By LI Biao, WU Yangyu
Last year was supposed to be an uneventful one for China’s ride-hailing industry. The market was dominated by Didi, which was about to stage one of the biggest ever IPOs by a Chinese company. The underdogs would scrap over leftovers. But just two days after its US$4.4-billion floatation, Didi was accused of data security violations and removed from app stores.
This was beyond the wildest dreams of Didi’s much smaller rivals. T3 said it was “entering war mode” and, three months later, closed a 7.7-billion-yuan funding round. Caocao Chuxing raised 2.8 billion yuan to “enhance its competitiveness and expand market share.” Food delivery giant Meituan revitalized its forgotten ride-hailing app and created a new business unit. In December, Hellobike, raised US$280 million to get people off bikes and into cabs.
Long-suffering drivers suffer on
Passengers were showered with coupons, flash sales, no-haggle prices and referral bonuses. Meituan offered discounts for long waits. It even called and texted old users to remind them that the app was back and there were free rides waiting for them.
Drivers are just as important as passengers. The more cars available, the shorter the wait, meaning happier hailers. Platforms came up with all kinds of incentives, including signup bonuses and commission waivers, to attract new drivers and encourage existing ones to work harder. The most common method, however, is to promise rewards – often in the form of driver scores – for finishing a certain number of trips in a given period of time. Higher scores mean better, quicker dispatches.
But drivers are not impressed. Zeng, who signed up for Gaode last year, said he worked until midnight one day but was still 5 trips short of his reward, which required 35 trips in a 24-hour period. “You can’t do it unless you start at 7 in the morning and finish at midnight. That’s 19 hours a day. How’s that even possible?” he said.
“It’s not worth it,” said Gou, another Gaode driver. Recently, he saw a reward that required eight trips in three hours. He could have done eight short trips to claim it but decided not to because long trips are less tiring and more profitable, even without the potential reward. He signed up on Gaode because his score on Didi was not high enough to unlock many benefits but still chooses to focus on Didi during rush hours.
It’s common for drivers to switch between apps. “There’s no loyalty to speak of. It all depends on where I can make the most money,” another driver said.
The reality is drivers don’t make much. No-haggle prices and flash sales are hugely unprofitable for them. Third-party apps that direct users to ride-hailing platforms also take their cuts. In the end, many drivers realize that Didi is still the best deal. Not to mention that ditching Didi means giving up the reviews and scores that took months or years to accumulate.
“We don’t want to part with our Didi credentials. Plus, it’s not necessarily better to switch,” said Fang, who signed up for AutoNavi last year but switched back to Didi. Once he got only 12 yuan for a 26-yuan trip. Overall, he made 20 cents less per kilometer on Gaode, which means 60 yuan less a day and 1800 yuan less a month.
Faith in the power of Didi
Nevertheless, the upstarts made progress while Didi lost ground. The number of daily trips on Didi dropped 20 percent in Q1, the missing 5 million rides more or less evenly divvied up among Caocao Chuxing, Meituan and T3. By October 2021, Meituan was averaging 1 million trips a day. The number of daily trips ranges from 1 million to 3 million on Caocao Chuxing and T3.
But the predicted paradigm shift never happened. Didi still dominates, and the underdogs are still underdogs. “You can be on Caocao Chuxing, or whatever other apps, but you may see no drivers, no passengers, all quiet,” said a manager at a taxi company that partners with Caocao Chuxing. “Many drivers don’t really know how much they make on each app, but they just believe Didi is the best and stick with it.”
Regulations also put a check on expansion. Last September, the transportation authority summoned 11 ride-hailing companies and asked them to stop “competing viciously” and self-regulate. It is now the platforms’ duty to make sure that drivers have the required licenses (which Didi has traditionally done a bad job at). And they were warned not to lure drivers up through false advertising and misleading deals.
More than mere numbers
Some players are already shifting their focus beyond market share. GoGoX, which recently went public in Hong Kong, has refrained from blasting ads and handing out coupons. When asked why, CEO HE Song said that it valued experience and efficiency more than size.
Many people who work in the industry have expressed doubt that ads and deals will bring about any real growth. The market was mature before Didi’s removal. The 25 million daily trips, once dominated by Didi, are now split 80-20 between Didi and everyone else. Another growth spurt is unlikely any time soon.
