The industrial chain is deeply cultivated to control transport capacity, and diversified exploration to build ecology

Ride-hailing is both a business and public service infrastructure, and the core barrier is the control of capacity.

Travel market size reached 2 trillion yuan, four-wheel travel accounted for 47%, high-frequency demand growth rate of nearly 15%; The traditional taxi is a business that depends on the license plate, which has many pain points, low efficiency and obvious regional cut;

The essence of online car booking is the spatio-temporal matching of travel demand and transport capacity; Demand tidal properties, dispersed and homogenized, price sensitive, non-viscous; The supply chain is short, the added value space is small, the transport capacity control is difficult, and the drivers tend to live on multiple platforms;

The net about car essentially makes money by scale and matching efficiency, strong cross-side network effect; The core of building barriers lies in the ability to control transport capacity, and there are two paths:

1) Product side diversification to supplement capacity;

2) The supply side is redone to enhance the viscosity of B end.

Travel is an important public service infrastructure, first-tier cities continue to tighten policies, stricter supervision is forcing platform reform, compliance and safety is always the focus of supervision.

Why the fight is more critical: Drunken Weng intends to mobile payment, the participants have different purposes.

High-frequency travel is an important scene of mobile payment, and the network ride-hailing scene has lower promotion costs for mobile payment;

Not to profit as the goal of the game intensified the intensity of the travel war: Tencent for Didi brought capital, flow, technical support, Ali with Alipay to support fast, subsidies war unprecedented fierce.

The objectives of the participants are different: BAT intends to close the ecological loop and empower the industrial chain, so it invests in proxy wars; Meituan intends to improve the life service ecology, so do traffic aggregation platform, vehicle manufacturers to expand services and alleviate inventory pressure.

BAT royal three never absent, an inside after joining forces to hustle outside, but it is difficult to become a boat, network about car leaders are diversified.

Tencent Ali early intervention, oligarchic competition pattern soon formed, mobile payment market after the purpose of breaking the cash return margin reduced, Didi Kuaidi merger a total of foreign enemy Uber;

The cooperation between Uber and Baidu is fierce, but Didi relies on the support of the giant to fight closely, and the world supports Uber's rivals. Under the background of stricter supervision, Uber and Didi eventually withdraw from the Chinese market by mutual shareholding;

However, there are still many disputes in the industry: the lack of viscosity at both ends of BC makes it difficult for subsidies to continue to make profits; C2C and B2C routes are swinging, compliance is not big, big is not compliance; Authenticity sharing disputes, new capacity and idle resources coexist;

Global ride-hailing platforms are on the second growth curve, Uber is becoming a food delivery and delivery company; Didi has obvious advantages in the field of travel products, transport capacity control ability, AI and data analysis technology, and entering the community group purchase is not only for development, but also to enhance the valuation; The United States group connects people and services business logic is clear, travel is an important part of local life services, the United States group has always been covetously.

1. It is both a business and a public basic service, and it is always in a game with regulation

1.1. Taxi is a traditional business based on license plates, with many pain points and regional fragmentation

"Line" is a high-frequency rigid demand market with a scale of 2 trillion, and the overall growth is stable. The continuous deepening of urbanization, the increase of business activities and the improvement of residents' living standards drive the growing demand for transportation, and the size of the domestic road transportation market increased from 1,385.3 billion yuan in 2015 to 1,515.8 billion yuan in 2019. It is expected to reach 1,906.6 billion yuan by 2025.

Four-wheel travel is the highest proportion and fastest growing subdivision track. In 2019, the four-wheel travel market, including hitch, ride-hailing and ride-hailing, was RMB 711.9 billion, accounting for 47.0% of the total road transportation market, and is expected to increase to RMB 1,500.5 billion in 2025, accounting for 57.7% of the market share.

The traditional taxi industry is a regulated industry relying on license plate access, with obvious regional segmentation characteristics, and there is a large room for improvement in supply and operation efficiency under administrative control. In order to prevent excessive competition in the industry and aggravated road congestion, the government tightened control on the number of taxi and private car licenses, the number of vehicles and service prices are strictly controlled, the driver entry threshold is high and the service form is single, and the supply side transport capacity lags behind the market demand.

A long wait is a pain point. In 2019, the number of urban taxis in China was 1.102,400 units, with a year-on-year growth rate of only 0.48%; More than 50% of consumers said that the average waiting time for a taxi is more than 10 minutes, and the waiting time is more than 20 minutes in the morning and evening peak hours and extreme weather conditions.

1.2. The nature of online car booking is space-time matching, and there is a tendency of multi-platform habitat in both supply and demand

Travel is a local life service that moves at both the B and C ends, and the essence is the matching of travel demand and transportation capacity in time and space. In the pre-Internet era, the society realized the spatio-temporal matching of travel demand and transport capacity by concentrating them in the "station". The traditional offline taxi recruitment model is to sum up the fuzzy demand curve through the driver's personal experience to achieve supply and demand matching.

