Taxi-calling apps halt cash subsidies

Taxi-calling apps, such as Didi and Kuaidi, have terminated their cash subsidies to drivers after pouring more than 2.4 billion yuan ($389.8 million) in fight for the heated market in the past few months, which analysts say may undermine the popularity of apps among customers, the China News Services website reported Tuesday.

Move comes as owners of the apps, Tencent Holdings and Alibaba Group, failed to figure out an effective business model for them to generate profits in the longer run, the report said citing industry insiders.

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Taxi orders are actually easy to get in first-tier cities even without those apps, especially during rush hours. And when cash incentives are gone, drivers will use taxi-calling apps less and less, Huang Yuanpu, an O2O analyst, told the China News Services website.

Beijing News reported earlier that drivers have already lost interest in taxi-calling apps ever since cash subsidies were reduced to 2 yuan in July. Shortly after the apps were launched in late 2012, taxi drivers and passengers would both get up to 15 yuan for each order.

Some fear it will be more difficult to get a taxi if drivers stop using the apps because of the subsidy cut.

Didi had attracted 100 million users nationwide by late March while Kuaidi, according to its website, is generating a combined average of 6.23 million orders every day in more than 200 cities from Beijing to Lhasa, according to earlier China Daily reports.

As of May 17, Didi had doled out 1.4 billion yuan to users, while Kuaidi handed out as much as 1 billion yuan.

Both companies have said that subsidies will never end, although dispensing cash could. Without specifying the details, they added that new incentives will be announced soon.

Analysts say, with the taxi-calling market hitting a bump, Didi and Kuaidi may turn to renting out commercial vehicles as part of their strategic move.