Quality of drivers, services will be key in surviving competition, analysts say
Ride-hailing services provider Didi Kuaidi announced on Monday that it would offer designated driver services in 55 more cities in the Chinese mainland, a move that signals further expansion of its service portfolio, analysts said.
Didi Kuaidi, backed by domestic Internet giants Alibaba Group Holding and Tencent Holdings, launched designated driver services on July 28. These services are usually aimed at people who want to avoid driving their own cars after a night out drinking.
After the expansion on Monday, the services will be available in 80 cities nationwide with more than 1 million registered drivers, the company said in a statement sent to the Global Times on Monday.
The company, formed in February with the merger of China's two biggest taxi-hailing apps Didi Dache and Kuaidi Dache, said that it aims to expand its designated driver services to 100 cities nationwide before the end of this year.
"The company aims to build itself into a comprehensive neighborhood solutions provider, and launching designated driver services is a key step toward that target," Zhang Xu, an analyst at Beijing-based consultancy Analysys International, told the Global Times on Monday.
Apps like Edaijia and Aidaijia, which specialize in offering online designated driver services, have been focusing on the sector for more than three years. Internet giant Baidu Inc also offers such services.
With all these existing players, Didi Kuaidi will face fierce competition in the market, analysts said.
Compared with its rivals, support from Alibaba and Tencent will be the major advantage for Didi Kuaidi, as competing in the sector demands huge input, Zhang noted.
Didi Kuaidi has already launched a promotional campaign to gain users. In the next two weeks, the company will waive the charge for designated driver services valued at less than 100 yuan ($15.64), and each user can enjoy these services for free twice a week, according to the statement.
Didi Kuaidi has ample cash for promotions and subsidies. The company secured $2 billion in July from major shareholders such as Alibaba, Tencent and Singapore-based Temasek.
Edaijia is already feeling the heat from Didi Kuaidi, and it is offering promotions of its own. For example, on every Wednesday in August, users in 25 cities don't need to pay for designated driver services under 200 yuan. Media reports said that the company had allocated 100 million yuan to support that promotion.
Edaijia is backed by online life information provider 58.com.
Zhang Yi, CEO of Shenzhen-based Internet research firm iiMedia Research, said that perks such as free services or subsidies can help these companies gain a large user base in a short time but in the long run, the quality of the drivers and the services that are offered matter more.
Besides taxi-hailing and online designated driver services, Didi Kuaidi also offers ride-hailing services called "Didi Express" and "Didi Zhuanche", which allow private car owners to accept fares for driving passengers around. However, the authorities have said that recruiting private car owners to offer transport services violates current regulations.
The authorities have asked Didi Kuaidi and other three ride-hailing apps including U.S.-based Uber to correct such irregularities and the four have agreed to cooperate, zgjtb.com, a news portal under the Ministry of Transport, reported on Monday.
"Online designated driver services face no such policy risks, as the country encourages such services in order to reduce the incidence of driving under the influence," Zhang from iiMedia Research told the Global Times on Monday, noting that the sector has great growth prospects.
Older people or those who want drivers for short business trips could also be target customers for online designated driver services, analysts said.