers.
In early April, the Kuaidi site offered a new version of its limousine service, making a chauffeured ride cheaper than a standard taxi. The service has a flag fare of 12 yuan, compared with 14 yuan in a registered cab.
In another innovation, the Didi platform will introduce what it calls a hitchhiking service in early June. Details haven’t been released but the service is expected to provide very low cost rides for multiple passengers.
Liu Qing, president of the merged firm, said the company’s aim is to offer a wide range of transportation options at prices tailored to all pocketbooks.
Other players in the app space, like US-based Uber and Beijing’s eDaijia, are watching Kuaidi and Didi closely, hoping to find holes in its merged business strategy.
Last week, app chauffeur service provider eDaijia said it raised US$100 million from venture capital firms Warburg Pincus, Matrix Partners China and Lightspeed China Partners. The company has the biggest app cab service providing people to drive you and your car home if you are too drunk to take the wheel.
EDaijia currently works with around 80,000 drivers and on a peak day handles about 120,000 requests for rides. It is aiming to enhance services and deepen market penetration in lower tier cities.
In April, Internet giant Baidu invested at least US$10 million in Beijing-based 51Pinche, a car pooling platform specializing in rides for downtown office workers who live in the outskirts of a city. The service is also available in Shanghai.
Some app cab companies maintain their own car fleets. Beijing-based Yidao raised at least US$200 million from Sequoia Capital, Morningside Ventures, Ctrip and CDC Capital to buy more electric vehicles, which can help lower fares. One thousand of the green cars will be available for passengers in Beijing, Shanghai, Guangzhou and Shenzhen by the end of the year.
Uber is currently offering services in nine domestic cities and is openly encouraging private car owners to offer “car pooling” services to users. The company is working with car rental firms as well as individual vehicle owners to provide rides.
Legal limbo
The essentially unlicensed app cab realm operates in legal limbo. Technically, one needs to be a licensed taxi driver to charge money to give people a ride. But the huge popularity of app-hailing means the government isn’t likely to take drastic action and shut the app companies down.
Instead, city regulators assert their authority by nibbling around the edges.
Last week, Uber’s offices in the cities of Guangzhou and Chengdu were raided by local traffic authorities who said they suspected the company of operating without a license. The company said the “visit” was simply a “routine check” and normal operations are continuing in China.
In January, the Ministry of Transport ordered app cab companies to exclude private cars from their platforms and ensure that all vehicles were either owned by taxi or car-hire companies for passenger safety purposes.
In the first four months of the year in Shanghai, the city’s transport authority has imposed fines on at least 100 drivers for offering unlicensed taxi services.
“The prospect of these Internet transportation services remains uncertain, especially without proper and specific rules overseeing the industry,” said Zhao Zhanling, a Beijing lawyer and a researcher at the Center for Intellectual Property Right Studies at China University of Political Science and Law.
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