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China's ride-hailing decline hurting car sales: report

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The use of ride-hailing apps is declining in China as operators scale back incentives for drivers, contributing to the slowdown in car sales in the world's biggest auto market, according to a Sanford C Bernstein report.

[BEIJING] The use of ride-hailing apps is declining in China as operators scale back incentives for drivers, contributing to the slowdown in car sales in the world's biggest auto market, according to a Sanford C Bernstein report.

Total daily active usage across ride-hailing apps in the third quarter fell 6.3 per cent from a year earlier, marking a fifth consecutive quarterly drop, Bernstein said, citing TalkingData figures. Didi Chuxing, which accounted for 93 per cent of total daily active users in the last 12 months, saw rider and driver app usage slide by 5 per cent and 23 per cent, respectively, according to the report.

"Driver density is a key determinant of user wait times and the perceived convenience ride hailing services offer," Bernstein analysts including Robin Zhu wrote.

"The simplest explanation for declining driver usage is the lower incentives paid by the ride-hailing platforms, and the meagre levels of take-home pay drivers stand to make once costs like fuel, maintenance, and vehicle depreciation are deducted."

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The report highlighted Didi, noting that the world's biggest digital-hailing service blamed driver incentives as a main reason for losses of around 11 billion yuan (S$2.12 billion) last year. "Were Didi's efforts to reduce losses what's impacted driver numbers? Could the ride-hailing industry be 'disrupted' by the lesser availability up of cheap capital, before it can 'disrupt' car ownership?" it said.

Making money from ride-hailing is difficult given the challenges operators face in differentiating the service of getting people from A to B in relative safety and comfort, the report said. To counter the contraction, carmakers may beef up ride-hailing services of their own electric vehicles (EV) to help boost sales and meet EV credit requirements, it said.

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