Kuaidi Founder: Three Forces in China’s Taxi App market

Taxi apps allow people to order cabs over the Internet and are part of a broader group of location-based services (LBS) that take advantage of global positioning technology. These taxi apps are particularly well suited to big Chinese cities like Beijing and Shanghai, where it’s often difficult to find a cab — especially during peak hours and bad weather.

Even Uber is getting set to move into China in a big way.

Reuters jounalist Mr. Doug Young wrote,

But like many emerging sectors in China, taxi apps have suddenly drawn a huge amount of “me-too” operators who have set up a wide range of companies. The result has been an unruly marketplace, where larger companies like Didi and Kuaidi compete with smaller players for a relatively small customer base.

Kuaidi, which is run by Kuaizhi Technology and based in Hangzhou, reportedly receiving a recent investment from e-commerce giant Alibaba (also based in Hangzhou) counts Shanghai as one of its largest markets. Founder of Kuaidi, Mr. Chen Weixing(陈伟星), wrote an analyse about the three forces in China’s Taxi app market:

The first force is all kinds of speculators who have relationships with relevant governmental departments. They are used to marketing governmental projects with network, receiving governmental contracts, meanwhile, gaining old information from the press to learn the popular business and join hands with the authorities to step in, or even lobbying their official buddies for financial support, certificate admittance, policy monopoly, entrapment enforcement and soft threat in order to win advantageous resources. We have come across such rivals in Hangzhou while Didi Dache has run into the entrapment enforcement in Shenzhen. There were higher-blooded organizations behind. Unfortunately they are just local snakes, only gaining an edge in a specific region, and without a scale they cannot reach the profit-making phase.

Major taxi companies are the second force. Stemming from strategic consideration, tax companies will worry about that the future cab hailing app, as the source of passengers, would impose a significant effect on its mechanism, thus making the cab booking app a strategic project of every big cab company’s information center. For the companies, caring whether the drivers can work happily or not is of same importance as doing the app, yet it’s hard to find Internet genes in traditional companies. Also, it’s unable to bring about a scale effect due to horizontal competition. Eventually, the cab-booking app is found to be a kind of staff welfare, and cooperating with an app developer makes it a free outsourcing. Therefore, the applications conducted by individual taxi companies may exist for a long while, but the mainstream in the future would be nationwide cooperation.

Taxi app developers with the background of Internet industry constitute the third force. It is common knowledge that the current cab-booking apps are generated by large sums, heavily relying on VCs’ bets on future. Such companies, undoubtedly, are able to provide the best service and products, yet anyone could die of running out grain facing the high cost. Kuaidi Dache seeks refuge with Alibaba and Didi Dache falls back on Tencent. The Internet giants are taking the cab-hailing app development as a game. I can hardly believe there will be more VCs to splash the cash in other like products, and within this year we’ll see either transformation or death. When I firstly talked with Ma Yun about this project, I asked:” it seems to be burning money at the moment but in or not?” Ma Yun said only one word, “in!” If it’s just a matter of losing money without going anywhere, of course, we may not hang on for long.

The taxi-booking apps that basked in media attention, of either independent companies or major corporations’ attached departments, is under the Damocles of “money shortage”, while the government control has become the bait and the flame to burn that string hanging the Damocles for speculators. It will be one year before we know whether or not this will have tragic repercussions.

(Source: huxiu.com)