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Didi Chuxing's dominant market position challenged by new competitors

A Didi Chuxing driver Photo: Reuters

The foray of new industrial challengers and traditional automakers into China's ride-hailing market is eroding the dominance of Didi Chuxing, which is under tightened government scrutiny due to its inability to ensure safety of shared rides. 

A 2016 deal allowing Didi Chuxing to acquire the China business of Uber has led to the monopoly of the ride-hailing leader in China. But its market dominance is being undermined, with several up-and-coming players, which are not engaged in ride-hailing business originally, marching into the money-burning industry.

Recently, Hello Chuxing, a startup making its way by originally offering bike-sharing service in China, started piloting its ride-hailing service in Shanghai, Nanjing and Chengdu in partnership with domestic car-hailing firm Dida Chuxing, which has grown the number of its daily active users to around 10 million since Didi Chuxing was mired in a safety scandal in August, when a young female passenger was raped and murdered while using Didi Chuxing's car-pooling service pairing up commuters heading in the same destination.

Financially backed by e-commerce giant Alibaba, Hello Chuxing aims to provide its taxi-hailing service in 80 cities across the country in the near future, with plans to build a complete ecosystem for public transportation including shared bikes, electricity-powered bikes and Internet-based taxies. Alibaba also offers technological solutions to Hello Chuxing.

Hello Chuxing's move came months after Meituan Dianping, a Chinese group-buying and dining information platform, launched its ride-hailing service in the new battlefield of Shanghai via its app, heating up competition with Didi Chuxing. Meituan Dianping enjoys an exceptional advantage in rivaling Didi Chuxing, as some users can look up the information about a restaurant and then passingly order a taxi taking them to the picked restaurant within the app.

Meituan Dianping had some 290 million monthly active users in April, according to a prospectus released in September. Its Chief Executive Officer Wang Xing has announced the goal of holding one third of China's ride-hailing market amid increasing demand.

In the modern economy driven by the mobile Internet, Didi Chuxing could lose its market share in the ride-hailing sector to Meituan Dianping which has an absolute advantage in the on-demand service sector, said Chen Yongwei, a researcher at the Research Center for Network Economy at Peking University.

According to Chen's judgement, Ctrip, a hotel-booking and travel information platform, could be another powerful rival for Didi Chuxing thanks to its large base of users, who are supposed to order a cab via the Ctrip app to get them to the hotels they select.

Besides the challenges from the industrial competitors and Internet technology-enabled on-demand service providers, Didi Chuxing is also challenged by domestic traditional automakers, as these car manufacturers' sales have been strained by the local governments which set limits on sales of traditional cars in pollution prevention policies and allocate a limited number of car license plates through lotteries.

Foreign carmakers are also eyeing China's ride-hailing market. Germany's Daimler is reportedly setting up a ride-hailing joint venture company with domestic carmaker Geely in a deal that could create a new powerful competitor to Didi Chuxing. In a statement, Daimler said that the joint venture company will provide ride-hailing mobility service in several Chinese cities using premium vehicles including but not limited to Mercedes-Benz vehicles. As foreign carmakers have been allowed to own a majority stake in its China join ventures, it is foreseeable that more and more foreign automakers would penetrate into China's ride-hailing market.

Also, since Didi Chuxing was hit by the safety scandal, licensed taxies again find favor with consumers, who are concerned about the safety of Web-based cabs especially at night. It provides an opportunity to Dida Chuxing, which has signed agreements with several local taxi associations, which put licensed taxi drivers into its own car-hailing network.

Monopoly allegation

Last month, Wu Chungeng, spokesperson of China's Ministry of Transport, said that Didi Chuxing is suspected of monopolizing the ride-hailing market.

Currently, Didi Chuxing has 90 percent of the country's ride-hailing market.

It is not the first time that the watchdogs have shown concerns about Didi Chuxing's monopoly.

Two years ago when Didi Chuxing bought the China operations of Uber, the American archival, the Ministry of Commerce already launched an anti-monopoly probe into Didi Chuxing. The result of the investigation has not been announced yet.

The safety scandal is widely considered as a driver to resume the anti-monopoly investigation against Didi Chuxing, which is seen by other smaller competitors as an opportunity to create a new fairer market environment.

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