Future of transport

Social media on wheels: China’s Didi Kuaidi ‘no longer a taxi app', offers networking service as daily rides hit 7 million

New ‘Hitch’ programme helps passengers make friends during their commute; company says private-car requests now double number of daily taxi rides

PUBLISHED : Wednesday, 04 November, 2015, 2:07pm
UPDATED : Wednesday, 04 November, 2015, 7:02pm

China’s largest ride-hailing company Didi Kuaidi can no longer be pigeonholed as a taxi app as demand for its private-car rides now dwarfs its other services while it keeps broadening its portfolio of services, according to an executive at the company.

“[Didi]… is no longer a taxi app,” Zhu, vice-president of strategy at Didi Kuaidi, said on Tuesday at the TechCrunch Beijing conference.

“Our biggest business is now private cars,” he said, adding that the company delivers 7 million rides a day, 4 million of which are private-car rides compared to just 2 million taxi journeys.

Moreover, Didi has moved into the social space by launching a new service called Hitch, which targets white-collars. Drivers who register with Hitch input their destination and get paired with a passenger who will be picked up along the way - allowing them to network.

READ MORE: Here’s what analysts are saying about Uber’s plan to push into China

The company rebranded itself in September with a new logo and name to distance itself from the negative stigma of being branded as an “illegal” taxi-hailing itself and reflect its self-proclaimed position as a service helping the Chinese government solve some of the country’s traffic problems.

It has expanded from its taxi-hailing beginnings, adding services such as private cars, chauffeur services, carpooling and bus routes for commuters in Chinese cities such as Beijing, Shanghai, Chengdu in Sichuan province and Shenzhen in Guangdong.

This expanded catalogue comes in the wake of a government crackdown on illegal taxi-hailing apps in China that is leading to better industry regulation as established taxi operators and drivers have launched an occasionally violent backlash against such services.

The authorities imposed tighter rules on the apps last month in a bid to level the playing field, and more would-be taxi drivers are reportedly ditching apps like Didi and rival Uber as the fear of prosecution for not carrying the right permits looms and earnings prove less lucrative than imagined.

READ MORE: ‘Any one of us could be the next victim’: More Chinese drivers ditch car-hailing apps like Uber, Didi Kuaidi as gov’t tightens screws

Unlike other Didi services, passengers using Hitch do not pay fares. Instead, they pay a nominal amount to the driver to cover petrol or parking costs, and both driver and passenger can form a friendship during the journey, according to Zhu.

“[With Hitch], we give you a passenger to pick up on the way. [The passenger] can be your [new] friend,” said Zhu, who described Hitch as a type of “social network”.

“In the future we are going to match people based on their interests,” he said.

“[In Beijing] sometimes it takes one or two hours to drive [because of traffic] … if you have a friend who shares the same interest you can talk about it on the way.”

Didi closed a funding round of US$3 billion in September, and the company is currently valued at US$16 billion, making it the sixth most valuable start-up globally. Its main rival, US ride-hailing company Uber, is the world’s most valuable start-up with a valuation of US$51 billion.

Zhu also stated that Didi Kuaidi is focusing on scaling its business, and spends only a fraction of what its competitors are spending in China. He declined to name Didi’s top competitors in the industry.

However, it is no secret that Didi’s largest rival is Uber as the two companies battle for market dominance in China.

Moreover, Didi has been investing heavily in recent months in many of Uber’s chief rivals in other markets in the region, especially in Southeast Asia and India. It also recently inked a deal with Lyft in the US so that users of both apps could use a shared platform to enjoy both services.

READ MORE: Chinese car-hailing app Didi Kuaidi invests in regional player GrabTaxi to help stymie Uber’s expansion plans in Asia

“The biggest importance in being competent is the scale,” said Zhu.

“[If it’s on a] bigger scale, you can lower cost efficiently.”

“We spend a quarter of what our competitor is spending here … More money will be spent on innovation [at Didi],” he said, in what is believed to be a reference to San Francisco-based Uber.

Didi is currently operating at a loss, according to a financial report seen by the Financial Times. The paper claims it is operating at a net loss equivalent to three times its revenue, with a reported loss of US$305 million in the first five months of 2015.

Uber is also operating at a loss of US$470 million, according to a bond prospectus seen and reported by Bloomberg in June.

Uber has been offering generous subsidies in the form of discounts and incentives to attract both drivers and passengers in China.

But other media reports in June revealed that millions of Uber rides in China were being faked as drivers attempted to exploit the company’s generous subsidy programme.

Referring to Didi’s recent US$350 million in Singapore-based GrabTaxi, which operates in countries such as Singapore, Malaysia and Indonesia, Zhu said deals like this allow Didi to service clients in markets where it hasn’t established a foothold as they travel around the world.

“[While] transportation services and ride-sharing is global, you have to understand the local passengers, drivers and regulation,” he said, putting his faith in increased localisation of services.

Both Didi and GrabTaxi are sharing experiences and knowledge in order to bring their technology, operations or expertise to the same level, he added.

While Didi and Uber’s car-hailing services are still operating in something of a legal grey zone in China, Zhu maintains that Didi is working with established taxi operators and the central Chinese government to “improve the efficiency” of taxi drivers and increase their hourly income.

“When we help them, it also helps the government,” he said.

“We solve a lot of social issues … [such as] reducing the total number of cars on the street [with carpooling and services like Hitch].”

“[Didi] is helping the government to solve the overall transportation, congestion and traffic issues out there.”