After 15 months, "Chinese Uber" Didi with Hitch service is back to public

China's leading ride-hailing platform Didi Chuxing, which has been offline for a year, has finally come online.

On November 6, Didi announced that on November 20, it will be running in several cities such as Harbin, Taiyuan, Shijiazhuang, Changzhou, Shenyang, Beijing and Nantong.

During the trial operation, Didi will first provide 5:00-23:00 service in the above-mentioned seven cities, and a Hitch platform service in short distance (within 50 km) of the city. That means women can only use the Hitch service during the period of 5:00-20:00. No information service fee is charged during trial operation.

In spite of the many disputes arising from the new rules, the Hitch service is important for Didi, especially at this critical moment.

During its offline time, the online ride-hailing market was surging. Cao Cao, T3 travel, as the representative of manufacturers, are promoting a full-time driver model. And they rely on car enterprises to promote new energy vehicles on a large scale.  Amap relies on map services to transform into an aggregation platform, becoming a new expensive. The number of Dida Chuxing's daily orders has directly doubled 6 times in a year. There is an endless stream of players in the intercity market.

At present, Didi Chuxing is still the market leader, occupying an absolute lead. However, as an important part of the online ride-hailing ecology, Didi Chuxing's drivers are on their way to "retreat"-Didi Chuxing is no longer the only option. For Didi Chuxing, it mainly relies on single quantity and extraction model to support its commercial value. And the withdrawal of drivers is undoubtedly even worse. Now it has become the internal worry of Didi Chuxing after suffering many problems.

In this case, Didi Chuxing is in urgent need of data coordination through a ride, which can not only retain the users at both ends of the ride, cost incremental engine, but also meet the challenges of different players and do strategic defense.

Not only that, the Hitch service is also the "performance stock" in the travel market. Its GMV grows 50% annually period-on period. And in 2017, the GMV is close to 20 billion yuan, its income is about 2 billion yuan, and the net profit is close to 9 billion yuan. In the same year, the overall net profit of Didi Chuxing was 1 billion yuan, and the remaining one hundred million yuan came from the drive. The target of the GMV for the Hitch service in 2018 was 40 billion yuan and net profit of RMB 2 billion. The return of the Hitch service is no doubt an inevitable choice for Didi Chuxing, who has a continuous loss.

Key surgery

Didi Chuxing is undergoing an operation, which is directly related to the interests of Didi drivers.

In July, Didi's partners suddenly received a piece of paper from Didi. It asked for the Didi Chuxing leasing company to stop the financing lease, and only to do business lease from September. According to several bosses of the leasing company, the Didi driver is divided into three types including self-owned vehicles, the rent-in-lease car, and the ownership of the operating lease introduced by the offline operation service provider through the platform cooperation. The vehicle in which the rent-in-lease mode is generally within the 36-year period of the contract period, the ownership is vested in the driver. And the ownership of the operating lease model is owned by the off-line operation service company.

One owner of the leasing company said that third-party financial services providers with financial leasing provided a certain amount of credit to offline operating companies (also known as 2B in the industry) or loans to drivers recruited by CP (referred to as 2C in the industry), subject to whether the CP company, had signed a cooperation agreement with the platform company. In the case of 2B, the company bears the responsibility for backpedal and guarantee, once there is a wave of withdrawal or driver shutdown, it will be a major blow to the business development of the company. Before that, there was a phenomenon that the operating company was insolvent or the person in charge ran away.

Financial leasing model is based on the driver's platform as a credit, the car is sold to the driver as a financial product, the driver returns the money every month, also known as rent instead of purchase, once the driver has a 'bad debt', it is shared by the driver and his company. Operating rental drivers, on the other hand, have no pressure, as long as they pay the required rental money every month.

"Didi is shuffling cards. During the red profit period, many Didi cooperative leasing companies in order to expand the scale, constantly 'leverage' to buy vehicles, now the rental company's ecology is in bad condition, and its bad debt risk has become greater." The owners of the leasing company said the rented drivers were less sticky than the rental companies because they were more flexible and ready to withdraw from the lease.

The way drivers can withdraw at any time makes the business of leasing companies more uncertain. In mid-October, a number of leasing companies received extensive requests from rental drivers to return cars in Guangdong, Shanxi and other places.

"I ran more than 10,000 orders every day, from 8: 00 am to the second day’s 2: 00 am. I earned about 500 yuan a day. The car was a new energy car rented from other companies. The daily expenses totaled about 200 yuan including the charging and  rental fare of the car. So the daily income was about 300, and the monthly income was 5000 yuan." A Didi driver in Shenzhen said. Despite his poor income, he did not choose to quit because he could not find a better job for the time being.

However, the case of Cheng Min was worse. He was a member of the delisting tide, who worked a year as a full-time Didi driver in Shenzhen. "Income has fallen since September, especially in October, when it used to work 10 to 12 hours a day, with an average of 450 yuan to 550 yuan a day. Now it's the same as it used to be, but it's only about 300 yuan a day." he calculated an account, this income has to deduct each month to pay 5000 yuan to rent a car (an average of about 170 per day), the daily charge of 60 yuan (new energy electric car), "can earn less than 3, 000 yuan a month."

