Cab-hailing services expand into ridesharing in China

Want China Times, Staff Reporter 2014-10-19

Taxi app advertisement. (Photo/Beijing XiaoJu Technology)

The competition between cab-hailing apps has moved beyond helping customers find a taxi and is now focused on building a platform for transportation services, Shanghai's National Business Daily reports.

"After spending 1.5 billion yuan (US$245 million) over two years, we can be called the internet startup that has burnt the most money," said Cheng Wei, CEO of Beijing Xiaoju Technology that operates cab-hailing app Didi Dache.

Cheng's remarks on Oct. 11 were made after his company and rival Kuaidadi ended a cutthroat subsidy war over the cab-hailing services market earlier this year. The two are now battling it out over establishing transportation service platforms, the newspaper said.

"No one can say how much will be invested over the next five to ten years, but we and our investors would not dare make such investment if we did not think of the travel service platform as a valuable market," Cheng said.

Given the massive room for improvement in the transportation sector, industry insiders told the newspaper that cab-hailing services are unlikely to rely on subsidies for customers or stay in one sector for the long term.

The heavy subsidies ended in May after Kuaidadi and Didi Dache each secured funding from e-commerce giant Alibaba and web portal Tencent, respectively, the newspaper said.

With cab-hailing services unable to turn a profit, Kuaidadi, and later Didi Dache, launched ridesharing services to tap into a more lucrative and high-end market, the newspaper said.

Kuaidadi further established partnerships with Air China, Alipay, and online map services AutoNavi and Baidu, while Didi Dache teamed up with over 100 car rental services and hired its own drivers.

Compared with food, clothes and housing, Cheng said transportation is a sector that has not seen close integration with the internet, and the rise of mobile internet has provided the opportunity for just that.

Meanwhile, Cheng does not expect his company to turn profitable in the next three to five years and his company has no plan to go public.

According to a forecast made by industry insiders, the ridesharing market in China is expected to reach a scale of 400 billion yuan (US$65 billion) in 2016.

Uber, which established the ridesharing market in the United States, and AA (Anytime Anywhere) are both existing players Didi Dache and Kuaidadi will compete against in the Chinese market, the newspaper said.