Imperfect market innovation: How Didi did it

It really bothers me why a company that is little different from real estate brokers... would have the nerve to brand itself as a champion of new mobility solutions?

Editor's note:

The killing of a young lady by a driver has put Didi ride-sharing service under the limelight. Shanghai Daily opinion writer Ni Tao pierces the veil of so-called market innovation to reveal the reality of certain “unicorns.”

I’m not a neo-Luddite opposed to innovation, nor do I harbor prejudice against successful innovators.

But the rise of ride-sharing apps like Didi Chuxing, and bike rental initiatives such as Mobike, does seem to generate more problems than it solves.

Take Didi for example. Through a series of mergers and acquisitions, this company has emerged as the top ride-sharing service provider in China, with a staggering valuation of US$50 billion.

Didi beat back competition by lavishly subsidizing fares paid by passengers. Among the bested were big names like Uber, whose China operations were eventually bought out by Didi.

With Didi establishing a de facto monopoly in the ride-sharing market ­— until the entry of Internet giant Meituan — the quality of its service has become a lightning rod for criticism.

In a rare salvo fired against the ride-sharing industry, the Ministry of Transport recently blasted some online ride-sharing platforms for failing to undertake the necessary social responsibility after their business has flourished. Instead, they have spared no effort to harm the interests of drivers and passengers, said the statement.

It went on to say that the platforms in question choose “traffic” and “valuation” over people’s “sense of gain.”

Moreover, they are deferential to the whims of investors but indifferent to the feelings of passengers as well as the plight of drivers. Despite the strong wording, the ministry did not name any specific ride-sharing operator, although we all know Didi takes much of the blame as the industry’s “alpha male.”

Under fire

In addition to the official censure, Didi has also come under fire from its own drivers, who often voice disappointment at the way they are treated in disputes with passengers. They allege that Didi invariably takes sides with passengers, poised to fine drivers without a thorough and transparent investigation.

And drivers are dismayed at rules that oblige them to provide three bottles of water from qualified suppliers for free during a ride. Didi’s choice to turn off the subsidy tap, coupled with rising oil prices, has made life harder for drivers who already feel being exploited in the form of high rate of commission charged by Didi on each transaction.

Didi draws even heavier flak from passengers because of its notoriously loose standards in screening candidates applying to drive a Didi cab. It’s common to come across emotional comments online relating incidents in which passengers are taunted, intimidated and even assaulted by thuggish drivers.

Horrible tales about women being filmed by hidden cameras or molested by lascivious drivers during and after the journey also proliferate. There are even cases where female passengers were raped and killed, raising serious concerns about to what extent Didi vets its drivers — or does it vet them at all?

In its statement, the Ministry of Transport urged ride-sharing service providers to prioritize the interests of passengers and drivers, for they contribute to the sector’s sustained development. Otherwise, platforms will collapse, however big.

I don’t know if Didi will imbibe this no-one-too-big-to-fail lesson, but definitely it will feel being singled out, for the problems it faces are likely to be confronted by new entrants in the market, namely, Meituan, Ctrip and Amap.

Call for caution

It is reported that Meituan “stole” almost one third of Didi’s business in Shanghai within three days of launching its own ride-sharing service. In a flurry of panicked reactions, Didi promised better deals for passengers and soon a bombardment of discount information hit the users’ phones.

Which is why the No.1 standing should be seen more as a call for caution than as a source of complacency.

A US$50 billion unicorn? Come on.

The underlying logic with prevailing in a subsidizing war is that investors’ money has to be repaid, in this case by none other than the drivers and passengers who have to pay over the odds to help Didi stay in the capital game.

To fleece those at the bottom of the food chain seems to be the common tactic of Internet giants given to spending big in the early days of their business. We’ve seen this play out with Mobike, which was effectively bailed out with its buyout by Meituan; its arch rival, Ofo, even had to pawn its bikes to borrow 1.7 billion yuan (US$270 million) from e-commerce tycoon Jack Ma.

I fully understand the difficulty for regulatory oversight to catch up with the speed of innovation today. But one thing regulators and lawmakers surely can do is to pass laws that do have teeth, that slap a convincingly exorbitant fine on offenders who keep skirting rules. And more should be done to right the wrongs these innovations have caused to the market.

To begin with, many traditional taxi drivers are left worse off by the rampant practice of subsidizing fares.

Worse still, the ride-sharing service is a bane to senior citizens, who are left behind or even actively discriminated against by the advent of technology. Old people waiving in vain to stop a booked taxi are a common sight in some big cities. Apparently their interests are seldom the top priority of profit-driven players.

It really bothers me why a company that is little different from real estate brokers, mired in scandals, and occasionally accused of undermining the operation of a fair market, would have the nerve to brand itself as a champion of new mobility solutions? Will Didi please begin calibrating its bombast to the quality service it claims to swear by?

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