Image Source: Visual China

Lanjing News, July 17 (Reporter Zhang Han) "Nowadays, the most we earn is hard-earned money. We drive for over ten hours a day, and after deducting the platform's commission, we only receive around 300 yuan. Then we still need to deduct money for meals and charging, leaving us with an income of 3000-4000 yuan a month, which can barely maintain our normal lives." A ride-hailing driver in Dongguan City, Guangdong Province told Lanjing News.

Through field visits, Lanjing News found that the above situation is a true portrayal of the lives of most ride-hailing drivers. With the platform's commission ratio increasing and the scale of ride-hailing drivers expanding, earning money has become increasingly difficult. "To earn a little bit of money driving ride-hailing, you still need to be in first-tier cities like Beijing and Shanghai. In small places, you simply can't make any money," said a ride-hailing driver in Shanghai.

Despite constant complaints, people still need to live. Some drivers in small counties are using their own ways to survive tenaciously outside the purview of large ride-hailing platforms like Didi and Gaode.

Taking Baodi District, Tianjin as an example, the taxi-hailing app used by most locals is neither Didi nor its subsidiary Huaixiaozhu, nor Gaode, but a taxi-hailing mini-program called "Cheng Paopao." For local residents, "Cheng Paopao" is inexpensive and economical; for drivers, the income is also more substantial.

When entering the taxi-hailing interface of "Cheng Paopao," one can find that it is actually connected to a platform called "Tongcheng Taxi." According to Tianyancha, its operating entity is "Heilongjiang Lingyun Network Technology Co., Ltd." Currently, in addition to Baodi, it operates in 25 other regions, including Wuchang City (administered by Harbin City, Heilongjiang Province) and Xinglong County, Chengde City, Hebei Province.

The commonality among these regions is that they are all economically underdeveloped low-tier cities, also known as "sinking markets" in the industry, with relatively low per capita income and populations of less than one million. Wild ride-hailing platforms like "Tongcheng Taxi" have found room for expansion in these places. These ride-hailing platforms have "prescribed the right medicine" and attracted a large number of loyal users, occupying a development space of their own, while the big players Didi and Gaode have become abandoned objects.

Behind the continuous expansion of "Tongcheng Taxi," it means that while the ride-hailing market in first- and second-tier core cities is gradually becoming saturated, China's vast low-tier urban markets still have ample room for imagination. At present, although the battle for ride-hailing in low-tier cities has not yet reached a stage of intense confrontation, it is inevitably coming.

"Didi doesn't work, and Huaixiaozhu is even worse."

Recently, Lanjing News discovered that in some small counties unfamiliar to the outside world, Didi and Gaode, the major platforms that users in Beijing, Shanghai, Guangzhou, and Shenzhen are accustomed to, do not dominate the ride-hailing market. For example, in Baodi, Tianjin, most ride-hailing drivers told Lanjing News that "Didi doesn't work, Huaixiaozhu is even worse, locals all use 'Cheng Paopao'."

One important reason for using "Cheng Paopao" is that unlike platforms like Didi and Gaode, "Cheng Paopao" does not charge a commission per order.

Based on the number of orders and passenger feedback, drivers need to pay the platform around 210-350 yuan per month, averaging around 10 yuan per day, with no restrictions on the number of passengers or the duration. The more orders received and the fewer passenger complaints, the lower the monthly fee required. The first month requires a payment of 350 yuan, and adjustments are generally made every three months thereafter. In case of violations or complaints, a single fine is about 50 yuan. However, its rigid standard is that it must be an electric car; fuel-powered cars are not allowed.

"I only accept orders from Cheng Paopao now, not from Didi or Gaode. Their starting prices are high, and the platform commission is high. We earn less, and passengers spend more, so it's not worth it," a driver on the "Cheng Paopao" platform told reporters. According to him, Cheng Paopao's predecessor was Baodi Che Bangmang, which recently changed its name. There are monitors in the cars, and it operates legally and compliantly, requiring both human and vehicle licenses when applying.

