Shenzhen and Chongqing join! Multiple regions are once again warning that the online car hailing market is becoming saturated

After Sanya, Zhuhai, Jinan, and Suining, Shenzhen and Chongqing also issued saturation warning signals for ride hailing services.

On April 29th, the online ride hailing supervision information exchange system released data for March, which showed that a total of 891 million orders were generated in March, an increase of 15% compared to the previous month. On the other hand, as of March 31, 2024, a total of 6.791 million driver’s licenses and 2.847 million vehicle transportation licenses for ride hailing services have been issued in various regions, an increase of 29.9% and 26.5% year-on-year, respectively.

Overall, the ride hailing market is in a state of capacity saturation and fierce competition in the industry. On the other hand, the industry compliance rate has increased, and there have also been conventions to promote industry self-discipline.

Publish capacity warnings in multiple locations

Since last year, regulatory authorities in multiple regions have issued warnings regarding the saturation of the ride hailing market, and many cities have continued to issue relevant warnings this year.

On April 11th, the Shenzhen Municipal Transportation Bureau released operational dynamics and risk warnings for the ride hailing industry, stating that the Shenzhen ride hailing market has become saturated. In recent years, some practitioners have been evaluated and withdrawn from the ride hailing industry in Shenzhen. Enterprises and practitioners who intend to engage in ride hailing services should have a detailed understanding of relevant regulations, conduct market research, fully consider changes in operating income due to factors such as supply and demand, market conditions, fluctuations or continuous declines, objectively evaluate the actual income level of industry practitioners, and make rational and prudent career choices.

On April 16th, the Chongqing Municipal Transportation Commission issued a risk warning for investment and operation of ride hailing services in the first quarter, stating that there were approximately 65000 ride hailing vehicles in Chongqing that attended and received orders on a monthly basis, accounting for 54.7% of the total number of ride hailing services in the central urban area. With the current order volume, it is actually difficult to support the participation of all 118000 ride hailing services in the central urban area, and the vehicle transportation capacity has far exceeded the actual demand.

Last year, cities such as Sanya, Zhuhai, Jinan, and Suining have successively issued notices on risk warnings for the online reservation taxi industry.

According to data released by some cities, the income of ride hailing drivers is lower than that of taxi drivers. The 2023 White Paper on the Development of the Ningbo Taxi Industry released by the Ningbo Highway and Transportation Management Center shows that from an operational perspective, the daily average revenue of touring cars was 471.6 yuan last year, while the compliant ride hailing service was 361.4 yuan; The daily average business volume of touring bikes is 18, and the daily average business volume of ride hailing bikes is 16. At the same time, from the perspective of daily passenger mileage, the daily average mileage of cruisers is 121.9 kilometers, and the online ride hailing mileage is 120.2 kilometers, which means that the revenue from online ride hailing per kilometer is lower than that of cruisers.

Many drivers have also told First Financial reporters that their income is declining. A Nanjing ride hailing driver told reporters, “Taking a 30 kilometer order as an example, in the past, the revenue from a 30 kilometer order was between 60 and 70 yuan, but now it is only about 50 yuan.”

Guangdong ride hailing driver Zhang Shifu told reporters that he believes the biggest change in the past year is that the working hours have increased by two or three hours, while the turnover has decreased by 35%. He stated that this change is mainly due to a decrease in the number of orders. “Previously, there were 3 to 4 orders per hour, but now there are 1 to 3 orders per hour. In reality, 2 orders are more common (excluding long-distance orders).”

Ji Xuehong, director of the Automotive Industry Innovation Research Center at Northern Polytechnical University, revealed that according to his research, about 50% of drivers currently earn between 30 and 45 yuan per hour in daily income. If the median is calculated at 38 yuan, the income for 10 hours is 380 yuan. After deducting various related costs, this income belongs to low to medium income. To achieve relatively high income, there must be a relatively long driving time.

Strengthening capitalization

Although the transportation capacity is approaching saturation, from the overall changes in the industry, there has been a significant improvement in compliance issues.

Currently, some platforms have begun to launch new measures. On April 9th, at the Kunming Online Ride hailing Industry Association Conference, 18 online ride hailing platform companies in Kunming jointly signed the “Kunming Online Ride hailing Industry Self discipline Convention” (hereinafter referred to as the “Convention”), agreeing not to engage in unfair competition such as “burning money war” and “big data killing”, including platforms such as Shenzhou Special Car, Shouqi Ride hailing, and Caocao Chuxing.

In February, the Chengdu Municipal Federation of Trade Unions and the Municipal Transportation Bureau jointly launched the Chengdu City Online Ride hailing Industry Self discipline Convention, establishing a differentiated management reward and punishment system and a reward and punishment mechanism to support the superior and limit the inferior for drivers.

From industry data, there has been a significant improvement in compliance issues in the industry. According to statistics from the online ride hailing supervision information exchange system, as of March 31, 2024, among the top 10 ride hailing platforms in terms of order volume, 5 platforms had a compliance rate of over 90%, and only 2 platforms had a compliance rate of 90% in the same period of 2023.

Another significant change in the ride hailing industry is the increase in capital activities. Since the beginning of this year, many travel companies have accelerated their capitalization layout, and many of them have once again faced challenges in going public.

On March 25th, Ruqi Chuxing once again submitted its prospectus to the Hong Kong Stock Exchange. According to the prospectus, Ruqi Chuxing’s revenue in 2021, 2022, and 2023 was 1.01 billion yuan, 1.37 billion yuan, and 2.16 billion yuan, respectively, with net losses of 685 million yuan, 627 million yuan, and 693 million yuan, respectively. The main reason for the loss is due to the high cost of revenue generated by expanding geographical coverage and acquiring new users in the early stages of business development. In 2021, 2022, and 2023, the travel business revenue of Ruqi Chuxing (ride hailing, Robotaxi, and Shunfeng) was 1.347 billion yuan, 1.796 billion yuan, and 2.741 billion yuan, respectively.

Ruqi Chuxing submitted a prospectus to the Hong Kong stock market in August 2023, but the prospectus later became invalid. Dida Chuxing is also impacting the IPO here. On March 19th, Dida Chuxing submitted its prospectus to the Hong Kong Stock Exchange. According to the prospectus, Dida Chuxing’s revenue in 2021, 2022, and 2023 was 780 million yuan, 570 million yuan, and 820 million yuan, respectively. Multiple business data shows that Dida Chuxing is facing challenges in the ride hailing and taxi services. In 2021, the subsidies provided by Dida Chuxing to private car owners accounted for 5.9% of the total service cost, and the proportion increased to 13.8% in 2023. Dida Chuxing stated that the increase in subsidies for private car owners is mainly due to the platform’s strategic increase in marketing efforts for private car owners to incentivize drivers to provide ride services on the platform.

In addition to the aforementioned platforms, on April 22nd, the China Securities Regulatory Commission released a notice on the filing of Pony AI Inc.’s overseas issuance and listing. The autonomous driving company, Pony Smart, plans to list on the NASDAQ or New York Stock Exchanges in the United States.

Regarding the situation where travel companies have been more active in the capital market since the beginning of this year, Ji Xuehong told First Financial that going public can enrich funds for specific companies, provide support for business expansion, and is also beneficial to the industry, which is conducive to enhancing its vitality. However, travel companies also face many challenges when going public, such as user information protection, compliance with transportation capacity, and platform profitability.

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