China’s highly consolidated ride-hailing sector swerved into a fifth consecutive quarterly decline, as the total daily usage of Chinese ride-hailing services dropped 6.3% in the third quarter of 2019 from the same period last year, per a research note by investment bank Sanford C. Bernstein cited in a Bloomberg report.
Specifically, China’s ride-hailing monopoly Didi Chuxing, which accounted for a whopping 93% of the total daily active users in the past 12 months, sees a decrease of 5% for its app usage by passengers. The driver usage of the app also fell 23%, according to the note, citing data from Beijing-based app analytics firm TalkingData.
The decrease in online ride-hailing drivers will affect passengers’ wait time and their experience of the service, according to Bernstein analysts. A possible culprit for the declining driver usage could be that the ride-hailing platforms, including Didi, have been dialing back on subsidies. This leads to drivers receiving less payment after deducting the costs of fuel, maintenance, and vehicle depreciation.
Didi was reported to generate a deficit of up to RMB 10.9 billion (USD 1.6 billion) in the 2018 financial year. Of all its expenses, Didi spent a total of RMB 11.3 billion (USD 1.6 billion) on subsidies and incentives to attract qualified drivers.
The report also pointed out that the slowdown in China’s online ride-hailing apps usage may contribute to a reduction in total car sales. To counter the decrease, automakers have started offering their own ride-hailing services to help boost sales.
KrASIA previously reported a new ride-hailing brand dubbed T3 Chuxing, which is backed by three Chinese traditional automakers FAW Group, Dongfeng Motor Corporation, and Changan Automobile. T3 Chuxing’s app went online on July 17 and started to operate in Nanjing one day later on a trial basis.
T3 Chuxing is not the first ride-hailing platform backed by Chinese traditional automakers. Other competitors include Geely-backed Caocao Chuxing, SAIC Motor-backed Xiangdao Chuxing, and OnTime backed by Guangzhou Automobile Group. These platforms will offer ride-hailing services using a fleet of standardized new energy vehicles provided by their investors, which is different from Didi whose drivers will bring their own cars.