China Auto Rental (CAR Inc) has recently launched an online chauffeur service as one of its 2015 core initiatives, cutting into the market dominated by Didi Taxi, Kuaididache and Yongche.
How will CAR Inc’s entry affect the online chauffeur market?
1. The entry of more companies like CAR Inc into the market will build up momentum for change in relevant government policies. Didi Taxi and Kuaididache are now facing the opposition of municipal transportation committees and the taxi industry as well as pressure from public opinion for operating in the grey area of online platforms without leasing certifications. The entry of a bona fide car leasing company like CAR Inc could accelerate the development of online chauffer service.
2. Alternatively, it could redress the balance of power in the market cornered by Didi Taxi, Kuaididache and Yongche. Although the online chauffeur market is large, there definitely isn’t room for three players. CAR Inc has RMB4.1 billion (approx.: US$659 million) in cash reserves while Didi Taxi just raised US$700 million in late 2014. This could be the writing on the wall for Kuaididache and Yongche.
3. One industry observer commented that as CAR Inc’s nemesis eHi Car Services has invested US$25 million in Kuadidache, CAR Inc’s market entry might to strategically barricade its position vis-à-vis the competition, as much as to capture a business opportunity.
CAR Inc’s next moves
1. CAR Inc’s chauffeur service has already recruited almost 100 staff and formed a dedicated teams of drivers, operational and customer service staff who will be augmented by corporate marketing and technical divisions.
2. CAR Inc will launch its service in Beijing and Chengdu, but Shanghai and Hangzhou are unconfirmed as among the first cities, suffice to say the major cities Beijing, Shanghai, Shenzhen and Guangzhou will definitely be covered within six months of the launch.
3. CAR Inc will launch an independent app and will enjoy promotion and a synergistic relationship with Car Inc’s main app.
4. CAR Inc’s chauffeur service app will offer subsidies that match Didi Taxi’s. It will offer a free ride to first-time app users for fares below RMB50.
5. CAR Inc will directly recruit and manage its drivers instead of using the associated driver or third-party partnership models of Didi Taxi and Kuaididache.
6. CAR Inc has not officially stated the size of the capital investment in the project, but it is believed to be to the tune of hundreds of millions yuan.
However, for all the cash reserves that CAR Inc has, it falls short when compared to the Yongche, Kuadidache and Didi Taxi’s individual financial backing by the China tech trinity – Baidu, Ailbaba and Tencent (BAT) respectively.
Summary
While the online chauffeur market welcomes a formidable new player, stalwarts Didi Taxi, Kuaididache and Yongche are no pushovers. One thing can be certain of this skirmish – there will be no shortage of bonus deals for users for some time to come.(Translation by David)
