Didi Chuxing is making a further push into the financial arena as it looks to diversify its business amid huge losses. We reported in January that the company, which controls a dominant slice of China’s ride-hailing market, released financial and insurance products targeting riders and drivers. Its service offering just broadened after the startup launched on Thursday an online financial system aimed at car leasing and fleet management companies.
The move to carve out a product exclusively for third-party partners is telling of Didi’s conviction to secure more drivers and cars amid changing industry currents. In its purest form, a ride-hailing company serves as a marketplace connecting individual drivers and passengers. As Beijing continues to rein in the sector over safety concerns and, some argue, threats that ride-hailing poses to state-owned taxi operators, the industry little by little sheds its appearance as a sharing-economy business.
The most pivotal change comes in the form of government-issued licenses required for both drivers and the cars they operate. To obtain those permits, drivers must go through background checks and exams. The cars, on the other hand, must be fully insured, registered as commercial vehicles and dumped after eight years, as taxis do.
These rules essentially turn ride-hailing into a souped-up, digitally powered manifestation of the taxi industry. To counter the sharp decline in drivers and cars due to new regulatory hurdles, players like Didi either have to invest in driver and fleet management, or outsource the work to third-party companies.
Didi is sticking to its internet play by aggressively partnering with outside partners. These include car leasing companies, which take care of the costs of running a commercial vehicle for drivers. There are also driver management firms, which recruit, train and manage individuals to be deployed on ride-hailing apps. In other words, these partners are essential to ensuring Didi doesn’t spend its way into the traditional mode of a taxi company, while giving it a healthy supply of drivers and cars.
As such, Didi has strong incentives to get pally with these driver and fleet managers. The new financial service, according to Didi, aims to make its partners’ lives better by providing risk control tools built upon its mountains of driver data. The freshly minted software suite is expected to serve 1,500 leasing partners by the end of 2019.
“The ability to monitor a ride-hailing vehicle’s operation, performance and maintenance in real-time is a tremendous asset for drivers and fleet managers, enabling them to better and more efficiently identify risks and implement place timely improvements,” said Xiaoyu Liu, head of Didi’s financial services operations in China.