Uber’s China rival Didi Kuaidi had to 'burn cash’ to build scale, but won't comment on fate of subsidies for drivers

Didi Kuaidi, the Chinese car-booking competitor to Uber Technologies, said it had to spend on driver incentives in order to build enough economies of scale to tip the business into a "virtuous circle."

"You need a sufficient operational base to have enough users - if you only had 10 or 20 cars, you will never be able to book one," Didi Kuaidi president Jean Liu said at a forum in the Zhejiang provincial capital of Hangzhou on Monday.

By achieving scale, "waiting times are shortened by a little, fares become cheaper, and because more drivers on the platform don’t require subsidies, you create a virtuous circle of increased orders, customer retention," Liu added.

Liu was explaining why the company was "burning cash" to chase operational scale and did not say whether the company will eventually end driver subsidies.

Didi Kuaidi said it still provides subsidies to commuters and drivers, and that incentive levels fluctuate.

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The company, formed from a merger of two competing Chinese taxi-hailing apps in February, has competed with Uber in giving out incentives to attract drivers and free rides to win over commuters. The subsidies, which can reach multiple times the actual fare, has also created a cottage industry aimed at scamming the companies of the payouts.