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UPDATED: May 29, 2015 NO. 10 MARCH 6, 2014
A White-Hot Battle
Backing a price war between cab-booking apps serves the larger ambition of China's Internet companies
By Zhou Xiaoyan
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Alipay accounted for a dominant 69.6-percent share in the third-party mobile payments while Tencent only accounted for 3.3 percent in 2013, according to Analysys International. However, experts believe Tencent still has a shot at catching up, thanks to its increasingly popular mobile chatting app WeChat.

"Tencent is right now making efforts to move into the mobile payment sector by integrating payment functions into the company's dominant WeChat app. So it's hard to say if Alibaba enjoys an edge," said Zhang Meng, a researcher with Analysys International. "Most of the people who use Alipay are those who want to make transactions and then pay their credit card bills. But as a social networking app with more than 400 million users, WeChat's users are more likely to buy things such as cinema tickets that they would enjoy offline."

Zhang predicted that the duopoly in the taxi-booking app market may last for a long time given the deep pockets of the two companies.

Grabbing as much share as possible in the mobile payment market serves the even larger ambition of the two arch rivals—establishing an O2O (online to offline) sphere covering every aspect of people's lives by offering location-based smartphone services. Tencent, Alibaba and search engine giant Baidu are all competing to establish dominance in the field, as a way to cash in on China's mobile Internet wave.

Tencent announced on February 19 that it will purchase a 20-percent stake in restaurant ratings and group-buying website Dianping for $400 million.

On February 10, Alibaba offered $1.1 billion to acquire navigation company AutoNavi Holdings Ltd., following the previous deal with group-buying website Meituan.com.

Baidu has joined the war too, with its alliance with group-buying website Nuomi.com and online app store 91 Wireless.

Risk factor

As convenient as they may be, taxi-calling apps have also aroused mounting concerns over safety issues. In order to snap up taxi orders and claim as many subsidies as possible from both apps, cabbies usually install more than one app and constantly check them to grab more cab calls, even during driving. Some of them even have several smartphones in the taxi, each dedicated to one taxi-booking app. This has the potential to greatly distract drivers' attention, thus posing a threat to driving safety.

An investigation conducted by The Beijing News shows over 60 percent of 50 surveyed passengers think it could be very dangerous if drivers snap up taxi orders while driving and 74 percent of them have seen that happen when they are in a moving taxi.

An editorial from China Business News claims it may also cause legal disputes.

"If an accident happens because the taxi driver is snapping up orders, should those apps be held legally responsible?" the editorial asked.

Also, while using those apps may be quite convenient for young people, it could be difficult for unprivileged groups, such as senior citizens, foreign travelers and migrant workers. As drivers prefer taking taxi orders from apps, they will inevitably overlook those people who have no choice but to hail taxis standing on the side of a street. This will dent the image of China's cities, said the editorial.

Some cities have taken measures to guard against those potential risks.

For instance, the Beijing Municipal Commission of Transport said in February that each taxi is only allowed to be linked with one cab-hailing app. Cab drivers should prioritize driving safety before responding to smartphone messages. The commission said that it will team up with Beijing's transport law enforcement corps to enforce the regulation.

The Shanghai Municipal Transport and Port Authority prohibits cab drivers from using taxi-hailing apps during morning and evening rush hours. The new regulation took effect on March 1.

The transport authority in Guangdong Province said that it would intervene with those taxi-hailing apps if they threaten driving safety or cause market disorder.

"Taxi-calling apps are a new thing. During its initial stage, we should observe carefully," said Liu Xiaohua, Deputy Director of the Guangdong Transport Department. "However, whenever they cause driving dangers or market disorder, relevant government authorities are obliged to intervene."

Email us at: zhouxiaoyan@bjreview.com

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