Tech in China: Boom of Taxi Apps in 2013

by -
16

rdn_52aa7e2128614

Technology developments have given rise to new solutions for urban transportation. Taxi apps gained popularity quickly in Chinese market this year, attracting sizable investments from leading venture capitalists and Internet companies.

The leading ones include Beijing-based Didi Dache, Hangzhou-based Kuaidi Dache, Beijing-based YaoyaoZhaoche, and Shanghai-based Dahuangfeng. DidiDache received $15 million of funding from Tencent at valuation of $60 million and reportedly to raise $100 million round from investors such as Citic and Tencent. Kuaidi Dache secured several millions of US dollars from e-commerce giant Alibaba.

In order to gain bigger market share, taxi app companies invested heavily to attract passengers and taxi drivers by distributing cash bonus, mobile data plan, mobile chargers, etc. As of September this year, Didi Dache, Kuaidi Dache and Dahuangfeng have invested tens of millions of yuan on aggregate and the annual investment is expected to reach hundreds of millions of yuan (via Sina).

For the sake of market share, none of the taxi apps is taking transaction-based commission or any other fees. Monthly net loss of Kuaidi Dache reached millions of yuan and they do not expect profits in future two years, according to COO of the company Zhao Dong (source in Chinese).

Before taxi apps begin another round of expansion, the government steps in to ban taxi-hailing apps, because the popular “bid-to-win” feature, which allows users to offer tips upfront to win a cab in peak hours, violates existing price regulations and causes market instability, according to governmental officials.

Beijing municipality banned the bidding feature and announced officially credited taxi appsShanghai transportation bureau also claimed that the bidding service is not allowed and encouraged citizens to use taxi apps offered by taxi companies. Shenzhen government tries to ban taxi apps altogether.

Under the huge capital and policy pressure, the number of taxi apps shank quickly and convergence began. At least forty taxi booking apps were shut down, according to Lv Chuanwei, CEO of KuaidiDache. Alibaba-backed KuaidiDache acquired Dahuangfeng, the fourth largest player of the industry.

In order to survive the fierce competition, existing taxi apps started to expand their businesses in a bid to gain larger user base. Didi Dache and Kuaidi Dache buddied up with OTA Ctrip to embed their services in the newly launched Ctrip mobile app. Didi Dache partnered up with AutoNavi Amap and both of the above-mentioned companies launched cooperation with Baidu Maps and travel search Qunar.

Car rental service is also booming in China, witnessing both capital injections and entrance of foreign companies. Yongche booked $60 million of financing let by Ctrip and DCM, while Ctrip led a $100 million funding round in eHai AutoServices for a 20% stake. Car Clubs, a Hangzhou-based car rental service, secured tens of millions of yuan in Series A financing from Incapital and Tobon VC.

Overseas car rental services also set eyes on Chinese market. U.S. car booking service Uber is expanding aggressively after landing in Shanghai this AugustPPzuche, a P2P car sharing platform which has already rolled out service in Singapore, hit Chinese market in October.