In Baodi District, "Cheng Paopao" displays two types of vehicles: economy and comfort, with a price difference of around 2 yuan. However, drivers stated that there is no difference between these two types of vehicles on the driver's end.

Lanjing News reporters found the Baodi store listed as the "Ride-Hailing Service Center" based on the information provided by "Cheng Paopao." A store staff member introduced that drivers are recommended to use their own cars or rent cars from "Cheng Paopao" at prices ranging from 2700 to 3300 yuan per month, but he said it was not recommended as the rental cost is relatively high.

Image Source: Photographed by the reporter

The staff member also added that the "Cheng Paopao" official account now has over 200,000 followers.

According to several drivers, there are currently around 500 drivers registered on "Cheng Paopao" in Baodi. If a driver drives for 7-8 hours a day, the daily revenue is approximately 200 yuan; if more than 10 hours, the daily revenue can reach 300 yuan, and during weekends and holidays, it can reach up to 400 yuan. These earnings do not need to go through platform commissions but do not include electricity costs.

Compared to the entire ride-hailing industry, drivers' income on the "Cheng Paopao" platform is considered relatively substantial. According to the "Monthly Report on the Operation and Management Monitoring Information of the Guangzhou Online Ride-Hailing Taxi Market" released monthly by the Guangzhou Municipal Transportation Bureau, from September 2023 to May 2024, the average daily revenue of ride-hailing drivers in Guangzhou decreased from 343.34 yuan to 311.63 yuan. In Wuhan, Hubei Province, a Didi driver told reporters that after deducting platform commissions and rental costs, the monthly income is less than 7000 yuan.

"For a small county, it's already very good. We're quite content. The monthly membership fee averages around 10 yuan per day, plus charging and meal expenses, all expenses combined are only 20-30 yuan, which is much more suitable than Didi," several drivers admitted. However, many local residents in Baodi also said that during peak periods like holidays, the car-hailing speed is indeed slower, sometimes not as fast as the Gaode platform.

Lanjing News reporters actually took taxi rides and found that only one of the eight drivers accepted orders on both "Cheng Paopao" and Didi. "Actually, inside Baodi, Cheng Paopao is very suitable, but outside Baodi, Didi is still better," claimed the driver who accepts orders from both platforms.

In addition to drivers' willingness to use it, citizens also choose "Cheng Paopao" because of its low prices. According to introductions, the starting price in Baodi is 5 yuan, and outside the city, it is 7 yuan; the taxi fare during ordinary hours is 1 yuan/km (inside the city) and 1.5 yuan/km (outside the city). During peak hours, prices will increase slightly but not by much. However, Didi's local starting price is around 9.5 yuan, with mileage fees ranging from 1.7 yuan to 2.1 yuan per km.

For an 8.71-km ride, the passenger only paid 13.18 yuan. "In our small county, who would spend more money to take Didi? It's not worth it," several local Baodi citizens told Lanjing News.

Lanjing News reporters found through actual taxi ride experiences that for a distance of around 10 km, Didi's fixed-price express requires the passenger to pay 35.15 yuan, while a sedan on Cheng Paopao only costs 21.76 yuan; for a distance of 1.3 km, Didi's fixed-price express requires the passenger to pay 11 yuan, but "Cheng Paopao" only costs 5.5 yuan.

Penalties for driver complaints are stricter than Didi's

It has become increasingly difficult for ride-hailing drivers to earn money, which is a consensus among all drivers.

"It used to be easier. You could work more or less depending on your mood, and you could still earn money. Now, you have to work for over 10 hours a day to make a little money," said a ride-hailing driver in Beijing. He revealed that after deducting the platform commission, the daily revenue is between 600 and 700 yuan, requiring 13 hours of work.

According to statistics from the ride-hailing supervision information exchange system, as of December 31, 2023, a total of 6.572 million ride-hailing driver licenses have been issued nationwide, more than twice the number three years ago. In terms of order volume, the average daily orders in 2023 were 24.97 million, compared to 21 million three years ago. In other words, the growth rate of drivers is much higher than that of market orders, and the growth in supply is much higher than that of demand. Since this year, many regions across the country have issued risk warnings for the ride-hailing industry.

