/Cash burning remains a must for Didi in 2016

Cash burning remains a must for Didi in 2016

Take a look at popular car-hailing apps in China, and the first name that jumps out might be Didi, a company that accounts for over 80% of the market share, receiving a total of 1.43 billion orders in 2015. According to Didi’s official data released on Tuesday, it now receives more than 10 million orders a day.

But the picture is not all that rosy for Didi: the cash burning must continue.

“Customer loyalty is not gained with subsidies. But subsidies attract people to experience our services, which leads to customer loyalty, ” Didi’s CEO Cheng Wei said at the Boao Forum for Asia on Wednesday.

In early March, Didi and Uber China started a new “subsidy battle”, with the former offering a 30% to 40% discount for customers in cities such as Chengdu and Shanghai, and the latter reducing its minimum car-pooling fee from five yuan (USD 0.77) to 3.5 yuan. While Uber has accused Didi of going too far on subsidies, Didi said that Uber subsidizes Chinese users with USD 1.5 billion.

“Subsidies are here to stay, for the long term,” added Cheng. “But our focus is no longer on increasing scale, but on improving our services to win customers’ hearts.” He said that with features like its carpooling service, bus service, and designated driver service, Didi faces many competitors besides Uber China, who is admittedly its major rival.

Subsidies require continuous fundraising, and Didi has no detailed plans for listing just yet. “The market has not matured enough to start making profit yet, and we need to have patience for customers to grow accustomed to our services,” said Cheng.

Bloomberg reported in February that Didi has raised at least USD one billion in a new round of funding, which puts its valuation at over USD 20 billion.

(Top photo edited from Senn.com.cn)

Ke graduated from the University of Edinburgh with a Master's Degree in English and has worked on projects with Ipsos MORI and SDI Media. She's particularly intrigued by China's thriving technology scene and is eager to write about this flourishing industry.