2014 will be remembered as the year China’s taxi-booking apps began a brutal slugfest. While Kuaidi Dache and Didi Dache have called for a truce after burning billions yuan tovie for the emerging market, the war is far from over.

Powered by the capital of the IT giants Alibaba and Tencent, the companies spent more than 2.4 billion yuan on one of the most direct strategies in marketing history: literally paying drivers and passengers to use their apps.

That massive financial investment has significantly transformed Beijing’s taxi habits.

“Some 60 percent of our users only book taxis over Wi-Fi. That means more people prefer to book online than flag down a cab by the side of the road,” said by Cheng Wei, CEO of Didi Daiche.

According to the data from Beijing-based Analysys International, taxi apps had more than 130 million registered users as of the end of June.

Heavy investments by Alibaba and Tencent have frozen the budding market in a duopoly. Didi Dache controls 68.1 percent of the market while Kuaidi Dache controls 30.8 percent, according to a report from the Sootoo Research Institute.

But that high market share is unlikely to win more venture capital, especially after polls found that 30 percent of the users said they would abandon the service once Kuaidi Dache and Didi Dache stopped offering free money.

While subsidies may have won the apps users, keeping them is another challenge.

Actually, the companies had designed a perfect platform for retaining users at an earlier stage of development. When the apps were first launched, they allowed users to bid for taxis during rush hour by paying an additional percentage. “As long as the taxi apps keep involved in the relationship between passengers and drivers, their business model can be sustainable,” said by Zhao Dong, chief operating officer at Kuaidi Dache.

But city officials closed that door, requiring taxi-booking apps to strip out the bidding feature if they wanted to stay legal.

With the subsidy money gone and their business model broken, the taxi apps may have to start over.

Search for a New Model

Inspired by the ride-sharing app Uber, Kuaidi Dache and Didi Dache are now experimenting with rentals as a solution.

At the end of 2013, Kuaidi acquired Bumblebee, a traditional car-rental firm in Shanghai. The company was renamed to Yihao Zhuanche in July. The derived service of Kuaidi Dache aims to win high-end clients who require short-term car use.

Didi also began fighting with U Taxi, an app that offers carpooling services, earlier this month.

“As a traditional industry, car rental agencies have been established for more than a decade and have a mature business model. Fleet operators get a 10 percent to 25 percent commission from their clients,” said by Liu Xia, a reporter for The Beijing News.

“Gathering different levels of cars together to meet consumers’ diverse demands could be a competitive new way to approach this industry,” he said.

Compared to the system of additional flat fares, the business models of Yihao Zhuanche and U Taxi seem more adapted to market rules. “Whether or not consumers want to pay a higher price for a certain services largely depends on their demands, and this is a promising point of the model,” Huxiu.com said in an editorial.

The battleground of Kuaidi Dache and Didi Dache is also tied up in online-to-offline business through their cooperation with real estate sites.

Earlier this month, Didi announced a partnership with Telecom Operators for mobile traffic and a customized package and terminal design. Kuaidi followed by announcing its plan to collaborate with China Unicom.

“The companies plan to decrease the costs for taxis to listen for passengers by subsidizing the moblie data cost,” Liu said.

Embedding taxi-booking services into the interface of real estate websites and apps such as Sina Leju and Sohu Focus could help users call a cab when they want to check out an apartment.

It seems that there are a lot of possibilities for the current generation of taxi apps, but even with such large players the future remains uncertain.

Lynne Wang

About Lynne Wang

view all posts

Lynne Wang finds passion for life in digital gadgets and the stories of start-ups. In her free time she likes to travel and collect stories from interesting people.

You May Like This

Leave a Reply

Your email address will not be published. Required fields are marked *