When Uber launched in Beijing, my first thought was that they were going to have a really hard time in China.
However, this was not because I expected there to be protests from taxi drivers like in London or threats of jail time from city governments like in San Francisco, but because there is already so much existing competition from mobile taxi booking apps in the country.While in Shanghai this past March, I was introduced to the latest of these apps, DiDi Dache, which is built in to the popular messaging service WeChat.
With DiDi Dache, you simply list where you are and where you want to go, leave a voice message for prospective drivers, and in my experience, within 5 minutes you have a taxi.
Even more impressive than the speed with which your taxi appears, is the speed with which the technology has spread throughout the country. Within just a few months of the app being launched, nearly every cab in Shanghai now has it set up in their vehicles and is using it as their primary means of finding customers, which has greatly reducing the amount of time they must drive around searching for riders.
Even my 70 year old great aunt was using it so frequently and naturally, it seemed as if she’d been using it for years.
DiDi Dache, promoted itself initially with massive rebates and incentives for both riders and drivers, some have reported that they were able to take rides for just 2 yuan, approximately 33 cents. This is possible due to the company’s revenue model, where revenue comes not from taxi fares themselves, but instead from “location-based advertising,” which uses geo-tagging to target riders with advertisements related to their location.
A unique feature of the app is that people seeking taxis are able to bid for rides if demand spikes and/or they want a faster response. A contributor to Tech in Asia recounts her experience using the app to hail a taxi during a rain storm, where she was able to get out of the storm more quickly by increasing her base rate bid. In contrast to Uber’s method of using an algorithm that recalculates prices for you based on increased demand, this enables individuals themselves to determine at what rate they value the service to be. Bringing individuals even closer to experiencing a free-market system.
While DiDi Dache is undoubtedly the market leader, with over a 100 million riders and 67,000 taxi drivers across the country, there is no shortage of competition. Another app, Yaoyao Dache, competes through ease of use, enabling users to call a cab simply by shaking their phone; while funding pours into addditional challengers, such as Kuaidi Dache and Dache Xiaomi, owned by Alibaba, Chinese e-commerce giant (think Amazon.com), and car rental firm Yonchi respectively.
Aware of the challenges it faces in China, Uber has taken a new angle on the market: where rather than competing in terms of price, the company is in fact focusing on serving the higher-end of the market. With a fleet of sleek, black Audi A6s, Uber in China offers rides for nearly double the price of regular taxis. It is clear that regardless of how strong one company’s marketshare is, or how saturated a market seems, there is always room for an innovative approach.
Sadly, the Chinese government, like governments elsewhere, is starting to introduce market restrictions into the taxi app industry. Recently, they have tried to pull together all third-party apps under a single government platform and have also banned the companies from charging fees on top of those of taxi’s metered fares. Though the latter has less to do with an attempt to block the new technology, and is more a related to its existing policies intended to standardise cab fares——a significant issue in developing countries.
Inevitably lagging behind the market, the state will find it very difficult to upset the market too much at this point. So many Chinese have already started using these apps that if the government were to ban them or restrict them too greatly, there would be great backlash. Thus, it seems unlikely that the government is even interested in shutting down the taxi app market; however, if anything, we may see the government trying to enter the market itself and regulating it just enough to give itself an advantage.
So next time you come to China, make sure to have a taste not only of the delicious food, but of a transportation market that is competitive, innovative, and priced in real-time. The low prices and speed of service will have you hungry for even more free-market services!