To earn more money, drivers can only extend their working hours. "There are many drivers and platforms, but there's no choice. Now everyone is used to hailing taxis through their phones, so we have to follow the times," a Didi driver in Shanghai told Lanjing News.

In most people's stereotypes, local taxi-hailing platforms like "Cheng Paopao" and "Tongcheng Taxi," because of their low prices, should have lower requirements for drivers compared to leading ride-hailing platforms like Didi and Gaode. However, according to feedback from driver groups, in reality, "Cheng Paopao" imposes stricter restrictions on drivers than platforms like Didi, and drivers fear passenger complaints the most. Lanjing News reporters noticed that when using "Cheng Paopao" to hail a taxi, the platform pushes information to passengers, including the license plate number, driver's phone number, departure location, and a complaint WeChat ID.

"One day, after dropping off a passenger, I went to the restroom, and the platform automatically accepted an order, but I didn't know. The passenger waited for a few minutes and complained about me. This complaint resulted in a fine, and I felt very wronged," a "Cheng Paopao" driver told Lanjing News. Regardless of the reason, as long as a passenger complains, the driver is sure to be punished.

To earn money by accepting orders on "Cheng Paopao," drivers must accept this "one-size-fits-all" penalty policy. The essence is that there are now too many drivers, leading to an excess of transport capacity, and the discourse power is shifting towards the passenger side.

During actual visits to Baodi, reporters also learned that indeed, some drivers cannot tolerate "Cheng Paopao's" requirements and switch to other platforms, but their income is much lower than on "Cheng Paopao." A Didi driver in Baodi said that after deducting the platform commission, his daily revenue is around 200 yuan, not including charging and meal expenses.

The low price is the most important reason, but it is also related to the characteristics of small counties. Most drivers on the "Cheng Paopao" platform are locals who are familiar with the roads, making communication more convenient. In addition, social relations in small counties are relatively close, and one person's use will drive those around them to use it, leading to faster spread.

"Tongcheng Taxi" Continues to Expand in Low-Tier Cities

In fact, since the rise of e-commerce platform Pinduoduo, the entire Chinese internet industry has been seeking incremental growth in sinking markets, and ride-hailing platforms are no exception. Chinese ride-hailing giant Didi launched the independent brand "Huaixiaozhu" in 2020, focusing on low-priced ride-hailing services, while platforms like Gaode and Hello Bike also leveraged their respective products and business characteristics to attack the sinking market.

Through visits, Lanjing News found that unlike in first- and second-tier cities where platforms like Didi and Gaode dominate, in many counties in China, there are many local taxi-hailing platforms, with "Cheng Paopao" being just one of them. Such platforms operate almost exclusively in sinking markets like fourth- and fifth-tier cities and small counties.

When asked about their relationship with Didi, many drivers shared the same view: "Competition, it's always been a competitive relationship, but in Baodi, unless Didi can offer the same low prices as Cheng Paopao, it will never win."

However, some drivers also said, "When Didi first started crazy subsidies, Cheng Paopao was almost replaced, but later when Didi's prices returned to normal, Cheng Paopao regained the upper hand and has continued to dominate ever since."

Most local drivers believe that Didi and Gaode's pricing standards and platform commission models are not suitable for small cities.

Taking "Cheng Paopao" as an example, its predecessor was "Baodi Che Bangmang." According to its official WeChat account, it was registered as "Cheng Paopao" on June 26, 2023. Baodi has its own characteristics. Due to historical reasons, Baodi has never had a compliant taxi company since the 1990s, so taxis were private cars with taxi signs. Before Didi emerged, Baodi drivers unified their passenger pick-ups through phone calls and walkie-talkies. According to a driver's recollection, around 2000, someone went to internet cafes to distribute flyers calling for people to join, and from then on, there was precipitation and accumulation.

