Ahead of November’s Code Conference/Asia in Hong Kong, Walt Mossberg and Re/code staffers including senior writer Dawn Chmielewski checked out the scene in Beijing, Shenzhen and Hong Kong. Here are a few stories we collected along the way. Expect more from us across Asia leading up to our conference.
Hitching a Ride With China’s Premier Taxi-Hailing Company (Hint: It’s Not Uber)
Didi Dache and rival Kuaidi Dache are merging to command an estimated 99 percent of the transportation app market in China.
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On the drive from China’s National Stadium to the bustling midtown district of Wangfujing, our cab driver chatted amiably about how mobile taxi-hailing apps are altering the transportation landscape in Beijing.
As we rolled past 700-year-old landmarks, such as the Confucius Temple, Ma Jiansheng talked about how modern smartphone technology — in the form of mobile taxi-hailing app Didi Dache — has changed his job. It has meant less time idle, waiting for a fare. But not always more money.
“Previously, I had to drive around looking for passengers, scanning the streets,” Ma said. “Now, with Didi Taxi, I at least know where the passengers are, or know roughly where they are. I can avoid a lot of unnecessary driving.”
For the last three years, Didi Dache (Honk Honk Catch a Taxi) and rival Kuaidi Dache (Speedy Taxi) were locked in a money-losing battle to dominate China’s cab-hailing business, in a rivalry that mirrors the contest among app-based ride-sharing services in the U.S., led by Uber and Lyft. Both of the Chinese companies heavily subsidized rides in a bid to grab market share. The services were backed by two of the most powerful players in the Internet sector, Tencent Holdings and e-commerce company Alibaba.
Each saw opportunity in solving the same problem. It’s tough to catch a cab in many of China’s big cities, particularly during rush hour. In Beijing, just 67,000 taxis serve a population of 20 million — creating an acute shortage of rides and setting the stage for unlicensed drivers, operating unsafe cars, to extract usurious fares.
“A great many passengers would take an unlicensed car, but with a painful experience,” said Didi Chief Technical Officer Zhang Bo in an onstage interview with Re/code. “When people are running late for work but couldn’t find a cab, they would probably take an unlicensed car. They could negotiate with the driver, bring down the price, but generally it costs more than the street cab.”
The race for market dominance benefitted drivers like Ma, as the competing services paid drivers “cash rewards” for using one service over the other.
Those payments have grown more modest, Ma said, since the rivals announced plans in February to combine to create a juggernaut in the transportation app business: Didi-Kuaidi.
Together, they would command an estimated 99 percent of the transportation app market, according to a recent study by Analysis International. There’s still room for growth, as mobile taxi-hailing apps account for just 15 percent of the taxi business — which includes rides summoned the old-fashioned way, curbside. And recently, a group of U.S. hedge funds invested in the combined business, giving it an $8.75 billion valuation, according to the Wall Street Journal.
The merger of Didi and Kuaidi may mean executives can shift resources from “killing each other” to improving the overall quality of taxi services in China, Zhang said.
Didi uses a virtual currency system called “Dimi” to incentivize drivers to deliver better service to passengers. The system awards drivers points for accepting lower-fare local rides. The driver with the most points receives priority for more lucrative fares, such as a trip to the airport.
The combined company also could explore new services, such as airport-to-city shuttles and cargo services.
Meanwhile, the dominant U.S. player in mobile car-hailing services, Uber, is barely a blip on commuters’ radar in the world’s most populous country. A year after its launch in China, Internet search giant Baidu has taken a stake in Uber, giving the San Francisco company a domestic partner and advocate.
An Uber driver who gave his name as Mr. Fan said the upstart competitor is cutting fares to attract business — though, for the moment, it is perceived as a service favored primarily by ex-patriots and foreign travelers.
At least one foreign visitor, though, found that requests for an Uber car sometimes get lost in translation (as when the English-speaking passenger attempted to communicate a pickup location with the Mandarin-speaking driver).
This article originally appeared on Recode.net.
