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BEIJING, May 16 (TMTPost) – Despite a steady rise in drivers for online ride-hailing platforms across China, the total orders in April fell 1.4% from March to 706 million in April, making a race between the drivers for orders even more fierce.

A total of 309 business licenses had been granted to ride-hailing platforms at the end of April, with 2 more platforms receiving their business licenses in April, according to data released by China’s Ministry of Transport. As of the end of April, 5.406 million drivers held special driver’s license for the ride-hailing business, representing a month-on-month increase of 3.4%. Meanwhile, 2.3 million vehicles had transport permits, representing a month-over-month increase of 2.2%.

With a market full of drivers, cars and platforms, the demand fell in April. A total of 706 million orders were received by the ride-hailing supervision information system, which was a 1.4% fall from March.

An industry insider told TMTPost that ten orders per day for a driver is the minimum for them to cover their fuel and other costs and any number below 10 means the driver is losing money by working. However, the average daily number of orders per car was 10.2 in April or less than 5 orders per driver in April, which was a sign of danger for the industry.
The average daily order per car was 10.2 in April, which was a sign of danger for the industry.

The average daily order per car was 10.2 in April, which was a sign of danger for the industry. Source of data: the Ministry of Transport

“The ride-hailing market is so crowded that it seems that one more driver could bust the industry,” he said, adding that local governments are moving to issue guiding opinions to stop newcomers from hitting the already busy lanes, probably with empty cars.

“The economy may still be in doldrums in the wake of the Covid-19 pandemic based on the ride-hailing orders in April,” he pointed out.

Of the top ten platforms that brokered the most orders in April, OnTime, a platform owned by Guangzhou Automobile Group (GAC Group), had the highest compliance rate. Didi, the industry leader, ranked the eighth and Meituan ranked the ninth.

Of major metropolises, Hangzhou registered the highest compliance rate in April while Kunming was the worst performer.

Sanya and Dongguan Suspend Licensing

The Municipal Transportation Bureau of Sanya in Hainan province has decided to suspend issuing ride-hailing business license and transportation permits.

The bureau issued a notice in early May, warning about illegal operations amid the saturated market in the wake of a surge of the number of ride-hailing platforms and cars in Sanya in recent years. To maintain the market order and protect the interests of passengers and other operators, the issuance of ride-hailing business license and transport permits were suspended from May 5.　

Sanya will then assess the capacity of the ride-hailing industry and accordingly decide on the date to resume licensing.

The Dongguan Municipal Transport Bureau in Guangdong province also released a notice, requiring drivers to register with a car-hailing platform before receiving an operating permit from May 5. In the first quarter of 2023, Dongguan had 23 ride-hailing platform companies, 43,000 licensed cars and 10,100 licensed drivers.

A large number of cars are crucial for the car-hailing platforms to increase transactions since a small fleet is unbale to match the demand from drivers and passengers. However, excessive players in this industry will intensify competition, leading to a drop in driver income and longer driving hours.

The number of drivers of the market leader, Didi, has risen 46% in two years. "Nowadays, the difficulty to find a job plus the low entry threshold make a ride-hailing driver a preferred job for many people", said a driver with nine years of work experience in the industry from Guangzhou city.

"In order to ensure sufficient capacity, the platform prefers more drivers while their income is disregarded. Because of the increased number of drivers, we need to run another two to three hours to earn the same amount of money as before, while the price per kilometer drops from 2.5 yuan to 1.5 yuan,” said the driver.

Another driver at Didi became a truck driver after getting disillusioned with the situation of the industry.

To increase the income of employees, a cap has been placed on the percentage of revenues kept by the car-hailing platform. On November 30, 2021, the Ministry of Transport and other eight departments required the companies to strengthen communication and consultation with local trade union organizations and industry associations, and reasonably set the cap. On April 17 this year, the Ministry of Transport released a work plan, requiring major ride-hailing platform companies to lower the upper limit on the percentage of revenues kept by the them by the end of May 2023, to leave a reasonable income for employees.

The compliance rates of the car-hailing industry are still low. According to authorities, as of December 31, 2022, there were 298 licensed online car-hailing companies in China; a total of 5.09 million driver’s licenses and 2.118 million vehicle permits were issued around the country. Among the top 10 car-hailing platforms in terms of orders, On Time has the highest compliance rate while Huaxiaozhu the lowest. 18 metropolises, including Hangzhou, Guangzhou and Xiamen, have compliance rates of over 80%.

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