LeEco’s Yidao Yongche car-hailing firm denies cash woes
Reports say the LeEco-based premium vehicle firm had failed to pay suppliers, and drivers are turning their backs on the company.
Yidao Yongche, the premium Chinese ride-sharing company controlled by LeEco, has denied any financial troubles, after media reports suggested it has failed to make payments to several of its service suppliers, and its drivers.
The company insisted in a series of replies to local media that it is operating normally, and its cash flow is sound, although the company has admitted to some payment problems being caused by technical glitches.
Financing activities are smooth, and the company plans to initiate an initial public offering plan recently, Yidao said.
The Chinese company, which claims to have 40 million registered users and six million registered drivers, has failed to make payments to as many as seven suppliers, and a number of drivers have also flocked to Yidao’s headquarters in Beijing in search of payment, according to reports.
In 2015, LeEco invested US$700 million for a 70 per cent stake in Yidao. But the car-hailing service provider, which has raised more than US$860 million in four rounds of funding since launching in 2010, has been finding it hard to raise more working capital, according to a Bloomberg report last year.
According to CNIT-Research figures, Didi Chuxing – which acquired Uber to become the country’s largest car-hailing platform – dominates 94.6 per cent of China’s car-hailing market, with Yidao’s share at 3.6 per cent, due to its concentration on offering premium cars.
But unlike Didi, Yidao is still providing hefty subsidies to consumers in a bid to grow the business.
In November 2015 it launched a 100 per cent-rebate campaign, which doubled the prepaid amount for consumers for as many as 227 days, to June 30, 2016.
That campaign also offered 50 per cent discounts to some users, and reported that in total it had attracted 6.35 million consumers, depositing a total of six billion yuan (US$870 million), equivalent to almost 1,000 yuan per head, according to the company.
Problems, however, appear to have emerged in the past few months as some consumers have reported finding they are unable to get a car, as only a few drivers are available.
The drivers themselves, it seems, have been unable to cash in their forward-booking income and there are reports many are threatening to quit working with the company.
Even last week, Yidao was still offering up to 60 per cent rebates to users who deposit certain amounts into their accounts first.
Car-hailing platforms that have offered such high subsidies in the past have found it hard to halt them without drastic losses of customers, said Zhang Xu, a senior analyst at internet consultancy Analysys International in Beijing.
“Platforms like Didi have gradually lowered their subsidies to consumers but increased expenditure on services. That kind of move can filter out those customers simply looking for cheap rides, but retain those highly active and loyal ones,” said Zhang, who nevertheless believes controlling shareholder LeEco will agree to provide financial support to Yidao to solve any cash-flow problems it might have.
LeEco, which has invested in various hi-tech products from electric cars to smartphones, also admitted to a shortage of cash in November, which officials blamed on its expanding too fast, in too many directions.
Chief executive Jia Yueting said the company would cut costs by reinforcing the importance of capital controls and efficient operations.
Yidao and LeEco did not reply to enquiries from the South China Morning Post regarding whether Yidao users’ prepayments have been used to fund LeEco’s businesses.