(Yicai Global) June 15 -- Major ride-hailing operators are the darlings of investors, yet an increasing number of their private drivers in China are walking away because of shrinking subsidies, public concerns about safety and harassment from taxi drivers, reports Beijing Business Today.
Subsidies have a great impact on driver incomes. Didi Chuxing, the dominant market player, has more than halved the bonus for completing 22 fares a week to CNY90 (USD13.65) from CNY200, while rival Uber Technologies Inc. has scaled back to CNY300 for 20 fares during peak hours from CNY7,000 for 85 fares.
"Subsidy cuts have directly resulted in the disappearance of monthly income of CNY20,000 in the private car market," the report cited Mr. Yang Yang, who drives his own car for Didi Chuxing, as saying. "Lately, the best 'harvest' a private car driver can get is CNY5,000 a month."
Another driver chauffeuring for Didi for more than a year said reductions in subsidies and rewards may force him to switch to another provider or quit altogether.
Didi's taxi-hailing app enjoys a near monopoly in China, while its car-hailing service has a more than 80 percent market share. "When you have an absolutely advantageous market position, subsidies are not of the greatest importance," Didi President Jean Liu has said.
Introduced to China just a few years ago, ride hailing has become very popular because of low prices and user friendliness. A fierce turf battle is being fought by a number of providers including Didi, Uber and Ucar Technology Inc. Uber CEO Travis Kalanick said in February that the San Francisco-based company is losing USD1 billion a year competing with Didi, which itself also lost an estimated USD1 billion last year.
In May, Apple Inc. invested USD1 billion in Didi, which also attracted USD600 million from China Life Insurance Co. this month. Saudi Arabia's Public Investment Fund injected USD3.5 billion in Uber last month. Didi's Ms. Liu said earlier this month that the Beijing-based company's latest round of fundraising has surpassed that of Uber's.
Ms. Liu Zhen, senior vice president of Uber's China strategy and cousin of Didi's Ms. Liu, said, "Uber has cut costs and reduced outlays on driver awards in China. At present, expenditure on each fare has fallen 80 percent from a year earlier. We are on the right road to achieve operating profitability."
Several recent incidents involving Didi cars have put the industry's safety record under the spotlight. In March, a passenger in Beijing was involved in an accident when taking an Uber car, and received no compensation. In May, a Didi passenger in Shenzhen was robbed and killed after she hailed a car, and a Didi driver attacked a man with a knife this month.
Disruptors Didi and Uber also face heated opposition from taxi firms and their drivers. In May, taxi drivers in Xi'an staged a massive strike. Protests have also been seen in other cities including Chengdu and Wuhan.
Chinese cities are likely to be allowed to ban ride-hailing services based on yet-to-be released regulations, possibly leading to a radical shakeout of the industry. According to information leaked last month, the new regulations will apply to traditional taxi and app-based ride-hailing businesses and will probably give the green light to cities independently deciding if they want to ban private car owners from taking part in such businesses. According to insiders, the document will not be released soon.