When entering the taxi-hailing interface of "Cheng Paopao," one can find that it is actually connected to a platform called "Tongcheng Taxi," which currently covers multiple functional sections such as ride-hailing, private cars, intercity private cars, designated drivers, car rentals, freight transportation, customized passenger transportation, taxis, and corporate vehicle services.

According to Tianyancha, the operating entity of "Tongcheng Taxi" is "Heilongjiang Lingyun Network Technology Co., Ltd.," which currently operates in 25 regions besides Baodi, including Wuchang City (administered by Harbin City, Heilongjiang Province) and Xinglong County, Chengde City, Hebei Province. However, the services provided in different cities are not exactly the same, with some only offering taxi services and others also offering ride-hailing services.

The commonality among these regions is that they are all economically underdeveloped low-tier cities, also known as "sinking markets" in the industry, with relatively low per capita income and populations of less than one million.

Based on public information and on-site interviews by Lanjing News reporters, it was found that "Tongcheng Taxi's" business originated in Heilongjiang but is continuously expanding its service range to different regions across the country by connecting to local taxi-hailing platforms like "Cheng Paopao" in Baodi and "Baixing Taxi" in Xinglong County.

According to Tianyancha, the earliest branch of Heilongjiang Lingyun Network Technology Co., Ltd. was established in Harbin in December 2017. From 2017 to the present, a total of 33 of its branches have been cancelled, and currently, 24 branches are still in operation or open.

Image Source: Tianyancha Screenshot

Public information shows that in June 2018, the transportation management department of Harbin, the capital city of Heilongjiang Province, officially issued a "Network Reservation Taxi Operating License," commonly known as a "ride-hailing license," to Tongcheng Dache. Harbin was the first city where Tongcheng Dache was launched. On February 17, 2022, the WeChat official account of Wuchang Tongcheng, a county-level city under the jurisdiction of Harbin, announced that it had integrated the Tongcheng Dache mini-program.

Blue Whale News reporters noted that on Weibo, the Tongcheng Dache account currently has a gray V mark, indicating that it had originally passed Weibo's official verification but is now in an expired state. Weibo's warning label states that the company's qualifications have not undergone the annual review, with the latest post dated May 13, 2021.

However, on the Douyin platform, the Tongcheng Dache account is still actively operating, with the latest video updated on June 18, 2024. The operating entity is Guizhou Yuecheng Technology Co., Ltd. According to Tianyancha, the company was established in 2020 and is located in Zunyi City, Guizhou Province. The legal representative is Hu Xingxia, who is also the head of the Zunyi Branch of Heilongjiang Lingyun Network Technology Co., Ltd. According to videos released by the account, on January 22, 2024, the first batch of ride-hailing cars in Daozhen Gelao and Miao Autonomous County, Zunyi City, Guizhou Province, officially went online.

Blue Whale News reporters attempted to book a ride on the platform and found that, aside from Tianjin's Baodi District, it is possible to book a car within a minute in five regions: Nenjiang City and Wuchang City in Heilongjiang Province, Weihai City in Shandong Province, Xinglong County in Hebei Province, and Zheng'an County in Guizhou Province. However, there are some differences among these regions. In Wuchang City, Nenjiang City, and Xinglong County, the platform only serves taxis and does not provide ride-hailing services. In Weihai and Zheng'an County, ride-hailing services are available on the platform, similar to Baodi District.

According to public information, Nenjiang City has a population of approximately 345,000, Zheng'an County has a population of around 400,000, Xinglong County has a population of about 270,000, and Wuchang City and Baodi District each have a population of around 700,000. In terms of both population size and economic development, these regions are far behind first- and second-tier cities like Beijing and Shanghai.

A taxi driver from Nenjiang City revealed to Blue Whale News reporters that due to the small population and relatively low per capita income, large ride-hailing platforms had not entered the city for years. Local residents are still accustomed to using taxis, hailing them by waving on the streets, which is far less modernized than in first- and second-tier cities.

"We downloaded the app because it was required by our company management. We started using it around February this year. There's a service fee of about 100 yuan per month, but no commission per ride. I can get around ten orders a day through the app, which is pretty good," said the driver.

