DIDI’s Dominance in China, the Road to Reform

Didi concept advertising map
Didi Concept Design map. Image: Word Brand Design Society, all rights reserved

Perhaps in the world, Didi ChuXing (after this referred to as Didi) is not as famous as Uber. But it has established its empire in China. As of 2019, Didi has covered more than 400 cities, has more than 450 million users, and operates more than 30 million rides every day (Singh, 2019). This article will through Didi’s growth history, business model, Internet ecology, and its specific influence on society to discuss how it has a transformative impact on China in a unique way.

 

What is Didi?

About DiDi: An advertisement of DiDi. Video: DiDi Australia & New Zealand, all rights reserved.

Didi is an online peer-to-peer transportation platform originated in China (Guo et al., 2020). Its core purpose is to achieve rapid matching of passenger information and vehicle information with the support of Internet technology and big data (Zhu et al. al., 2018). Didi mainly operates different types and levels of ride-hailing. It also includes sharing bicycles, public transportation information query, designated driving, rent/buy cars and other personal transportation services (DiDi, n.d).

 

Origin and Development 

Didi is affiliated to Beijing XiaoJu Keji Co and was founded in 2012 by Cheng Wei, who has worked at Alibaba for eight years. Didi and traditional taxis are always regarded as competitors. In fact, Didi initially positioned itself as an online taking taxi platform. Its initial name was Didi Dache (means take a taxi), and it mainly targeted taxi drivers and recruited them to be the first drivers in the app (Chen, 2018). Didi quickly stabilized its position in the market. In December 2014, Didi received a US$700 million financing led by Tencent (Zhu et al., 2018). In 2016, Didi completed a milestone merger with Uber in China and indeed became the monopolistic online ride-hailing platform in the Chinese market (Dent, 2016). However, the contradiction between the rapid development of online ride-hailing services and the relatively backward security system has led to the emergence of quite abominable criminal cases. In 2018, there were two vicious social incidents in which young women were raped and killed by Didi drivers. Didi urgently shut down the functions of Didi Hitch carpooling and restored its credibility by the compulsory recording of the itinerary, sharing the itinerary with friends, and setting an emergency alarm button (DiDi, n.d). The overall effect is still good. In the same year, Didi entered the international market, starting with Australia.The business has now expanded to 7 countries around the world.

 

Business Mode

Zott and his colleagues (2011) defined business model is an approach to explain how and what an entity does in business, and its value creation and value acquisition. Didi has pronounced characteristics of the sharing economy. When Didi recruited drivers, it emphasized letting driver’s idle time valuable. This announcement is in line with Stephany’s (2015) definition of the sharing economy. He defines it is an economy based on people sharing the assets they already own (that is, the cars they already own). Therefore, Didi has similar value to other new enterprises in the sharing economy. That is, freedom, flexibility, and sharing (Rosenblat & Stark, 2016). This business model can be understood as an On-demand economy. It means production and operation activities are carried out around the actual needs of society members with potential labour capacity (Ticona & Mateescu, 2018). To put it simply, the driver works on demand and more pay for more work. Besides, the threshold for Didi drivers is relatively low. In other words, Didi encourages ordinary private car drivers who are only part-timers to earn extra money from their spare time and car space. This business model is unique because it is technically based. It is difficult for such a wide range of part-time drivers to have professional skills like traditional taxi drivers such as the ability to be familiar with city roads and road traffic laws. Didi Brain computational decision-making system makes up for all these things. This system can coordinate all driver and customer orders on the platform and redistribute them appropriately. It navigates the appropriate route and monitors the journey to ensure the safety of drivers and passengers. At the same time, the electronic one-click payment system provides fair pricing.

Didi’s relatively low price is also its winning business model. This cheap is mainly reflected in two aspects. One is to deliver discount coupons, and the other is to reduce physical costs through carpooling. Although Didi is a veteran online ride-hailing platform, it still faces the challenge of other new online ride-hailing platforms’ emergence. Discount strategies, which reduce product prices during consumers’ shopping process to improve shopping decisions, is a timeless weapon for Didi ( Andersen & Poulfelt, 2006). In the early days, due to its business model based on big data management, the subsidy battle won Didi a large amount of user data. After the company stable, Didi relied on its strong strength and sufficient investors to keep the support of this discount strategy. After attracting more consumers to recover the cost, new concessions can be opened, thus forming a virtuous circle. On the other hand, based on Didi Brain, the driver can work in a carpooling way, deliver all passengers with maximum efficiency under the calculation of the system. The scope of sharing is further expanded here, not only the driver and passengers share the car space and time in exchange for higher profits.

An discount coupons advertisement on Didi's app.

