NEWSApr 27, 2018

Price War Broke Out Again in Online Car-Hailing Market

In recent years, the sharing economy has become prevalent. At the Boao Forum for Asia (BFA) in 2018 held from April 8 to April 11, the sharing economy has become one of the focuses of many entrepreneurs.

The online car-hailing market, as one of the areas of travel, is part of the sharing economy. It shows the characteristics of sharing and interconnection, developing rapidly with a huge market. According to relevant data, the number of users in China’s online car-hailing market is expected to reach 283 million people in 2018. Roland Berger, a well-known consulting company, also reported that the size of the Chinese online car-hailing market will reach ¥500 billion in 2020.

Although Didi Chuxing occupies more than half the market in online car-hailing, its challengers emerge in endlessly, and Didi's dominance may be difficult to maintain. In the past year or so, Meituan, Yidao, Ctrip, ShouQi, and Gaode have all launched various online car-hailing services, plus a variety of dazzling preferential subsidy policies, making the online car-hailing market into a barbaric growth in multi-competition situation.

Nearly half a month, Meituan and Didi have started a new round of “price war,” and various vicious subsidy methods such as ultra-low starting prices, 14-yuan coupons, and default discounts have swept the market. In fact, as early as the start-up period of the online car-hailing platforms, in order to attract customers and seize the market, many online car-hailing firms have triggered a “subsidy war” that has continued for a long time. Unlike the initial stage, this “price war” which has the price that is far lower than operating costs is raging in the air and seems to benefit consumers in the short term. However, many illegal passenger behaviors such as click farming and use of substandard vehicles behind the price war have seriously damaged the online car-hailing market order. With a series of measures intervened by the transportation authorities, the Public Security Bureau, the Price Bureau, and other related regulatory agencies, the wave seems to have a tendency to die down. On April 13, Didi and Meituan announced in succession that they had stopped giving subsidies to Nanjing users on the 12th and ensured that they would no longer operate below the cost; on the following day, Didi also announced that it would cancel the regular subsidies in Shanghai on the 14th and strengthen the clearance of internal non-compliant vehicles. The regulatory authorities issued policies and fined the irregularities, promoting the online car-hailing market to enter a diversified healthy competition track.

As the “price war” which last for a half-month has subsided, the online car-hailing market gradually bid farewell to the model of blindly relying on low prices to attract customers, and instead placed user experience and safety at the top of its competitive advantage. On April 16th, Didi announced the establishment of a one-stop automotive service platform that covers a number of automotive service and operation businesses, providing consumers with more convenient and efficient travel services. Some experts pointed out that the pursuit of service and safety in travel experience will be the first choice for more and more consumers. Didi has taken an important step in the transformation in online car-hailing market. The investment of more energy and resources in online car-hailing service and safety is a guideline for future competition in the market.

The recurrence of price war in online car-hailing market is actually not just a mere market competition, but also a competition in the entire travel field. Competitors in online car-hailing market are not limited to online car-hailing from different platforms, but also include taxis, public transportations, and even shared bicycles. In order to gain the right to dominant future travel field, the online car-hailing needs to go further step in terms of service and safety.

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