There are many drivers with similar experience with Cheng Min, who choose to withdraw their rents mostly because of a fall in single volume and a decline in income.

"The common demand of rental drivers is that the car is finally owned by the company. They only work for the rental company and Didi, and should pay social insurance and house fund" according to several rental company owners said. With the rapid development of the online car-hailing market, the promised monthly income of drivers at the time was no longer met, which led to the failure of rental drivers' expectations. 

From the other level, with the arrival of Cao Cao and T3 travel , the selection of the drivers is obviously changed.

According to Cao Cao's officials, Cao Cao driver's income is composed of basic salary (according to the city, the average is about 2300 yuan), reward, social insurance, commission."The company doesn't draw a commision at the driver's end, and the taxi fee paid by each passenger is the income of Cao Cao's driver."

"Cao Cao doesn't make money from drivers, because it hopes to do passenger ecology through their stable services to meet other passengers' needs, such as corporate and government cars. At present, Cao Cao travelhas 6500 cooperative enterprises, through the enterprise payment and settlement of each employee travel, Alibaba is one of them." some persons related to Cao Cao travel said that the biggest profit of the ride-hailing is to achieve no loss.

"The mainframe factory has a car, so there is no need to increase the cost of buying a car. For them, the heaviest cost is running." Another senior mainframe factory said.

The Didi, which only makes the information matching without making a car, is suffering from the dimensionality reduction of the factory.
The pressure of Didi comes not only from the mainframe factories, Amap, but also the Dida Chuxing with the same ride business, as well as the players in the intercity market, who are stinging Didi's nerves and making them face huge challenges.

Faced with internal and external troubles, this is Didi's critical moment. 

A "painkiller" that you have to take

Didi needs a product to make painkillers, no doubt, Hitch service is a good target.

After the Didi Hitch service incident, Didi ALL IN was safe, which gave competitors chance to compete. In this time, Amap become a newcomer to ride-hailing, whose orders continued to rise. And Meituan made a comeback by taxi hailing, even the ride-hailing platforms of main engine factories such as BAIC and Guangqi also emerged in endlessly.

In particular, in the field of Hitch service, Amap provided this service in Wuhan and Guangdong in June. And Cao Cao travel also started to run Hitch service, covering 20 cities such as Beijing, Shanghai, Guangzhou, Shenzhen and so on. Hellobike went on this service during the Spring Festival, according to the official data. As of July, the number of the platform's certified owners is more than 7 million and the number of the passengers is more than 18 million.

And long-distance downwind vehicles with highly overlapping intercity markets. In that past, there were more than 20 players in Wuhan in a month, according to the report.

"The Hitch service products should be returned to the trip itself, and should be reduced or even not drawn into the public welfare platform." according to some people familiar with the matter. "The degree of overlap between the free-riding and the express driver was at 8%.

The express order is to provide the user with a solution to the city's travel. It determines that it is unable to cover long-distance cross-city travel scenarios and is not able to gain this part of the incremental user. More importantly, because of the missing of the free-riding, Didi can't go through this "point" to perfect the "face" of the trip, thus creating an opportunity for other players, and get itself into the trap.

For Amap, Cao Cao, Hellobike and Dida Chuxing, they are more eager to achieve a single point breakthrough through a ride. However, for Didi, the greater value of the free-riding lies in the defensiveness that cannot be missing. And this  prevents a single breakthrough.

During the offline time of the Hitch service of Didi, Didi's valuation is all the way down, Didi D-wheel investors also started to sell the original shares of Didi. According to the prospectus presented in Uber this year, its 15.4% drop-out stake is worth $79.5 billion at the end of 2018, based on which the drop-out was estimated at $51.6 billion. By the end of August, Didi's valuation was as high as $7.5 billion. Previously, the investors had hoped that Didi would be able to secure in 2018.

Li Jinlong, co-founder of Didi Chuxing, said in an interview that the free-riding is not an operating online ride, it can not be sucked out, but it is still a huge market. Because it specifies the number of orders received by car owners and does not need subsidies to improve the data. According to a certain amount of information service charge, itself can also generate considerable income.

The free-riding of Didi net profit once accounted for as much as 90% of Didi's net profit, and increased by 50% year-on-year. It accounted for Didi's main source of profit. In 2017, the daily order amount of the free-riding was only 1/10 of that of express cars, it maintained at about 2 million orders. However, its GMV accounted for 15% of Didi's total GMV.

"We discussed it internally for a long time whether do or not to do this business. Frankly, no matter how much action is taken, it is difficult to completely put an end to security incidents, but it is the needs of users that ultimately prompt us to make a decision." Earlier, Didi founder and CEO Cheng Wei said in public.

Today, the Hitch service of Didi has finally returned, but I don't know whether it leads Didi to get out of the current situation.

This is an article from Sina, translated by Chris Yuan.