The Internet has changed the transmission mode of information flow between supply and demand. By improving the efficiency of information transmission, it realizes the infinite convergence of travel demand and supply curve, thus improving the spatio-temporal matching efficiency of resources and obtaining super profits. Ride-hailing also improves the peak capacity resilience of urban public transport services, providing up to 15-20% of the total capacity supplement.

Demand side: Tidal properties, dispersed and homogeneous demand, price sensitive, non-viscous.

Travel demand has typical tidal properties, and there is a matching demand for the time and space of transport capacity: the morning and evening peak (demand accounts for nearly 40%) and the demand during bad weather breaks out in a centralized way, and the demand exceeds the supply in stages, but the supply exceeds the demand in leisure time. There is a phased concentration of travel routes, and the flow of people flows in a single direction: the morning and evening peak flows tidally between the residential area and the city center.

Homogenized standard service, C end price sensitive without stickiness. Urban commuting demand is high and the standardization process is high, passengers are price sensitive, and whoever subsidizes more users will flow to which platform. Demand characteristics determine that there is less interaction between users, and comments on a single driver cannot generate positive externalities for other users. Peak users are essentially competitive relations, competing for limited supply side drivers, under the guidance of "call to the car" as the core goal, there is a natural tendency of multi-platform habitat.

Supply side: the supply chain is short, the space to provide added value is small, the platform lacks control over the transport capacity, and the driver also has a tendency to inhabit multiple platforms.

There is no employment relationship between the platform and the driver, which is regulated by rules. Moreover, due to the short supply chain of online car booking, the platform has weak capacity control: during holidays such as the Spring Festival and bad weather, drivers choose to go offline because they are afraid of bad weather, which leads to the loss of supply side capacity (drivers go offline).

At the same time, there is a bottleneck limit for the production capacity of a single driver, and the relationship between drivers on the platform is essentially competitive. The platform in peak demand has weak bargaining power for drivers, and drivers in off-season traffic demand also have the characteristics of multi-platform habitat, and the platform that can bring more single volume and better quality order delivery has short-term advantages.

1.3. To make money from scale and matching efficiency, the core of building barriers is to control transport capacity

The net about car essentially earns money from scale and matching efficiency, strong cross-side network effect, weak scale effect.

Disassemble the revenue of online car-hailing platforms:

Commission rate has ceiling, platform growth by doing GMV. There are two ways to increase revenue: GMV and commission rate, but the commission rate increase has an upper limit and a balance point, and if the commission rate is too high, there will be a loss of supply side capacity. Therefore, increasing GMV is the core path to increase revenue.

The essence of GMV growth is to compete scale and matching efficiency: GMV can be further divided into the growth of order number and customer unit price. Order number is an indicator of scale, and its growth depends on order volume and order fulfillment rate, testing the spatial distribution efficiency of order time and distance on demand side and supply side capacity.

The increase of customer unit price mainly comes from product upgrading and differentiation services: Customer unit price is affected by order distance, time, product grade and unit price. The order distance and time are certain, and the floating space of unit price is limited under the dual constraints of market competition and rental car pricing anchor. Providing differentiated services (such as private cars, etc.) has become the main path to increase the unit price of passengers.

The total capacity is the total constraint of all the above factors, and the control capacity is the core barrier: the spatio-temporal matching ability of the capacity determines the ordering efficiency and service experience of the online car booking platform, and the current capacity improvement is mainly achieved by providing drivers with incentives.

First-mover advantage needs to precipitant cross-edge network effect, which is obvious for scale and efficiency improvement: in the early stage of industry development, due to low demand and supply density, it is often difficult to match the time and space of demand and supply, and the ordering time is long and the distance is long, which seriously affects the supply and demand experience. After years of market education, the network car head platform has accumulated a large enough cross-side network effect, which has brought about the improvement of demand and supply density, which directly improves the efficiency of supply and demand spatio-temporal matching, and brings a better taxi experience.

For passengers, a waiting time of 3-5 minutes requires a high-density, extensive network of transport capacity and a dispatch system supported by strong computing power to quickly calculate the optimal route. For the driver, the order includes the receiving distance and the travel distance, and the long sending distance will lead to the reduction of the driver's order completion rate per unit time, and then affect the unit time income.

In the early days of online car booking, the linear distance (without considering traffic jams and one-way street factors) dispatching system was adopted, and the main dispatching logic was distance priority. With the development of mapping technology, the Estimated Arriving Time (ETA) system was gradually changed. Based on the real-time map, the estimated arrival time was calculated by taking into account traffic jams, one-way streets and other factors. ETA ordering technology has extremely high requirements for maps and algorithms, so the ordering system (algorithm) is the core technology of the ride-hailing industry.

