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Taxi app wars provide windfall for Dalian passengers and drivers

With Tencent and Alibaba, two of the mainland's digital giants, locked in a battle for taxi app supremacy, passengers and operators have benefitted from generous rebates and rewards, but what happens when the incentives run dry?

Photo: App-ed response: a Dalian driver heads for a passenger pick-up.
App-ed response: a Dalian driver heads for a passenger pick-up.

Two dedicated taxi-booking apps have transformed the experience of would-be passengers in Dalian, a coastal city in the northeast Liaoning province. The two apps – Didi Dache ("Didi Taxis") and Kuaidi Dache ("Fast Taxis") – both came online before Spring Festival this year, with both said to have been warmly received by taxi drivers and their prospective fares.

Overall, Dalian has fewer taxis than most cities of a comparable size, ensuring that demand constantly outstrips supply. This is a particular problem in the colder months and at peak times. Such has been the shortfall in the service that taxi sharing is now a common practice in the city. The problem is exacerbated during public holidays, with many taxi drivers away on vacation, despite the sharp increase in demand.

As well as the clear convenience of the service for many Dalian residents, the arrival of the two apps has also sparked off increased competition between the two companies behind the new services. Didi Dache is backed by Tencent (and paid for via WeChat), while Kuaidi Dache comes courtesy of Alibaba (with payment via Alipay). This has seen LBS (location-based services) and O2O (online-to-offline) become the new battlegrounds for the two digital giants.

Reportedly, Tencent is investing Rmb100 million in backing the application across the mainland in a bid to establish itself as the market leader. Alibaba's investment of Rmb500 million has come as a direct challenge to Tencent's plans, though both passengers and taxi operators stand to benefit from the keen competition between the two.

Both of the taxi apps offer incentives to drivers and passengers. In Dalian, Didi Dache – the first to enter the local market – offered both parties a cash reward of Rmb10 each if the fare was paid via WeChat. Taxi drivers were entitled to claims this reward five times day, while passengers could receive the rebate up to three times in any 24-hour period.

Following its own launch, Kuaidi Dache upped the stakes by offering drivers a cash reward of Rmb15 on up to five trips a day, as long as they paid by Alipay. As with Didi Dache, passengers could claim back Rmb10 per trip, but only on two trips a day.

Regardless of the app that customers and operators opted for, the opening salvoes of the rivalry between Tencent and Alibaba offered considerable savings for passengers, as well as a mini-windfall for drivers. On a fare of Rmb18, for instance, any group of passengers using one of the apps would only have to pay Rmb8, with the shortfall being made up by the app companies.

During the Spring Festival period, when taxi usage is traditionally high, people on average might use one of the apps more than three times a day. For groups travelling together – allowing for multiple individuals using the same app – the savings would be quite substantial, with the three trip limit being easily avoided. According to some sources, those taxi drivers who had chosen to install both apps earned an additional Rmb100-200 more a day.

Photo: App-vertisment: in-car promotion.
App-vertisment: in-car promotion.

The taxi apps have clearly proved a huge success with drivers and passengers in Dalian. Their cost-saving/cash reward incentives have led to a huge uptake in the service, with many also enjoying the freedom from having to find the small change needed to pay taxi fares in a traditional manner.

This early success, however, does prompt two questions – how long will the two operators sustain these generous incentives and, once these incentives are trimmed to more commercially viable levels, how popular will the services be?

Shirley Li, Dalian Office

Content provided by Picture: HKTDC Research
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