China Taxi Apps Call off the Subsidy Program, Orders Drop Drastically

China’s most popular taxi calling apps Didi and Kuaidi have announced officially on May 16th and 17th respectively, that they will stop the payment subsidies program for passengers. However, they will keep subsidizing taxi drivers.

This signals the first break between the two top taxi apps on their ongoing multi-billion cash burning battle to attract popularity since December last year. The subsidy offered by Didi and Kuaidi have once gone as high as RMB 20 yuan (US$3.20) per order. Since late March this year, the two companies have both tuned down the amount of subsidies and it now stands around RMB3- 5 yuan (US$0.5 – 0.8) per ride, and it is for taxi drivers only. 

Both Kuaidi and Didi indicated that there will be a change of incentive system for using their apps: a switch to a more service orientated program rather than cash back reward only. It is clear that this is far from the end of the battle but a start of a new one. If the reason to use the taxi apps was for monetary incentive, now with the subsidy being withdrawn, people will expect a well rounded and better customer service. As industry insiders believe, the loss of subsidies should not bother those who frequently use mobile applications to order taxis, as the emergence of taxi calling apps is not only meant for cutting down the cost, but also to create a convenient taxi usage system with a better turnover.

Since the withdrawing, The taxi calling app market has witnessed a sharp drop on daily order volume. Cheng Wei, the CEO of Didi, told media recently that the current volume is around 3 million orders daily, a significant decline from its peak of 5.3 million rides a day. However, he is confident in keeping a large portion of the users. “Despite of the decline of taxi booking, which we have already anticipated upon the cancellation of the subsidy plan, we noticed a trend of mobile payment for cab fare. Right now about 75% of the orders are paid via WeChat, previously it was 85% the most.” (report in Chinese)

Kuaidi, financially backed by internet giant Alibaba, is based in Hangzhou and serves some 300 Chinese cities. Didi, financially backed by Tencent and locates in Beijing, is only available in fewer than 180 cities. Together, Didi and Kuaidi control more than 97 percent of China’s taxi-booking market, according to 199IT.com, an Internet statistics database.

image credit: xinmin.cn