Didi Taxi and Kuadidache’s No 1 Chauffeur announced it is releasing one billion chauffeur service vouchers. Thier attempt to buy market dominance in the segment with handouts is reminiscent of takeover in the taxi app segment earlier.
Before their epic merger this year, Didi Taxi and Kuaididache blew a combined RMB2.4 billion in subsidies last year in an attempt to wrest customers from each other.
However, the lucrative chauffeur segment has plenty of strong competitors like CAR Inc, Yongche, eHi and AA Car Rental. Meanwhile car sharing model startups like PPzhuche, UUzuche and Baojia will bring additional competition and disruption to the market.
CAR Inc announced it was launching a “UCAR” chauffeur service in 60 cities nation-wide on January 28, and offered free rides for first-time users during its initial year of operations.
On March 2, UCAR announced it would have a cash coupon campaign for the next three months, making its service cheaper than other car hire services including the heavily subsidized Didi Taxi and Kuaididache services.
CAR Inc Chairman and CEO Zhengyao Lu said: “We will invest at least RMB2.5 billion to attract new customers at the beginning and we have unlimited cash reserves to continue.”
Mr. Lu predicts CAR Inc will dominate the segment in three to six months.
Giveaways a business trend in the segment
Since it went online on January 28, UCAR has made its presence felt by opening up a price war and attracting users.
As a veteran car rental, CAR Inc is coming into the segment with a full war chest. It raised RMB3.19 billion with an IPO and over-allotment sale in September 2014 and amassed RMB6.96 billion in capital reserves over the last five months.
“The last thing we’re worried about is a price war because we are the most efficient when it comes to giving away subsidies,” Mr. Lu said confidently.
With its large car pool, CAR Inc also has better supply capability and a decided advantage in vehicle availability.
“Our chauffeur service team is formed of members from our long-term and short-term leisure car rentals teams and so we leverage synergy between existing departments to improve efficiency. The chauffeur service’s gross margin is as high as our original car rental service,” Mr. Lu said.
An observer said: “Even if a platform has 10,000 listed vehicles, if the majority of drivers work only part-time, there are at the most 1,000 available cars at peak hours. So although CAR Inc only has a fleet of 6,000 cars, all of them have drivers available to take fares.”
A chauffeur named Chen said: “UCAR employs under a responsible system so all drivers earn a fixed salary. There are also no penalties for refusing fares.”
CAR Inc’s stock price at record high
Things have also been going smoothly for CAR Inc in the stock market. Its stocks were at an all-time high of RMB13.80 per share at the end of trading on March 27. The company’s market value is HK$32 billion.
CAR Inc’s 2014 annual revenue rose 30% y-o-y to RMB3.52 billion with short rentals rising 34% y-o-y to contribute RMB2.3 billion of total revenue. Its net profit also rose 20% y-o-y to RMB562 million after tax, according to its first annual fiscal report since its IPO.(Translation by David)
