Didi Chuxing

Didi counts on Hitch as local city rules curb car-hailing drivers

As car-hailing becomes costlier and harder in major cities, Didi looks to last-mile rides to subway stations and car-poolinig for growth

PUBLISHED : Wednesday, 25 January, 2017, 7:30pm
UPDATED : Wednesday, 25 January, 2017, 10:55pm

Didi-Chuxing, the dominant Chinese ride-hailing service that bought out Uber’s China business, launched a new service a fortnight ago, offering a “Share-A-Seat” programme for car owners to pool their rides with other commuters during the annual Lunar New Year mass migration.

As many as 8.4 million passenger trips may be logged via Didi’s Hitch network in the 40 days since January 13, a fourfold increase from last year’s same period, according to the company’s forecast.

The popularity of Hitch will be good news for Didi’s president Jean Liu, whose company must find alternative services to extend its business model after a slew of local government curbs restricted the number of available drivers for her main ride-hailing platform.

“We are concerned that those local restrictions are already hurting the development of the industry,” said Zhang Xu, an analyst at Beijing-based consultancy Analysys International, who maintained his forecast for China’s ride-hailing market to reach 52 billion yuan (US$7.6 billion) by 2018. “We will soon see a loss of users and orders if the municipal governments keep restricting local rules.”

Didi-Chuxing is at a crossroads in its five-year history, after a period of rapid expansion propelled it into the world’s largest ride-hailing company, providing 1.43 billion rides in 2015 to 300 million users across 400 cities in China. In the process, it displaced Uber from mainland China, and burned through billions of yuan in subsidies to passengers and drivers.

Business is becoming tough in the new year for Didi, after a landmark government decision in October mandated local city authorities to regulate ride-hailing, removing the company’s big capital advantage and forcing it to compete in each market with the local taxi service.

Beijing, Shanghai, Guangzhou, Shenzhen and several major cities have begun to bar out-of-town drivers from operating Didi services in their city limits. In Shanghai, a mere 10,000 out of 410,000 registered drivers were eventually qualified to respond to a ride hailed through Didi’s smartphone application.

The loss of 97 per cent of the driving pool from a megacity of 20 million residents has been painfully felt by commuters. Not only is it much harder to hail a ride, prices have been increased several fold in most major cities, as the demand for rides far exceeds the supply of divers.

“The ride-sharing economy is dying in China,” said Wu Jun, who said he’d sworn off the car-hailing service, after paying 80 yuan (US$11) for a 4-kilometre Didi ride on a frigid Beijing winter night.

The restrictions are affecting jobs too.

The vast majority of Didi drivers are usually from out of town, drawn to the higher costs of transportation in major cities. They usually lack the local hukou (户口), residency permit, that controls where people are allowed to legally work, and compelled to operate illegal cabs.

That’s not entirely bad news for commuters like Wu.

“I don’t mind hailing an illegal taxi again if it’s cheap and convenient,” he said. “Now the fee of an online car-hailing service is as expensive as a taxi in Beijing, and taxi drivers are spoiled by Didi.”

For Didi, which counts China’s three largest technology companies Baidu Inc., Alibaba Group Holdings and Tencent Holdings as investors, opportunities lie in offering other forms of last-mile connections to commuters.

Didi begun offering short rides in December to commuters on mini buses, connecting major bus and subway stations in selected areas in Beijing and Chengdu via seven-seat coaches rented from leasing companies. Alibaba is owner of the South China Morning Post.