Private cars are cleaned up and turned into express cars: paving the way for Didi Kuaidi's listing

On May 7, Didi launched the Didi Express project in Hangzhou, which had never been widely publicized before, with a starting price of 0, 0.99 yuan/kilometer and 0.3 yuan/minute, and the minimum consumption is only 5 yuan.

On May 13, Didi announced that it would officially launch the express program in eight cities, namely Beijing, Tianjin, Guangzhou, Shenzhen, Chengdu, Wuhan, Chongqing, and the previous pilot city of Hangzhou. The prices per kilometer and per minute vary slightly in different places, with the lowest being only 0.9 yuan per kilometer.

In fact, in April, Kuaidi had already launched the "No. 1 Express" in some cities on a trial basis. The charging plan was similar, but the minimum consumption amount was slightly higher.

From taxi subsidies to private car services to express cars, what is Didi Kuaidi planning after the merger?

1. From taxis to private cars

Didi and Kuaidi became famous for the taxi subsidy war between the two companies over the past year or so. By spending billions of dollars, they got users to install the APP, and taught drivers how to use the software and get used to the operating methods of Internet car rental.

But taxis burn money. Although Didi and Kuaidi had big backers, they were unable to sustain for too long. Finally, the two merged on Valentine's Day in 2015, and taxi subsidies were cancelled. Instead, subsidies for private cars were issued.

Didi and Kuaidi's private car services have always been high-end services. Their starting prices and kilometer prices are slightly higher than taxis. Didi and Kuaidi also charge membership fees like taxi drivers, and the drivers' welfare benefits are gradually declining.

When Didi and Kuaidi were competing with each other, the company paid insurance for private car drivers in Shanghai, and the minimum income was 4,000 to 5,000 yuan. If they worked a little harder, they could easily earn over 10,000 yuan a month. After the merger, however, drivers had to pay for their own pension insurance, with a daily contribution of 210 yuan, and only four days a month without having to pay. At the same time, the workload was significantly increased, and a last-place elimination system was introduced.

The salary of a private car driver has dropped from easily earning over 10,000 yuan to only 5,000-6,000 yuan after hard work. The difference naturally goes into the pockets of the Internet car rental companies.

At this stage of development, private cars are actually similar to taxis. If everything goes as planned, Didi Kuaidi can become a national monopoly taxi company, competing with taxi companies across the country and enjoying the huge pie of the Chinese market.

2. Pressure from supervision and listing

Internet-based car-hailing services affect the interests of taxi drivers and will naturally face pressure from regulators.

Yang Chuantang from the Ministry of Transport has repeatedly stated that private cars are strictly prohibited from entering the Internet car rental market, and all regions are investigating and punishing Internet car rentals. In theory, private cars should go through the channels of rental companies, and private cars are not allowed to enter. And according to information disclosed by Yang Chuantang, the government is considering issuing guidance on Internet car rentals, which will make regulations on operating licenses and pricing.

This means that after two years of wild development, Internet car rentals are likely to be put under a tight rein soon. Currently, local governments are only investigating and punishing Internet car rentals in a piecemeal manner as illegal taxis, but when guidelines are issued in the future, all Internet car rental companies will be brought under management. If they continue to skirt the rules, Didi Kuaidi's headquarters and local branches may be closed down.

Before the guidelines are issued, Didi Kuaidi needs to expand its territory and scale as much as possible to form a fait accompli, so as to avoid being constrained in its development after the guidelines are issued.

On the other hand, there are reports that Didi Kuaidi will start the IPO process as early as June. Foreign media reported that a US hedge fund invested $600 million in the merged Didi Kuaidi, and Didi Kuaidi's valuation will reach $8.75 billion.

If the pressure from policy supervision is still a long-term pressure, then expanding the scale as much as possible before the IPO process starts is a short-term pressure.

Giving up short-term profits, increasing scale as much as possible, expanding the number of contracted vehicles, and increasing sales are wise choices both from a regulatory perspective and from a capital valuation perspective.

So there is the unprofitable express service.

3. The Nature of Express

In theory, the express service is a non-profit platform where "all payments from passengers belong to the car owners, and the software platform will not charge any fees." Didi Kuaidi is working hard to emphasize the public welfare nature of the express service.

In fact, this is just an excuse for private cars to enter the special car service and evade supervision.

For private car services, Didi and Kuaidi charge fees, and are defined as operating requirements that must be passed through rental companies, and they cannot be affiliated. In contrast, if the express car service does not charge membership fees, it can bypass the rental companies under the banner of public welfare, allowing private cars to directly access the service, and making the crackdown by regulatory authorities lose the commanding heights of public opinion.

The fundamental purpose of launching express vehicles is to lower the threshold, reduce prices, quickly expand vehicles, and quickly occupy the market with low prices. Expand the scale before listing, increase valuation, and grab land before supervision is implemented to form a fait accompli.

The lowest fare for express trains is 0.9 yuan per kilometer, while the A-class car costs 0.7 yuan per kilometer even with fuel costs on congested roads in cities. Without subsidies, such low prices are unsustainable, and subsidies will not be permanent, but will only be a short-term measure before listing or regulatory policies are implemented.

Currently, the price of express cars is lower than that of taxis, and the car condition, service and convenience (express cars require new cars worth more than 100,000 yuan, and there are many examples of BMW, Mercedes-Benz and Land Rover owners joining) are much better. Coupled with the power of high subsidies, the taxi industry will be hit unprecedentedly. Didi Kuaidi will have another opportunity for explosive growth in a few months.

4. The final madness

From private cars to express cars, Internet car rental and taxis have gone from having conflicts of interest to fighting for their lives. Private cars are priced higher than taxis, and their positioning is different. Express cars are meant to directly replace taxis.

It can be predicted that the launch of Express will trigger a strong backlash in the taxi industry, and this backlash is likely to accelerate the introduction of guidelines for Internet car rental.

Didi Kuaidi can no longer care about so many things. With the IPO about to start, they are taking advantage of the time difference and going crazy before the regulation is introduced. They are not afraid of contradictions and are spending a lot of money regardless of the consequences. They are striving to increase market share, sales, and the number of signed vehicles, and blow up the valuation bubble a little bigger. After all, the return of the capital market is real money.

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.