Price war escalates between taxi-hailing apps backed by internet giants Alibaba, Tencent

PUBLISHED : Tuesday, 18 February, 2014, 5:53pm
UPDATED : Tuesday, 18 February, 2014, 5:53pm

A frenzied cash-burning war between popular Chinese taxi-booking mobile applications Kuaidi Dache and Didi Dache escalated this week, with both parties boosting cash rebates to new heights in their quest to each dominate the market.

Didi Dache on Tuesday morning raised its subsidy of its users’ taxi fares from 10 yuan (HK$13) to random amounts between 12 and 20 yuan (HK$15 and HK$25). This means passengers will get a discount of between 12 and 20 yuan off the fare, while drivers get an additional cash reward of 5 to 10 yuan on top of the fare price for each taxi trip successfully booked through the application. 

The raised rebate comes less than a day after its competitor Kuaidi Dache set its cash rebate at 11 yuan for all users and either 11 or 5 yuan for drivers depending on various cities and the time of day.  

The price war between the two taxi-booking applications, which has been ongoing for several months, rapidly escalated in the last month, when one after another the companies announced they would offer cash rebates to their users if they booked taxis by connecting their bank accounts to the mobile applications.

Analysts said the heated price battle reflected the competition between internet giant Tencent and e-commerce company Alibaba, which financially back Didi Dache and Kuaidi Dache respectively.

Furthermore, Tencent’s popular instant messaging mobile app Wechat is linked to Didi Dache, while Kuaidi Dache is built into Alibaba’s leading payment management application Alipay.

The subsidies, often more or less on a par with taxi starting fares in different cites, are widely viewed as incentives driving more potential users to their services.

Until last week, Didi Dache had lavished 400 million yuan on subsidies while Kuaidi Dache had spent more than 100 million yuan, the companies disclosed.

The rebate price war, though touted as a marketing stunt that would benefit all customers, has also prompted some to try to illicitly profit from the rebates, Chinese media revealed. A number of drivers have been found guilty of colluding with customers to fake taxi bookings in order to benefit from the rebates, according to Xinhua.

The Beijing News also previously reported that some residents in Beijing without smartphones are ignored by taxi drivers who prefer to get mobile application bookings so they can enjoy the financial rewards.

Tencent and Alibaba, perhaps the two most promising technology companies in China, have clashed with each other on different fronts, with the latest row expanding to the financial industry. Each company has teamed up with a monetary fund to create their own online finance products.