Photo/Shetuwang

Feb. 14 (NBD) – China's largest car-hailing platform Didi Chuxing is rumored to lose 10.9 billion yuan (1.6 billion U.S. dollars) and offered subsidies of 11.3 billion yuan (1.7 billion U.S. dollars) to drivers in 2018.

NBD contacted Didi Chuxing but the latter didn't comment on the issue.

The rumor caught much public attention but the industry was not surprised. Throughout the history of car-hailing sector, the industry featured "burning through cash for expansion". 

After Didi Chuxing dominated the segment, it still remained loss-making for consecutive six years and registered a loss of 4 billion yuan (59.0 million U.S. dollars) for the first half of 2018, according to an internal letter sent last September by its CEO Cheng Wei.

Last year, two female passengers were murdered by drivers working for Didi Chuxing when using the carpool service. After the two incidents, the ride-hailing giant pledged a business overhaul and suspended its Hitch service, which contributed a remarkable number of orders and made profits more rapidly than other services. This seemed to deteriorate its financial situation for the second half of 2018.

Chen Liteng, an assistant analyst with China E-commerce Research Center, said to NBD that after the incidents, stricter regulations were imposed on the industry. To keep normal operation, Didi Chuxing needed to attract drivers and cars that meet requirements with more cash, which resulted in a substantial rise of costs, Chen added.

Meanwhile, a practitioner pointed out that before the murder cases, Didi Chuxing has already spent a large amount of cash in other fields.

Under the current circumstance, part of the costs for regulating the car-hailing industry will be borne by passengers, and consequently the price of taking a ride via Didi Chuxing will possibly surge, an industry analyst predicted.

Amid the cut-throat rivalry in the car-hailing industry, drivers are playing an increasingly important role. 

As auto makers are also marching in the sector, the core of the competition will fall on how to attract qualified drivers. Granting subsidies to drivers is the major way for ride-hailing platforms to draw more drivers.

According to an industry insider, Didi Chuxing has already gained an advantage since the platform has formed relatively steady alliance with car rental firms and drivers. But, reversely, the large number of drivers will also push the costs to ascend.

Another industry insider observed that drivers become the core assets in the car-hailing sector, thus players are rushing to compete for drivers. Challenged by the pressure brought by tightened regulations, car-hailing platforms will face even fiercer competition. After all, transport capacity determines the activeness and customer stickiness of a car-hailing platform.

Email: wenqiao@nbd.com.cn