Biz / Tech

New companies elbow into crowded ride-hailing industry

The ride-hailing market shows no sign of reaching saturation, and the entry of yet more new players may strain prospects for expansion and profits.
New companies elbow into crowded ride-hailing industry

The ride-hailing market shows no sign of reaching saturation, and the entry of yet more new players may strain prospects for expansion and profits. Didi has dominated the market for some time, securing its grip after merging with smaller rivals Kuaidi and Uber’s China operations. 

The biggest new challenger is Meituan Dianping, an online-to-offline service platform that links consumers with restaurants, movie theaters and beauty salons. Another new rival is Dida Pinche, a carpooling service that started in 2015 and began offering an online taxi-booking service last year. 

Earlier this month, it said it now covers 17 cities, including Shanghai, Guangzhou, Beijing, Zhengzhou, Qingdao and Xi’an. Meanwhile, existing players are caught in an endless cycle of having to offer costly incentives to attract and keep riders and drivers. 

Yidao, the car-hailing subsidiary of cash-troubled Leshi Holdings, announced a commission-free promotion period for drivers. That compares with the 20 percent commission from Didi.

Shanghai-based travel agency Ctrip said it has received a national car-hailing license through a subsidiary in Tianjin.

For now, all eyes are on Meituan Dianping in the ride-hailing sweepstakes. Meituan started out as an online food delivery service. At the end of last year, it started its first online car-booking service in Nanjing, expanding to Shanghai last month.

The company has been able to take advantage of the burgeoning market in offline services ordered and paid for online.

The industry grew 72 percent last year to almost 1 trillion yuan (US$159 billion) and includes film ticketing, leisure activities and food delivery, according to Analysys International.

In the first half of this year, the market is forecast to reach 616 billion yuan, a two fifths increase from a year earlier. Meituan describes its services as an indispensable part of big-picture urban lifestyle. It is promoting its services through discounts and free coupons, and through cash rewards for people who recruit new users to its ride-hailing platform. 

Anecdotal comment from some users suggests that Meituan services are pretty no-frills. Shanghai office worker Agnes Dong took advantage of a weeklong special discount promotion, receiving 50 percent off when booking a ride through Meituan. "I really don’t care about fancy vehicles or services,” she said. “Meituan's discounts work just fine for short rides of 3 kilometers or less."

Another user, Jeremy Yang, said he booked three rides from Meituan last month. The mapping service used by the company’s drivers is so poor that they had difficulty finding the designated pick-up point, he said. To counter any foothold Meituan may get on its turf, Didi responded with a price war. 

It also offered discount coupons. For a short ride within 2 or 2.5 kilometers, passengers need only pay 2 or 3 yuan. Didi also took the battle into Meituan’s backyard, starting its own online food delivery business with a pilot operation in the city of Wuxi. Didi boasts that its new business has captured a one-third market share there. Meituan disputes that claim.

Meituan Dianping's recent merger with bike sharing company Mobike opens yet another front in the offline-to-online market. Are bike rentals about to merge with food delivery?

There’s little doubt that the business of ordering meals online and having them delivered to the door, which first emerged around 2012, has been growing rapidly. By the end of last year, Meituan and dominated the market, with a combined 87 percent share, according to Analysys International.

At this stage, food delivery services and ride-hailing apps have one thing in common.Their growth relies on discounts, subsidies and another incentives that detract from the bottom line. The Internet makes it easy for consumers to compare prices.

Some say the market is one of reckless competition, fueled by a lack of comprehensive regulations.

Yang Xiaoxi, vice director of the Shanghai Traffic Commission, recently told a radio program that a weeklong crackdown on private cars picking up passengers through online apps nailed 668 illegal cars. 

Of those operating outside regulations, 433 were from Didi, 135 were from Meituan and the rest were from other platforms.

Shanghai regulations require that all ride-hailing firms operating in the city must have cars with local plates and drivers with local permanent residency permits.

Didi is still in the process of applying for a ride-hailing license from local traffic authorities after receiving national approval at the end of last year.

Online ride-hailing apps are subject to fines of only up to 30,000 yuan if they fail to verify the official papers of drivers or allow drivers to register one vehicle with the app but use a separate vehicle to pick up passengers.

The ride-hailing businesses are sometimes willing to turn a blind eye to malpractices because they need as many as vehicles as possible on their platforms to attract more riders.

Market watchers say they see no order — or profit — coming to the industry anytime soon, as long as Internet giants with deep pockets continue to fight for market share and consumers continue to chase cheaper rides.

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