The order dispatching logic of Didi is the global optimal solution of GMV maximization, but the transport capacity in peak demand is the only constraint, and the function of order dispatching logic is not obvious: supply and demand forecasting, route planning, service sub-(driver service evaluation system), cloud computing and machine learning, and the objective function is the global optimal solution of GMV maximization. However, in the case of limited transport capacity, the effect of this strategy is not obvious: the vehicle profit ratio reaches the peak, the supply side of the transport capacity becomes the core constraint, and the analysis and matching of supply and demand is not important.

The core of the network car construction barrier lies in the control ability of transport capacity, and there are two ways to improve the supply side transport capacity control:

1) Diversified products supplement peak capacity;

2) Redo and deepen: lengthen the supply chain length and increase complexity, deeply participate in the upstream of the industrial chain, and improve transport capacity control through vehicle control when users and drivers are difficult to control.

Path 1: Free ride and carpooling are effective products to solve the shortage of capacity and improve the control of capacity, while also lowering the price threshold and harvesting price sensitive customers. Carpooling aggregates demand in time and space, and concentrates passenger demand on the main trunk line for matching, which greatly improves the single loading capacity of the driver. In the process of carpooling, there will be a combination effect: the more overlapping routes, the more obvious the combination effect.

Uber's Uber Express Pool product is based on the above principle: Passengers who choose express pool need to wait for 2-3 minutes first, the system calculates the passenger's boarding point, and passengers walk to the boarding point (2-3 blocks) according to the map instructions to get on the bus. When they arrive near the destination, passengers get off the bus and walk several blocks to reach the destination.

Uber Express Pool attracts more passengers to use ride-sharing through low price and improves order intensity; Through passengers walking to the boarding/alight point, the demand is aggregated in space, and the driver only needs to pick up passengers on the main road, which greatly reduces the detour time and improves the proportion of route coincidence.

The actual operation is more complicated, and Hitch faces regulatory and profitability challenges. In the actual operation of Hitch business, the low acceptance of carpooling, the changing of actual road conditions, and the low accuracy of maps lead to the weak effectiveness of pooling, and both drivers and riders are in need of subsidies for a long time. Uber and Didi's carpooling business has not yet achieved profit.

Path two: Deepening the supply side industrial chain. Enrich the depth of the supply chain, and enhance the B-end stickiness and capacity control through value-added service price value creation. By continuously enriching the supply chain on the supply side, the platform improves the richness of the product side and the complexity of the supply chain.

In the course of its development, Didi has always invested deeply in the supply side, reflecting its strong willingness to control transportation capacity. Didi has optimized transportation capacity deployment by improving technical capabilities and research depth, and has also cooperated with a number of car companies and research institutes to make breakthroughs in frontier fields such as new energy, autonomous driving, big data, and smart travel, and continue to strengthen supply chain capabilities.

Improve the stickiness of car owners and drivers to the platform: Since 2016, Didi has provided free medical examination rights for drivers, and promoted the establishment of a car owner service credit system to encourage good services to have good income. Launch an owner growth program.

Ensure adequate supply of vehicles: Didi helps rental companies purchase vehicles and put them into the operation of Didi's platform through financial cooperation. For individual car buyers, the "No. 1 Car" mall is launched to provide financial channels for car purchase.

Reduce vehicle operating costs: cooperate with refueling parties to provide owners with low-price refueling rights; Launching small orange charging, integrating the charging services of various charging pile operators, providing charging convenience for new energy owners, Didi is also promoting the integration of maintenance business.

In August 2018, after the "Hitch incident", Didi has begun to fully carry out the "network car" compliance business, and announced the adjustment of the organizational structure in December 2018, marking the comprehensive acceleration of Didi's re-doing on the supply side:

The special express business group was merged to establish an online car-hailing platform company. Fu Qiang, former head of the private car business department, is the senior vice president of the group and the CEO of the online car-hailing company.

The former small Orange car service and auto Asset management Center (AMC) merged, upgraded to new car service, established the owner service company, by the former express business department head Chen Ting as the group senior vice president and general manager of the owner service company.

In 2018, Didi announced the establishment of a one-stop car service platform around car owners and cars. Didi, together with 31 automotive industry partners, officially announced the establishment of the "flood alliance", the participating enterprises include from parts to vehicle manufacturing to new energy industry, vertical integration of the entire industrial chain:

Baic, GAC, Volkswagen, Chery, BYD and other first-line automobile manufacturers;

Ningde Times, special call and other new energy enterprises;

Car building new power car and home, Weima automobile;

Industry components manufacturer Continental Group.

Didi takes the operating cost per kilometer as the core indicator, and cooperates with the upstream and downstream of the industry in the vehicle design stage to redefine and create exclusive car products for sharing. Didi is working with a number of car companies to design shared cars for the future. The company and car companies to build a car operator platform, instead of family ownership of cars, trying to build services and shared car rental and sales, refueling, maintenance, charging, finance and a series of support systems.