The battle of the taxi apps may soon end in China

March 7, 2014 Leave a comment

The battle of the taxi apps may soon end in China

Staff Reporter

2014-03-03

The Shanghai Municipal Transport and Port Authority yesterday decided that from March 1, taxis will be forbidden from using taxi app services during morning and night peak hours. This could mark the end of the battle between China’s taxi app operators, China News Service reports.

In certain cities, taxi app operators may be obliged to join municipal taxi calling service platforms as ordered by the government.

Alibaba Group and Tencent Holdings, two of China’s internet giants, are neck-and-neck in a turf war over the taxi app market. On Jan. 20, Tencent’s Didi, its taxi hailing service, announced a plan to add 200 million yuan (US$32.5 million) to its budget. The next day, Alibaba’s Kuaide counterpart swiftly announced an additional 500 million yuan (US$83 million) investment for improving hailing services, Shanghai’s China Business News reported last month.

Together, the two giants have subsidized more than 1.9 billion yuan (US$309 million) for their apps, statistics showed. The taxi app operators have yet to create an effective profit model, draining directly from parent comapnies instead. Such leeching can last for at most another month, experts said.

The money-burning battle could end immediately. Yesterday, Alibaba founder Jack Ma suggested that the two tax app operators sit down and talk about how to operate more smartly further down the road. Experts said Ma’s remarks indicate that drastic market competition will eventually calm over. Many Tencent Weibo users also expressed their belief that subsidies for taking taxis will soon come to an end.

On the other hand, Didi’s public relation department told the reporter that its subsidies are long-term activity, and more actions are to be taken. No elaboration was given.

The Shanghai regulator also decided to include the taxi app business into the city’s taxi calling service platform, a move praised by more than half of responding internet users in a survey. Beijing, Nanning and Chengdu have all ruled similarly, with quite a few other cities saying they have not ruled out the possibility of unveiling similar measures.

Both taxi app operators immediately said they will follow the Shanghai regulator’s ruling, and both plans to complete their technical linking with the city’s taxi calling service platform on March 10.

 

Filed under Macro Trends, TMT Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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