Kuaidi gears up for HK luxury car booking service

November 26, 2014 10:27
Kuaidi will enter the high-end car rental market in Hong Kong next year, says co-founder Joe Lee.

Hangzhou Kuaidi Technology Co., a taxi-booking service backed by Alibaba Group (BABA.US), plans to launch a luxury car service in Hong Kong next year after spreading its wings in the mainland.

"We are going to introduce Yi Hao Zhuan Che in Hong Kong," co-founder Joe Lee told EJ Insight, referring to the Chinese name of his firm's luxury car service mobile application.

The company sees an opportunity as people undertaking celebrations or attending special events prefer using high-end private cars instead of taxis, he said. 

He noted that as of now, even if people rent a car in Hong Kong, the leasing companies normally do not provide drivers. Kuaidi will solve that problem, Lee told EJ Insight in an interview.

Yi Hao Zhuan Che will offer luxury vehicles such as BMW 5-series and Audi AG's A6 along with chauffeurs. "It is quite successful in China and we plan to introduce it in Hong Kong," Lee said.

The service is being offered in 40 cities in China as of now, and Kuaidi plans to expand it to 100 cities in the first half of next year.

However, as the market structures in China and Hong Kong are different, the company might face some cost challenges in the city.

"Wage costs are high in Hong Kong. This is why most people don't employ drivers, unlike in China," Lee said. Gasoline costs here are also much higher than across the border.

Currently, orders booked through Yi Hao Zhuan Che make up only 10 percent of the company's total orders. The rest is accounted for by regular taxis.

Kuaidi's regular taxi-booking service now covers more than 350 cities in China, and was introduced in Hong Kong in the middle of 2014.

Fierce competition

The taxi-booking service in Hong Kong is facing fierce competition as many app operators are offering discounts and coupons to lure passengers and taxi drivers.

The law that prohibits discounting of taxi fares applies to taxi companies and their agents, but not to app providers. 

Thus, the app operators are making use of the grey area, claiming to be just information providers and not taxi companies or their agents. Meanwhile, they are giving cash incentives and shopping coupons to drivers as well as passengers.

Kuaidi launched a customer loyalty program which allows passengers to receive ParknShop and Wellcome store shopping vouchers after they accumulate certain points. Customers might also get free rides through lucky draws.

The company earlier offered HK$20 (US$2.6) cash-back to both passengers and taxi drivers per ride.

Other than discount offers, "we are going to introduce credit card payment service in the application by the first quarter next year to make the whole process cashless," Lee said.

It would work like Alipay in China, with the credit card info bundled with the application to make payment.

The next step would be with the Octopus card. Lee said his firm will wait until Octopus introduces e-wallet as it still needs a card reader to make payment.

Overseas expansion

Kuaidi saw 200 million downloads of its taxi-booking application in the mainland and Hong Kong, and claims 60 percent of market share in the two places.

"The Hong Kong taxi market has millions of orders each day. If we are entering another city, we would expect the city to have at least the same level of market size," Lee said.

Taiwan is a missing element in the Greater China push as of now, but Kuaidi expects to enter the Taipei market next year.

Greater China is not the only ambition for Kuaidi. After Taiwan, it plans to conquer the Southeast Asia market.

"Many people are afraid of taking taxis in Southeast Asian countries like Thailand, Vietnam, but with Kuaidi, all taxi drivers need to register; so passengers can trace the driver if anything happens," Lee said.

"We are preparing for the launch as we would need to hire locals to promote the application. We will also seek strategic and financial partners in the Southeast Asia region," he added.

Kuaidi earlier received US$100 million funding from Alibaba, New Horizon Capital -- which was founded by Winston Wen, the son of former Chinese premier Wen Jiabao -- and US-based Matrix Partners.

The company remains open for further financing opportunities, if the deals are worth at least US$100 million. As for a stock market float, it is eyeing a listing within three years.

-- Contact the reporter at [email protected]


Ayishah Ma is a financial reporter on Greater China issues.