The Ride-Hailing War in Lower-Tier Markets Has Yet to Truly Begin

The continuous expansion of "Tongcheng Dache" suggests that while ride-hailing markets in first-, second-, and third-tier cities are gradually reaching saturation, there is still significant potential in China's vast lower-tier towns and cities.

According to data from the China Internet Network Information Center (CNNIC) and the China Industry Research Institute in 2023, the penetration rates in first-tier and new first-tier cities reached 50.3% and 20.3% respectively, while the penetration rate in cities below second-tier was less than 10%. T3 Go CEO Cui Dayong has publicly stated that the majority of ride-hailing orders are still concentrated in large and medium-sized first- and second-tier cities, and that online ride-hailing services in lower-tier towns and cities are far from complete.

Didi, the giant in the ride-hailing industry, realized as early as 2020 that the growth rate of its ride-hailing business was slowing down. Users in fourth- and fifth-tier cities, influenced by their travel radius and consumption habits, are highly sensitive to price. In an attempt to test the waters in lower-tier markets, Didi launched an independent brand, "Huaxiaozhu."

According to an October 2023 report by LatePost, although orders from lower-tier cities accounted for more than 50% of Huaxiaozhu's total orders, its volume did not meet Didi's expected growth targets. However, this does not mean that Didi intends to abandon the lower-tier markets. A March 2024 report by LatePost revealed that in the fourth quarter of 2023, Didi established a specialized business unit and launched the ride-hailing franchise program "Di Alliance." This program aims to recruit franchisees in county-level markets with populations in the millions, authorizing them to operate under the Didi brand and granting them greater decision-making power in terms of rules and business strategies. In return, Didi earns transaction commissions. The Di Alliance model draws from Meituan's food delivery service provider model, delegating smaller cities deemed too costly for direct operations to franchisees. Didi expects the incremental orders from the Di Alliance in lower-tier markets to reach millions. According to sources close to Didi, while they have heard of this initiative, they are not clear on the specific progress of its implementation.

In smaller counties with limited population size and lower per capita income, platforms like "Tongcheng Dache" have found room for expansion.

However, this does not mean that these apps are a collection of only positive attributes. On the contrary, they have some shortcomings in terms of safety and security. A driver for "Cheng Paopao" remarked, "Our platform does not handle vehicle inspections as thoroughly as Didi does, which poses a potential risk." When a Blue Whale News reporter took a ride using "Cheng Paopao," they noticed the absence of system prompts like "fasten your seatbelt" and "ready to depart." Additionally, payment was not completed directly online at the end of the trip. Instead, the driver showed a payment code for the passenger to scan and complete the transaction.

In contrast, large ride-hailing platforms place a greater emphasis on safety and compliance. Following several major public incidents, Didi has implemented numerous measures to protect the safety and interests of both drivers and passengers, enhancing risk control and gaining more experience in handling disputes.

After more than a decade of development, the ride-hailing market in major cities has evolved from a state of chaotic growth to one of order and regulation, achieving significant milestones in 2024. On June 28, Dida Chuxing was officially listed on the Hong Kong Stock Exchange (HKEX); Ruqi Mobility completed its main board listing hearing at HKEX and was officially listed on July 10; Cao Cao Mobility also submitted its IPO application to HKEX in April of this year.

"Tongcheng Dache" resembles the e-commerce platform Pinduoduo, which rose to prominence by targeting users outside the Fifth Ring Road in Beijing. In the corners neglected by Didi and Gaode, it has quietly accumulated a user base in lower-tier markets by offering low-cost rides and strict penalties for drivers.

In January 2023, Didi resumed its focus on the ride-hailing business after returning to app stores. According to Didi's Q1 2024 financial report, its total ride-hailing orders in China grew by 27.1% year-on-year to 2.95 billion orders, with a daily average of 32.5 million orders, setting a new historical high.

It is clear that as the ride-hailing market continues to evolve, industry leaders like Didi will not remain indifferent. However, facing the current lower-tier market and the vast, rapidly growing group of informal ride-hailing operators, Didi's strategy to compete will likely be challenging.