Didi’s disruption of ride-sharing: an ill-timed gamble

Following the express service, Didi recently launched the "Didi Hitch" based on "shared travel". The so-called hitch is carpooling, that is, this service matches the routes of car owners and passengers through the Didi platform, so that they can travel together. It is understood that within this month, 26 cities across the country will be able to realize carpooling through the "Hitch" embedded in the Didi Taxi APP. But another news that followed was that Didi was interviewed by the Beijing Municipal Transportation Commission on the day the new service was launched. The reason for the interview was the same reason that was repeated over and over again: Didi Express's business was suspected of illegal operation and impacted the taxi market.

At present, when private cars violated the law and Uber was investigated, Didi launched the carpooling business, hoping to further expand the coverage of its platform and target customer base. But is Didi launching the carpooling business at the right time?

Taking too big a step, carpooling may further intensify the conflict between the taxi industry and its own platforms

At the beginning of Didi's development, the taxi-hailing business it launched could be said to have a win-win coexistence relationship with taxi drivers. However, as Didi quickly entered into the fields of private cars, express cars, and carpooling, this win-win relationship was gradually broken and it came into direct competition with taxi drivers. In addition, the money-burning subsidy war between Didi and Uber directly led to the gradual intensification of conflicts between taxi drivers and taxi APP platforms as well as private car owners who joined Didi.

We have seen that the emergence of a large number of illegal vehicles has led to a wave of taxi drivers' joint boycotts. For example, not long ago, 37 taxi companies in Jinan demanded that taxis uninstall taxi-hailing apps. Large-scale taxi strikes have occurred in many cities across the country, including Shenyang, Nanjing, Nanchang, and Hangzhou, and even violent clashes have occurred. From Jinan's "first private car case" to Guangzhou and Chengdu's investigations into Uber, Didi has also been interviewed by the government many times.

Although the investigation of private cars and the strike of drivers are still fermenting, Didi is well aware that its business has the broadest support from public opinion and users. In Didi's view, it is gradually promoting the reform of the car rental industry under the premise of legality and compliance with a "bloodless revolution", hoping to break through the old production relations, including the taxi operating license system and administrative licensing system, and promote the gradual transformation of the entire taxi industry.

But the problem lies here. Didi has taken too big a step. In order to grab the market share in a short period of time, it has affected the interests of many parties, which has increased the probability of friction between the parties. Although the dilemma faced by the taxi industry will not affect the citizens who use cars, for the government, it naturally needs a balance to maintain the stability of the industrial chain structure and take into account the two-way interests of citizens and taxi drivers at the same time. The taxi industry is obviously facing the difficulty of changing its operating system. The regulatory authorities are also urging the taxi industry to change to adapt to the marketization process, but all this takes time.

As a rapidly growing car-hailing software platform, Didi has been luring private car owners to join the Didi platform with high subsidies in order to achieve rapid scale-up. However, this has further accumulated conflicts between taxi drivers and Didi. The launch of Didi's hitchhiking service comes at a time when a large number of illegally operated vehicles have emerged and the joint boycott of taxi drivers has intensified, which has undoubtedly further escalated the conflicts between taxi drivers and the Didi platform, private cars, and carpooling drivers.

Although carpooling is a strategic detour based on the current regulatory situation, it still cannot escape the suspicion of being an illegal taxi

Didi's launch of the carpooling business is actually a strategic detour to the current regulatory situation. The private car market is currently at the forefront, and the regulatory authorities are stepping up their enforcement efforts. As early as during the two sessions, the Minister of Transport had clearly stated that using private cars to operate private cars would be considered illegal. Carpooling is a relatively niche field, and the transportation department has not clearly opposed it. Didi's involvement in this field may be more or less intended to avoid regulation. In addition, last year, Beijing also issued the "Guiding Opinions on Carpooling" to promote the legalization of carpooling.

But in fact, the Opinion does not allow carpooling to happen. The Opinion has strict standards for illegal taxis: for example, carpooling is for mutual assistance, while illegal taxis are for profit. A carpooling is for the owner's destination, while an illegal taxi is for the passenger's destination. We can see that although the carpooling business has begun to have a name at the policy level, it has been shackled. For example, from a policy perspective, one of the shackles is that once a car is used for profit, it is considered an illegal taxi. Secondly, carpooling on impulse is excluded from the legal scope.

However, ride-sharing companies do not see it this way. They believe that the Opinion supports the ride-sharing business. For example, during the time when Uber was investigated, ride-sharing software company Didi said that its ride-sharing business was not affected by the investigation of Uber and believed that Beijing's regulations already allowed the ride-sharing business. Undoubtedly, Didi launched the ride-sharing business with the strategic purpose of avoiding regulation.

Although carpooling services involve car owners and passengers riding together, the original intention of carpooling is to share fuel costs and tolls, save energy and protect the environment, and relieve traffic pressure, which is beneficial to the country and the people. However, in the eyes of regulatory authorities, carpooling and private cars are not much different. As long as private cars are involved, it is illegal operation. For example, Shanghai does not allow private cars to participate in operations, regardless of whether they are for profit.

