A White-Hot Battle

By+Zhou+Xiaoyan

Han Yonghui is a cabbie in Beijing. After a taxi fare increase in 2013， he makes roughly 5，000 yuan （$823） a month， just about enough to feed his family.

Recently， Han started using cab-hailing mobile software to pick up customers who order taxis via smartphone. Benefiting from an increasingly fierce competition of rewards between two of the most popular apps for this purpose， he can receive up to 2，250 yuan （$370） extra every month by using both of them to collect subsidies.

Two of Chinas biggest Internet companies—Tencent and Alibaba—are fighting a war within the lucrative mobile payment market by backing rival taxi-hailing apps—Didi Dache and Kuaidi Dache.

In the fourth quarter of 2013， Kuaidi Dache held 46.7 percent of Chinas taxi-booking app market and Didi Dache， 43.6 percent ， according to statistics from the Beijing-based research firm Analysys International.

In early January， the Tencent-backed app Didi Dache launched a campaign under which it will invest 200 million yuan （$33 million） to promote itself. Anyone who books a taxi through Didi Dache and pays the cab fare through the mobile payment platform of WeChat， a mobile messaging app developed by Tencent， will get 10 yuan （$1.6） off the fare. The driver also receives a 10 yuan subsidy for each ride.

Only a few days later， Kuaidi Dache， which has partnered with Alipay， Alibabas e-payment arm， announced a more generous offer： Users can get a rebate of 10 yuan for every taxi ride they pay for using Alipay Wallet， the mobile app of Alipay. Taxi drivers will get 15 yuan （$2.5） for each trip.

On February 10， Didi Dache reduced its subsidy to passengers from 10 yuan to 5 yuan （$0.8） per order. The sudden reduction of the subsidy has caused great client loss. As a result， the operator of Kuaidi Dache on February 17 resumed the 10-yuan subsidy for passengers. The same day， Kuaidi Dache increased its passenger subsidy to 11 yuan （$1.8）， citing its business slogan“forever 1 yuan （$0.16） more than the rival.”

As a response， Didi Dache adjusted its subsidy policy， giving passengers random subsidy amounts ranging from 12 to 20 yuan （$2 to 3.3） per order on the morning of February18. At 3：00 p.m. the same day， Kuaidi Dache increased its subsidy to 13 yuan （$2.1）.

“Personally I hope this war never ends. Its very good for taxi drivers and passengers，” Han told Beijing Review.endprint

Behind the war

So far， the fierce subsidy war in the taxi-booking app industry has depended on massive capital injection.

In April 2013， Didi Dache collected a$15-million investment from Tencent and in May， Kuaidi reportedly received several million dollars from Alibaba.

In January， the operator of Didi Dache received a new round of $100 million in funding. Of that sum， $30 million was from Tencent.

The wrestling match between Tencent and Alibaba seems to be never-ending. The two companies launched similar mobile chatting apps one after another and moved into the mobile gaming industry in quick succession. Right now， the cab-booking service represents a new battlefield in the fight between the two for Chinas emerging mobile payment market.

The mobile payment market is booming exponentially in China. The total transaction value of the market shot up to 1.3 trillion yuan（$214 billion） last year， up more than 800 percent from 2012， according to Analysys International. This is a cantmiss arena for both Alibaba and Tencent. Therefore， although the heavy investment in taxi-hailing apps may not generate returns in the foreseeable future， the two continue to do so because they are both aiming for a leading position in the market.

A hidden factor in the battle is the players ambition to establish their territory in mobile payments， said Lu Jingyu， an analyst at iResearch Consulting Group.

“It is about securing as many people as possible who use their mobile payment services，” said Lu， adding that mobile payments are a significant factor for any company wishing to rise to the top in the era of mobile Internet.

Alipay currently leads mobile payments with nearly 300 million registered real-name users， including 100 million who accessed services via mobile phones in 2013. Last year， those users made 2.78 billion transactions， with an aggregate turnover of 900 billion yuan （$148 billion）， according to data released by Alibaba.

Alipay accounted for a dominant 69.6-percent share in the third-party mobile payments while Tencent only accounted for 3.3 percent in 2013， according to Analysys International. However， experts believe Tencent still has a shot at catching up， thanks to its increasingly popular mobile chatting app WeChat.

“Tencent is right now making efforts to move into the mobile payment sector by integrating payment functions into the companys dominant WeChat app. So its hard to say if Alibaba enjoys an edge，” said Zhang Meng， a researcher with Analysys International. “Most of the people who use Alipay are those who want to make transactions and then pay their credit card bills. But as a social networking app with more than 400 million users， WeChats users are more likely to buy things such as cinema tickets that they would enjoy offline.”endprint

Zhang predicted that the duopoly in the taxi-booking app market may last for a long time given the deep pockets of the two companies.

Grabbing as much share as possible in the mobile payment market serves the even larger ambition of the two arch rivals—establishing an O2O （online to offline） sphere covering every aspect of peoples lives by offering location-based smartphone services. Tencent， Alibaba and search engine giant Baidu are all competing to establish dominance in the field， as a way to cash in on Chinas mobile Internet wave.

Tencent announced on February 19 that it will purchase a 20-percent stake in restaurant ratings and group-buying website Dianping for$400 million.

On February 10， Alibaba offered $1.1 billion to acquire navigation company AutoNavi Holdings Ltd.， following the previous deal with group-buying website Meituan.com.

Baidu has joined the war too， with its alliance with group-buying website Nuomi.com and online app store 91 Wireless.

Risk factor

As convenient as they may be， taxi-calling apps have also aroused mounting concerns over safety issues. In order to snap up taxi orders and claim as many subsidies as possible from both apps， cabbies usually install more than one app and constantly check them to grab more cab calls， even during driving. Some of them even have several smartphones in the taxi， each dedicated to one taxi-booking app. This has the potential to greatly distract drivers attention， thus posing a threat to driving safety.

An investigation conducted by The Beijing News shows over 60 percent of 50 surveyed passengers think it could be very dangerous if drivers snap up taxi orders while driving and 74 percent of them have seen that happen when they are in a moving taxi.

An editorial from China Business News claims it may also cause legal disputes.

“If an accident happens because the taxi driver is snapping up orders， should those apps be held legally responsible？” the editorial asked.

Also， while using those apps may be quite convenient for young people， it could be difficult for unprivileged groups， such as senior citizens， foreign travelers and migrant workers. As drivers prefer taking taxi orders from apps， they will inevitably overlook those people who have no choice but to hail taxis standing on the side of a street. This will dent the image of Chinas cities， said the editorial.

Some cities have taken measures to guard against those potential risks.endprint

For instance， the Beijing Municipal Commission of Transport said in February that each taxi is only allowed to be linked with one cab-hailing app. Cab drivers should prioritize driving safety before responding to smartphone messages. The commission said that it will team up with Beijings transport law enforcement corps to enforce the regulation.

The Shanghai Municipal Transport and Port Authority prohibits cab drivers from using taxi-hailing apps during morning and evening rush hours. The new regulation took effect on March 1.

The transport authority in Guangdong Province said that it would intervene with those taxi-hailing apps if they threaten driving safety or cause market disorder.

“Taxi-calling apps are a new thing. During its initial stage， we should observe carefully，” said Liu Xiaohua， Deputy Director of the Guangdong Transport Department. “However， whenever they cause driving dangers or market disorder， relevant government authorities are obliged to intervene.”endprint