In China, it seems only better-off citizens can afford to own and maintain their own car, and yet traditional taxis are outdated and lacking in numbers to meet growing needs of huge urban populations.
Enter the Kuadi Dache and Didi Dache taxi-hailing apps, which became widely available to smartphone users in China in 2013, and are changing people's transportation habits as well as the taxi and transportation industry at large.
Kuaidi Dache, owned by Alibaba, has received $725 million in funding over 3 rounds, with contributions from Japanese electronics giant SoftBank in Series D funding that closed on January 15, 2015.
Tencent's Didi Dache has raised $817 million over 4 rounds, receiving $700 million in a Series D round that closed December 9, 2014.
Clearly, bets are hedged on the game-changing nature of these apps, which link users looking for a ride to taxis trawling for a fare.
Kuaidi and Didi both report around 100 million registered users. Industry reports suggest the number of ride-fetching app users stands around 154 million in China. Together, Kuaidi and Didi own 90% of the market share.
It's not just passengers looking for a lift: More and more drivers are opting to drive for Kuaidi and Didi, in part because working for traditional taxi companies means onerous fees and regulations.
Taxi drivers working for local taxi companies in Nanjing, Beijing or Jinan, for example, may lose up to and over 50% of their incomes to "franchise fees", a monthly charge drivers must pay to the company to continue working for them. Franchise fees are commonly stipulated in many municipal taxi companies, and have been the subject of riots among taxi drivers.
This is a particularly painful cost to shoulder as taxi drivers are typically required to pay their own gas and road tolls.
Fast, tight corners over 2.5 year growth
Taxi-hailing apps Kuaidi and Didi were first introduced in late 2012. By mid-2013, Kuaidi was reporting 20,000 rides daily across two cities, with 300,000 users.
Almost immediately, these apps gained traction as they gave riders the option to offer premium rates (e.g. to pay higher fares) to attract cabs. Authorities in Beijing cracked down on this in 2013, introducing regulations requiring taxi finding apps to apply with local authorities to link their service to licenced taxi operators.
In 2014, taxi-hailing apps saw significant growth in China and abroad. By December, Kuaidi and Didi had each expanded to 300 cities and 100 million users.
In December 2014, San Fran-based Uber signed a strategic agreement with Baidu. Each of China's big three internet moguls now has their own taxi app, signalling the esteemed value of this business. Each has a proprietary edge over the other: Uber's partner Baidu happens to have a 50% share of all Internet search traffic in China, and features Baidu Map, China's pre-eminent geo-locating map and search tool. Tencent deploys its ubiquitous WeChat mobile app to help users find and pay for Kuaidi taxi rides, while Alibaba's Didi lets users pay through the likewise convenient and mobile Alipay app.
Into the beginning of 2015 however, these app companies might have found a bump in the road. As of January 12th, the Ministry of Transportation declared that the use of apps to hail a ride would only be legal if the ride were in a licensed taxi. If the government crackdowns on private, unlicensed rides, conditions could become hazardous, but so far the decree has not unduly affected business.