Discount coupons advertised on Didi’s app. Image: DiDi, all rights reserved.

Internet ecology 

Internet ecology refers to the relationship and interaction between people and the online environment (Mcfedries, 2003). Therefore, when talking about Didi’s Internet ecology, its stakeholders include Competitors, Partners, Users, Owners, Regulators, Investor.

Didi has a wide range of services, from the high-end DIDI Luxe to the most civilian Qingcai Carpool (DiDi, n.d). Didi’s audience can include all mobile device users who want short and convenient travel. Its employees have part-time, full-time, and former taxi drivers, at least with stable driving skills and no criminal record.

Didi has almost no rivals in China’s online car-hailing market (Singh, 2019), but there are also online car-hailing platforms such as Shouqi and Yangguan Chuxing for market share. Didi’s opponents also include similar modes of transportation, including Wukong, Shenzhou and other car rental software, and traditional taxis.

Didi’s partners come from all walks of life. It including payment provider WeChat, Alipay, navigation software Baidu Maps. In this month, Didi even launched the world’s first customized ride-hailing car specially designed for shared travel in cooperation with BYD Auto Company.

Didi is not only invested by Tencent, but also accepts financing from other large companies such as Alibaba, Apple, and China Life.

The primary regulator of Didi still comes from the Chinese government. The central responsible agency is the transportation authority. At the same time, according to the actual situation in different cities, Didi is also under the supervision of local city regulators.

An Internet ecology diagrm of DiDi

 

Transformative effective in society

Didi’s impact on society, especially in native China, is transformative. It has brought about a wave of sharing economy and changed people’s travel habits and attitudes as the leader. Before the emergence of online ride-hailing, taxis are accompanied by chaos, such as drivers detouring, random offer price, and not being able to get a taxi during peak hours. The great competitive pressure given by Didi has also improved the traditional taxi environment. The quality of tourism services has been improved (Zhu et al., 2018). Didi’s advantage is backed by high technology such as the Internet, big computing, and AI. These technologies eliminate the information asymmetry between drivers and passengers, and acts as a third-party platform that monitors the entire process. The result ensures a fair transportation service. In addition, Didi has adopted dynamic pricing adjustment mechanism to adapt to the different demands of the market at peaks and troughs. For example, in the morning and evening rush hours, due to the high demand for ride-hailing, the price will be relatively high . Users who are eager to call a car can get priority to being dispatched by increasing the driver’s tip when placing an order on the platform. (DiDi, 2018). This method not only alleviates the problem of difficult taxis during peak hours but also gives customers the option of solving emergencies.

A Pricing Heat Map that shows DiDi's dynamic pricing system

 Didi Pricing Heat Map. Image: Didi, all rights reserved.

On the other hand, Didi has contributed to protecting the environment. China has limited environmental carrying capacity due to its large population. Moreover, because of the rising living standards of residents, the number of family cars has increased rapidly, reaching 124 million. However, there are also 22 million idle vehicles, which a kind of resources waste (Zhu et al., 2018). As an online ride-hailing platform, Didi has improved the utilization of these idle social resources and effectively reduced carbon emissions (Martin & Shaheen, 2011). Besides, Didi’s data collection through tens of billions of trips can improve urban traffic environment. Based on these data, Didi AI can help realize the real-time adjustment of traffic lights, staggered traffic lanes, and contribute to the construction of smart cities (Dai, 2018).


Didi Chuxing’s President Jean Liu giving speech on The Future of Cities. Video: Mike Bloomberg, all rights reserved.

Regarding Didi’s laws and controls, it has also experienced development from scratch due to its completely new operating model. The “Notice on Regulating the Development of Online Taxi Call Services” formulated by China government in 2013 is clear support for the just starting Didi (Zhu et al., 2018). In 2016, “Interim Measures for the Administration of Online Taxi Booking Business Operations and Services” officially included private car services in the legal scope. After the vicious rape and murder in 2018, the government tightened legal restrictions on online car-hailing. At the same time, many places began to introduce local Didi regulatory policies.

 

Ending and the further impact

According to the research in this article, Didi’s innovation is un-doubtable. It can be regarded as a masterpiece of China’s sharing economy. Didi’s success is not only it is own but also provides confidence in the subsequent new sharing economy industry. After Didi, the business models of the hot sector like sharing bicycles and sharing power banks all have the shadow of sharing online ride-hailing.

 

 

 

Reference List

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Andersen, M. M., & Poulfelt, F. (2006). Discount Business Strategy: How the New Market Leaders are Redefining Business Strategy. In Why are some companies more successful than others? (1st ed., pp. 1–17). Wiley.

