Experts warn lower subsidies could hit business
Domestic car-hailing firm Didi Kuaidi said that the total number of registered drivers on its "Didi Zhuanche" platform continues to increase, despite media reports claiming that some drivers have left the platform after the company scaled down subsidies in August.
"Every day, there are more than 10,000 new registrations from drivers," a member of the PR department of Didi Kuaidi told the Global Times on Sunday, speaking on condition of anonymity.
He declined to specify the number of drivers who had left the platform but added that the firm regularly weeds out "unqualified" drivers.
The Zhuanche service allows private car owners to accept fares for driving passengers around.
Although the company expressed confidence in its business model, experts noted Sunday that the lower subsidies could cause Didi to lose both drivers and users.
The company was formed by the merger in February of domestic car-hailing service providers Didi Dache and Kuaidi Dache, which are backed by Chinese Internet giant Tencent Holdings and e-commerce titan Alibaba Group Holding, respectively.
Many drivers have chosen to leave the Didi Zhuanche platform, according to a report on news portal ittime.com.cn said on August 20.
After the subsidies were cut in early August, a Shanghai driver surnamed Chen told the Global Times on Sunday that his monthly income had fallen by 2,000 yuan ($313.8), even as he had to work harder than before.
Another driver who is registered on the Zhuanche platform but declined to be identified told the Global Times Saturday that the company now demands about 40 percent of the fares that drivers receive in return for platform membership, almost double the level at the beginning of the year.
"Many of our folks are shifting to the US-based car-hiring firm Uber, which charges less," the driver said.
Some users have also expressed concern about Didi Kuaidi's "dynamic pricing mechanism," which was also introduced in August, and charges users more at times when there are fewer vehicles available for hire.
The company said in August that the change was intended to better reflect the "dynamic supply-demand relationship."
Zhang Xu, an analyst at Beijing-based consultancy Analysys International, said it's certainly possible that some drivers and users will shift to Didi Kuaidi's competitors.
"But the company can always try to win them back by adjusting its subsidy policies accordingly," Zhang told the Global Times on Sunday.
"Didi Kuaidi believes its dominant market position means that it has a free hand to cut subsidies," Zhang said.
He also noted that "the pursuit of profit is only natural for companies and high subsidies won't last forever."
"Now that people have gotten in the habit of using the service, the subsidy strategy is giving way to other objectives at Didi Kuaidi," the PR employee at Didi Kuaidi told the Global Times on Sunday.
He added that the service's rapidly expanding user base "diluted" the subsidies that individual customers and drivers could get. But he also said that the subsidy policy was flexible. For example, newly included localities or those where competition was strong "will get steady support in subsidies."
As of the end of September, Didi Kuaidi had a dominant 80.2 percent share in China's car-hailing market, Beijing-based Internet intelligence agency Sootoo said in October.
Uber had 9.1 percent and the Chinese car-hailing company UCAR Technology Inc had 2.3 percent.
Even though the battle for user base would appear to be over, it continues.
Wang Qing, a Beijing resident, said he had also noticed that Uber had scaled back its subsidies.
"Now I'm generally using it less, although I did use it more often recently because of more targeted promotions, like those on weekends," Wang said.
"But when Didi copied that strategy, Uber answered by further increasing subsidies," Wang noted.
The Ministry of Transport began soliciting public opinions on the issue on October 10 after a draft rule was released to tighten control over domestic car-hailing services, effectively banning private cars from doing business via online car-hailing apps.
Gu Dasong, a lawyer with Southeast University in Nanjing in East China's Jiangsu Province, told the Global Times on Sunday that "It is better to let localities regulate car-hailing apps according to their own discretion, as urban traffic flows have strong local features."
