Car-booking apps start moving up the ladder

Internet giants add spice to nation's growing luxury pickup services market with products to attract more wealthy customers

The battle of the taxi hailing apps seems to have slowed, with market leaders Kuaidi Dache and Didi Dache calling an end in early August to their months-long marketing campaigns, during which both poured hundreds of millions of yuan into subsidies and cash rebates for taxi drivers and passengers.

But a new competition targeting wealthy travelers is now picking up speed, as Kuaidi, which is backed by e-commerce giant Alibaba Group Holding Ltd, launched a new car-booking brand called Kuaidi One that offers pickup services with luxury cars and chauffeur services.

Didi, which is supported by Alibaba's rival Tencent Holdings Ltd, is reportedly set to launch a similar service in late August. It is said to be holding training sessions for drivers so they can offer better services to high-end customers. The company, however, denied such reports when reached by China Daily.

Along with the two major players in ride-summoning apps, Beijing-based Baidu Inc teamed up earlier this month with car rental company Yongche to launch a car-booking service called Baidu Zhuanche, a high-end pickup service for business travelers.

With Baidu jumping in, the sector is now a battlefield for all three of China's Internet giants.

Rather than sending regular taxis to pick customers up, these apps offer a wide array of luxury automobiles to choose from, well-trained drivers and such in-car facilities as bottled water, umbrellas, WiFi and even slippers.

Neither Baidu nor Yongche would reveal financial details of their partnership, but Yongche said in a statement on Aug 4 that by teaming up with Baidu, it will give its mobile users access to Baidu's mapping app.

Yongche, founded in 2010, is the largest Internet-basedcar-sharing service company in China, involving more than 50,000 vehicles in 74 cities.

Its team-up with Baidu is expected to challenge not only Kuaidi and Didi but also its Western counterpart Uber, a US ride-summoning mobile app that entered Chinese market in February.

Statistics from Analysys International, a Beijing-based Internet consultancy, showed that the online car rental market in China climbed 22.5 percent quarter-on-quarter to 3.98 billion yuan ($484 million) in the quarter ending in June.

Booking luxury cars with chauffeurs through an app is a niche market still in its infancy in China, but it shows great potential for future growth, said Li Zumin, manager of Kuaidi One.

"The difference between traveling in a taxi and a high-end car with a chauffeur is like the difference between staying in a regular inn and a five-star hotel. Even though the luxury hotel is more expensive, there are still people who want to pay more to enjoy better services, environment and facilities," said Li.

Li said through cooperating with carrental companies, Kuaidi One manages a fleet of more than 1 million cars across China, ranging from Volkswagen, Mercedes-Benz and Bentley.

The trial operation of Kuaidi One over the past several months has received positive feedback from the market, with monthly revenue exceeding 10 million yuan, according to the company.

Zhu Zhengyu, an analyst with Analysys International, said the market for high-end car-bookings is not as big as the taxi-hailing one, but the profit margin is higher.

In big cities such as Beijing, it is difficult to own a car because of restrictions on issuing new license plates, he said.

Moreover, with the government's ongoing campaign to cut down on the official cars, these high-end service providers are expected to see an increasing number of orders from corporate clients, Zhu said.

The latest policy guidelines mean that most government cars－about 90 percent of the total number－will be auctioned off, and only those for minister-level officials and for public security purposes, such as police cars, will be kept.

Officials will be getting monthly commuting allowances ranging from 500 yuan to 1,300 yuan.

Wang Xiaofeng, an analyst at Forrester Research, said it makes sense for both Alibaba-backed Kuaidi and Tencent-backed Didi to enter the high-end car-hailing market as the two companies have invested heavily to build up their brands.

Statistics from Analysys International show that by the end of June, the number of accounts registered with taxi-hailing apps totaled 130 million, with Kuaidi accounting for 53.57 percent and Didi for 45.56 percent.

Wang said that ride-summoning apps are a strategic sector for Baidu, Alibaba and Tencent to carry out their location-based services.

"The apps help gather a lot of data about the consumption habits of users, such as where they usually go on a Thursday night. The information can be useful for these Internet giants to offer other services, such as coupons or cinema tickets," she said, adding the data concerning high-end well-spending users can be even more valuable.

Baidu's partner Yongche has offered subsidies to drivers since early August to encourage them to join its service team. The daily subsidy for each driver is 80 yuan. Yongche claims it is just a temporary move, but analysts said it signals the company's intention to attract more drivers before Tencent-backed Didi rolls out its competing service later this month.

Compared with price-sensitive taxi-hailing app users, Zhu from Analysys International said high-end business users focus more on service. "Whoever provides the best services wins the competition," he said.

Light-asset companies, such as Yongche and Kuaidi One, do not own a single car. Instead, they sign contracts with carrental companies and function more as information-sharing platforms.

"It would be challenging for light-asset companies to compete with companies that own cars and drivers. After all, the quality of their service depends on their supplier, not themselves," Zhu said.