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The logo for Chinese ride-hailing company Didi Global Inc is pictured during the IPO on the New York Stock Exchange. Picture: BRENDAN MCDERMID/REUTERS
The logo for Chinese ride-hailing company Didi Global Inc is pictured during the IPO on the New York Stock Exchange. Picture: BRENDAN MCDERMID/REUTERS

In the world of mobility, one of the best bargains of the last decade has been the discounted rides offered by many ride-hailing services, especially as they have entered a new market. This type of discount is sometimes dubbed the “millennial lifestyle subsidy” and it is a savings I have enjoyed taking full advantage of.

However, ride-hailing businesses are, in theory, no longer scrappy start-ups. Some of the world’s largest ride-hailing companies — Uber, Lyft and Didi — are now publicly traded. Southeast Asia’s Grab plans to join them later this quarter through a SPAC merger with blank cheque company Altimeter Growth. These companies, which raised billions in private markets, were supposed to start reducing the free-flowing spending on geographic expansions and discounts for riders and drivers. To show this hasn’t really happened yet, let’s take a closer look at Didi’s situation.

Over the course of 2021, Didi expanded into my native SA, as well as into Egypt and Kazakhstan. Didi even flirted with the idea of entering Western Europe. Job postings suggest Nigeria might be the next entry target for the China-headquartered mobility giant.

Didi’s commanding position in its home market seems to be the source of much of its confidence in travelling abroad. However, that dominance is in the early stages of a mounting new challenge.

According to data from China’s ministry of transport, compiled by my colleague, Jinghong Lyu, Didi provided just shy of 75% of China’s ride-hailing trips in September, down from about 80% in July. This does not include Huaxiaozhu (loosely translated as “Piggy Express”), Didi’s discounted service targeted at younger riders in China’s small cities.

While this fairly minor dip is unlikely to cause sleepless nights for Didi executives, it does come at the same time the regulatory environment is tightening and rivals are building up their war chests. In particular, two carmakers and tech-backed ventures are gathering capital and slowly gaining market share.

Nikkei reports that T3 mobility raised $1.2bn in late October, which even in the ride-hailing world is a lot of money for such a new company. T3 was founded in 2019 by three state-owned vehicle-makers, FAW, Dongfeng and Changan, along with internet giants Tencent, Alibaba and Suning. The latest funding round comes from Citic Group and other state-backed investors.

The other company mounting a revitalised challenge is Caocao Mobility, a spin-off from automaker Geely, which began as a premium private car service but is now targeting the general ride-hailing market. Caocao raised nearly $600m in September.

The ride-hailing market in China is growing again and a big part of the new race for mobility customers is for these businesses to pursue customers in China’s so-called tier 3, 4 and 5 cities, which have not yet saturated their ride-hailing demand.

Fierce competition among well-funded companies can be good news for the consumers who receive heavily discounted fares. Didi’s international expansion means prices should be favourable for consumers in those markets. Meanwhile, the burgeoning wave of domestic ride-hailing expansion means Chinese consumers should also benefit from a quest for market share. This leads me to believe the millennial lifestyle subsidy isn't going anywhere for now.

Bloomberg News. More stories like this are available on bloomberg.com


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