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Chen, J. (2018). Thrown under the bus and outrunning it! The logic of Didi and taxi drivers’ labour and activism in the on-demand economy. New Media & Society, 20(8), 2691–2711. https://doi.org/10.1177/1461444817729149

Dai, S. (2018, July 10). China’s biggest ride-hailing platform Didi now wants to help cities solve traffic jams. South China Morning Post. https://www.scmp.com/tech/china-tech/article/2154027/chinas-biggest-ride-hailing-platform-wants-crunch-its-data-improve

Dent, S. (2016, August 1). Uber China merges with rival Didi Chuxing. Engadget. http://search.proquest.com/docview/1807955345/

DiDi. (2018, December). Introducing DiDi’s Dynamic Pricing. DiDi Blog. https://didiaustralia.blog/2018/12/20/introducing-didis-dynamic-pricing-with-a-twist/

DiDi. (n.d.). Development History – DiDi official website. Xiaoju Automobile Solutions Co. Retrieved November 20, 2020, from https://www.didiglobal.com/about-special/milestone

DiDi. (n.d.). Home Page – DiDi official website. Xiaoju Automobile Solutions Co. Retrieved November 20, 2020, from https://www.didiglobal.com/

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Guo, Y., Xin, F. & Li, X (2020). The market impacts of sharing economy entrants: evidence from USA and China. Electron Commer Res 20 (3), 629–649 (2020). https://doi.org/10.1007/s10660-018-09328-1

Horne, B. (2020, March 17). DiDi driver guide: Melbourne. Finder.Com.Au. https://www.finder.com.au/didi-driver-guide-melbourne

Horwitz, J. (2014, January 6). Tech in Asia – Connecting Asia’s startup ecosystem. Tech in Asia. https://www.techinasia.com/china-hail-taxi-pay-driver-wechat

Kaye, B. A. J. (2018, June 15). Chinese ride-sharing giant Didi picks Australia for first Western foray. U.S. https://www.reuters.com/article/us-didi-australia/chinese-ride-sharing-giant-didi-picks-australia-for-first-western-foray-idUSKBN1JB0BL

Krivevski, B. (2020, November 19). DiDi Unveils World’s First Custom-Built EV for Ride-Hailing. Electric Cars Report. https://electriccarsreport.com/2020/11/didi-unveils-worlds-first-custom-built-ev-for-ride-hailing/#:%7E:text=Didi%20Chuxing%20(DiDi)%2C%20one,%2Dbuilt%20for%20ride%2Dhailing.

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Martin, E. & Shaheen, S., (2011). Greenhouse Gas Emission Impacts of Carsharing in North America. IEEE Transactions on Intelligent Transportation Systems12(4), 1074–1086. https://doi.org/10.1109/TITS.2011.2158539

Mcfedries, P. (2003). The internet ecology. IEEE Spectrum40(4), 68–68. https://doi.org/10.1109/MSPEC.2003.1191786

People’s Daily Online. (2019, September 6). 南方日报:出租车乱象如何根治? [Nanfang Daily: How to cure taxi disorder? ] Baidu. https://baijiahao.baidu.com/s?id=1643882732900643927&wfr=spider&for=pc

Rosenblat, A. & Stark, L (2016). Algorithmic labor and information asymmetries: A case study of Uber’s drivers. International Journal of Communication10, 3758–3784.

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Staff, R. (2020, August 27). Chinese city regulators suspend Didi’s new ride-hailing service. U.S. https://www.reuters.com/article/us-didi-chuxing-china-idUSKBN25N0TO

Stephany, A. (2015). The Business of Sharing: Making it in the New Sharing Economy. In The Billion Dollar Moustache (2015th ed., pp. 1–6). Springer.

Ticona, J. & Mateescu, A. (2018). Trusted strangers: Carework platforms’ cultural entrepreneurship in the on-demand economy. New Media & Society20(11), 4384–4404. https://doi.org/10.1177/1461444818773727

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Multimedia Reference List

DiDi. (2018, December). Didi Pricing Heat Map [Map]. Introducing DiDi’s Dynamic Pricing. https://didiaustralia.blog/2018/12/20/introducing-didis-dynamic-pricing-with-a-twist/

DiDi Australia & New Zealand. (2018, April 1). About DiDi [Video]. YouTube. https://www.youtube.com/watch?v=-FhP5oOi5bA

Mike Bloomberg. (2017, September 20). Didi Chuxing’s Jean Liu on The Future of Cities [Video]. YouTube. https://www.youtube.com/watch?v=G9uPGoN0dvQ

Word Brand Design Society. (2019). [Didi concept design map]. MetaDesign China – Didi Chuxing Rebranding. https://worldbranddesign.com/metadesign-china-didi-chuxing-rebranding/

 

 

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About Yixi Zhou 4 Articles
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