Car-booking apps start moving up the ladder

Zhu Zhengyu, an analyst with Analysys International, said the market for high-end car-bookings is not as big as the taxi-hailing one, but the profit margin is higher.

In big cities such as Beijing, it is difficult to own a car because of restrictions on issuing new license plates, he said.

Moreover, with the government's ongoing campaign to cut down on the official cars, these high-end service providers are expected to see an increasing number of orders from corporate clients, Zhu said.

The latest policy guidelines mean that most government cars－about 90 percent of the total number－will be auctioned off, and only those for minister-level officials and for public security purposes, such as police cars, will be kept.

Officials will be getting monthly commuting allowances ranging from 500 yuan to 1,300 yuan.

Wang Xiaofeng, an analyst at Forrester Research, said it makes sense for both Alibaba-backed Kuaidi and Tencent-backed Didi to enter the high-end car-hailing market as the two companies have invested heavily to build up their brands.

Statistics from Analysys International show that by the end of June, the number of accounts registered with taxi-hailing apps totaled 130 million, with Kuaidi accounting for 53.57 percent and Didi for 45.56 percent.

Wang said that ride-summoning apps are a strategic sector for Baidu, Alibaba and Tencent to carry out their location-based services.

"The apps help gather a lot of data about the consumption habits of users, such as where they usually go on a Thursday night. The information can be useful for these Internet giants to offer other services, such as coupons or cinema tickets," she said, adding the data concerning high-end well-spending users can be even more valuable.

Baidu's partner Yongche has offered subsidies to drivers since early August to encourage them to join its service team. The daily subsidy for each driver is 80 yuan. Yongche claims it is just a temporary move, but analysts said it signals the company's intention to attract more drivers before Tencent-backed Didi rolls out its competing service later this month.

Compared with price-sensitive taxi-hailing app users, Zhu from Analysys International said high-end business users focus more on service. "Whoever provides the best services wins the competition," he said.

Light-asset companies, such as Yongche and Kuaidi One, do not own a single car. Instead, they sign contracts with carrental companies and function more as information-sharing platforms.

"It would be challenging for light-asset companies to compete with companies that own cars and drivers. After all, the quality of their service depends on their supplier, not themselves," Zhu said.

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