12 December 2018

A pleasure ride for less than a yuan

A taxi ride for less than one yuan (16 US cents)?

Yes, it’s even cheaper than taking a bus or metro, and that’s because of the generous subsidies provided by cashed-up technology behemoths for the two biggest taxi-hailing apps in mainland China.

This was what Hong Kong Economic Journal reporter Wang Xiaoqing found out for himself when he took a taxi ride using both Tencent’s (00700.HK) Didi Dache and Alibaba’s Kuaidi Dache.

After Wang sent a message to the two platforms, the operator called back in about three minutes to confirm the particulars of his location and destination, and tell him the approximate time he would be picked up.

Most taxi drivers have joined both platforms, and they pick up the location through GPS.

From Wang’s point of view, Didi Dache is more convenient in terms of payment method. Didi Dache has linked up with many banks and credit card firms so it can accept almost all kinds of cards for payment, while Kuaidi Dache only accepts Alipay.

When Wang arrived at his destination, the cabbie told him to pay up 70 fen, that is, after deducting Tencent’s hefty subsidy.

Both Tencent and Alibaba have been burning cash to win customers. They have already raised the subsidy to as much as 12 yuan per trip. In January, Tencent said it has set aside 1 billion yuan for the purpose.

Analysts have predicted that once the subsidies end, users may abandon the apps. But Wang thinks demand will not wane because of the intrinsic value provided by the apps, which is to match vacant taxis and waiting customers in a location-based, cost-efficient way.

Sure, some will probably stop using the apps when the promotion ends, but many users will continue to use the technology for the convenience it provides.

In the internet business, there is not much room for number two. So the taxi apps subsidy war will probably continue to rage until the tie is broken.

Wang’s personal experience with taxi apps is excellent, but shareholders may still have their doubts.

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EJ Insight writer

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