In addition, we know that it is inevitable that the regulatory authorities will intensify their crackdown on illegal taxis and private vehicles that do not have operating qualifications. Therefore, if Didi service platform is to be standardized, it will inevitably need to cooperate with regulatory authorities in the future to provide a rear data platform to promote transparency and symmetry of information between law enforcement officers and operators. Although carpooling is a business that matches demand, the original sin that carpooling cannot escape is the suspicion of being an illegal taxi, which is an invisible shackle on the carpooling business.

Hitchhiking may cause Didi to fight back on its own front. Social driving culture is difficult to implement in China

Didi has relatively high vehicle resources, active APP users, and market and user recognition, so it is natural for it to enter the carpooling field. However, Didi attempted to launch multiple user services in a short period of time in an attempt to cover most areas of travel. For example, after the merger of Didi and Kuaidi, there are currently four businesses: taxi, private car, express car, and carpooling. This has caused confusion in its own business lines. Multiple businesses may present a relationship of mutual competition, such as carpooling users are also private car customers, and carpooling and private car drivers are competing for customers.

On the one hand, Didi wants to support the carpooling project, which may divert the users and profitable business of private cars, but carpooling will lose to private cars and express cars in terms of user experience. The carpooling business involves the matching degree of the same route and the sharing of the cost of multiple people sharing the same route. The matching degree and response speed are not as good as the user experience of private cars and express cars.

The inherent business model of carpooling also has problems. According to Didi's tone, it is inevitable that a large-scale subsidy war will be launched in the field of hitchhiking in the future. As mentioned earlier, the carpooling business focuses on the loser economy, and its user experience will be inferior to taxi and private car services. Drivers will not only find it difficult to make a profit just for subsidies, but will also accelerate the depreciation rate of their own vehicles. At the same time, they will also be suspected of being illegal taxis, resulting in dissatisfaction between users and car owners. At the same time, the subsidy war in the carpooling business will cause Didi to burn money in four business lines at the same time. In addition, it faces huge pressure from competition from Uber. Once Didi's capital transfusion and profitability cannot keep up, it will fall into a vicious cycle of exchanging subsidies for market share and cannot extricate itself, causing significant pressure on profitability and finance.

In addition, according to the head of Didi Hitch team, the carpooling business will be socialized, indicating that the social networking of the carpooling will be connected with WeChat, and the current binding of WeChat account is just the beginning. However, the social driving culture does not match the national conditions of China. We know that the prototype of carpooling comes from Lyft in the United States. Lyft emphasizes solving the embarrassment of strangers based on social relationship chains by importing Facebook account information, and at the same time advocates and encourages making friends with strangers. Lyft requires passengers to greet the driver by "fist bumping" when getting on the car, and helps passengers charge their mobile phones and play music to solve the awkward situation of stranger social interaction. The relatively open stranger friendship culture in the West makes this model unimpeded. However, in China, there is no strong trust relationship between strangers, and the implicit and introverted friendship culture has a sense of estrangement or distrust in stranger friendship. At the same time, there are common social trust and safety issues in the stranger friendship culture in China. Didi hopes to follow the social path of Lyft, but the foreign social driving model may face cultural obstacles in China.

The timing and the trend are wrong. Didi Hitch is not a wise gamble

Back to the discussion at the beginning of the article, drivers in many cities are protesting against the low-priced Uber and Didi that are encroaching on the market that originally belonged to them. They accuse this of unfair competition. Because whether it is a private car or a carpooling car, the openness of the service platform, the lowering of the entry threshold, and even the inclusion of private car operations will undoubtedly further lead to a drop in the price of taxi licenses. Although the root cause lies in the operating system of the taxi industry, the revision or reform of the operating system is not an overnight achievement.

Uber is like a thorn in the side, which has posed a huge threat to Didi's one-stop travel platform. This anxiety has forced it to launch a variety of user services in a short period of time, basically covering all areas of the travel market. However, although the overly aggressive pace has accelerated the process of segmentation and reshuffle of the traditional taxi market, it will inevitably lead to policy supervision and a strong backlash from the taxi industry. Didi's launch of the ride-sharing service is an inevitability of its platform development, but it did not follow the right time point to cut in and then promote this business in a step-by-step manner.

From the previous analysis, we can see that carpooling may not only lead to a conflict between its own multi-line businesses and fall into a vicious circle of burning money, but also carpooling mainly targets the loser economy, with poor user experience and difficulty for drivers to make profits. User habits in the carpooling market have yet to be cultivated, and a business model has yet to be formed. The implementation of social driving culture in China also faces cultural barriers. Didi is currently at a time when the interest structure is changing and policy supervision is tightening. Didi launched the ride-sharing service in an attempt to further expand the market and user coverage to seize a piece of the market cake, but it is obvious that the timing and trend are not right, which determines that Didi's disruption of the carpooling market is not a wise gamble.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.