China’s car-hailing market is set to expand on increased investment

The four major players in the mainland market, including Didi Chuxing, Uber, Ucar and Yidao Yongche, will have generous cash flows

PUBLISHED : Tuesday, 17 May, 2016, 8:49pm
UPDATED : Wednesday, 18 May, 2016, 9:54am

China’s car-hailing market is poised for an extended period of growth, stimulated by capital inflows as the industry’s major players aggressively compete in investing in innovative services and solutions to target customers.

“The market was expected to reach 52 billion yuan by 2018. But we found the estimate is too conservative,” Zhang Xu, an analyst at Beijing-based consultancy Analysys International, said.

The ride-hailing industry on the mainland is going to grow faster than industry insiders predicted as billions of yuan from investors will continue to pour into the industry’s major companies in the coming year, following Apple’s $1 billion investment into Didi Chuxing, operator of China’s top ride-hailing mobile application, he said.

The four major players in the mainland market, including Didi Chuxing, Uber, Ucar and Yidao Yongche, will have generous cash flows to expand to more cities and connect with more users in the coming year, Zhang said.

On Friday, Apple joined Alibaba Group, owner of the South China Morning Post, and Tencent Holdings among the biggest stakeholders in DiDi, which serves nearly 300 million users in more than 400 Chinese cities, with a US$1 billion investment. Didi already received US$3 billion in September through its last financing round.

In January, Uber announced it would receive nearly US$2 billion from Chinese investors without disclosing the exact amounts from individual investors. The financing round boosted Uber China’s valuation to US $7 billion.

In April, UCAR secured 3.68 billion yuan in financing, pushing the company’s cash flows to between 8 and 9 billion yuan, according to mainland media. Additionally, in the same month UCAR applied to be listed on China’s New Third Board.

In March, Yidao Yongche, said it had already started preparing for a public listing after Internet giant LeEco Holdings Co Ltd took a 70 per cent stake in the firm in October.

Having spent to gain market share over past years, the companies’ rankings in the market are becoming stable. Now they will start to invest and launch their own innovative services to develop customer loyalty.

A trend may develop that car-hailing applications compete to launch new and creative services that lead to a better user experience, especially regarding user safety, Zhang said.

Operators of the car-hailing applications have been under stress after authorities in Shenzhen said thousands of drivers working for various operators of ride-hailing applications in the city had criminal records. Additionally a female passenger was killed by a Didi driver last month.

Didi said it would launch future safety techniques including an instant police help button, a facial recognition system for drivers, real-time itinerary sharing and real-time alerts about deviations from suggested routes.

Ucar already launched its virtual mobile number programme to protect the users’ privacy. Mainland media have reported in recent years that some passengers who gave poor ratings to car-hailling application drivers have been harassed or threatened.

In the coming month, Uber will require drivers to conduct a real-time identify verification test by performing a series of simple head gestures in front of the camera, which it said would enable more sophisticated and secure identity verification.

Also, Uber introduced a new service for local riders in Shanghai where they can receive coupons for eateries, restaurants and retailers as a new move for the ride-hailing application to bring consumers a more value-added service.