Has the smell in the ride-hailing cars gone away after winter?

The discussion about the smell in online car-hailing services started with a post on Xiaohongshu saying "getting into the car is like crawling into the driver's bed."

During the 3.15 period this year, the topic of smelly cars repeatedly trended on hot searches, becoming a nationwide issue for hailing rides. Once the journey exceeds 15 kilometers, there is an irresistible urge to jump out due to the smell.

The cause of the smelly cars is not difficult to understand:

First, seasonal factors. In winter, the low temperature makes drivers reluctant to turn off the defogging, which is one of the few opportunities for ventilation, turning the online car into an enclosed space. Combined with the reduced bathing frequency in winter, various odors naturally accumulate in the car.

Second, the extended working hours of the drivers. This point is often overlooked and is one of the reasons why the smelly car issue has not sparked widespread discussion in the past few years.

"Look at News" interviewed a driver in Shanghai. He pays 350 yuan a day for renting a car in Shanghai (residence permit required for purchasing new energy vehicles). After running for 8 hours a day, the money he earns is his own. This driver lived in the car for 5 months, charging for 3 hours each day, and driving for 15 hours regardless of wind and rain. But the byproduct of hard work and sweat is the strong smell.

With several online car-hailing platforms submitting their prospectuses, the obscure financial indicators have clearly answered how this driver's working hours have been extended.

Mysterious deductions

In May 2021, Xinhua News Agency interviewed a group of online car-hailing drivers, and none of them could understand how much the passengers paid and how much the platform deducted. When the reporter compared his own ride receipts with the drivers, some were deducted 20%, and some even 50%.

The online car-hailing platform itself is a matchmaker, and the mileage price for hailing a ride often has a relatively agreed-upon fair price.

Therefore, the platform's deduction ratio determines the income distribution and directly affects the working hours of the drivers. After all, when both parties share a meal, if one eats more, the other will go hungry.

In the first 11 years of the development of online car-hailing, the platform's commission has always been a black box, and it has been a field research project that university professors are passionate about. However, due to the cost of production materials, its popularity has long been inferior to food delivery.

It wasn't until July 2022 that the Ministry of Transport launched the "Sunshine Action" for commission deductions, bringing two major achievements: allowing drivers to see the deduction ratio in real time and setting a red line for deductions at 30%.

However, in the process of implementing the policy, major platforms cleverly demonstrated what is called "Oriental wisdom." China National Radio's Voice of China found in an interview that the commission rate for an order had reached 31%, but with the arrival of a surprise reward of 4.3 yuan, it miraculously dropped to 29%.

Due to the commission rate being closely related to the platform's core revenue, even listed companies will heavily modify financial details, placing the crucial commission rate behind an extremely complex revenue recognition model.

After all, the operational costs of building the second growth curve (such as selling vegetables) rely on the reimbursement of the driver brothers.

However, in March of this year, the ride-hailing platform Ruqi submitted an extremely simple prospectus, providing a valuable sample for the sociological study of "how platforms influence driver income."

Ruqi clearly listed a core indicator: driver service fees, which can basically represent the commission rate taken from the drivers by the platform.

Over the past three years, Ruqi's order volume has doubled, the number of drivers has tripled, and the ratio of the service fees received by the drivers to the revenue has decreased from 93.5% to 77.6%. According to Ruqi, the main reason is the "enhanced driver stickiness" [3].

In other words, previously, when a passenger paid 10,000 yuan, the drivers could take home 9,350 yuan, but now with the same 10,000 yuan, they can only take home 7,760 yuan.

Similarly, another honest player, Cao Cao Travel, which recently submitted its financial statements, saw its commission rate increase from 16% to 21% from 2022 to 2023, with the reason being "reducing driver subsidies" [3].

Compared to Didi, there are only 36,800 drivers affiliated with Ruqi Travel, which is a relatively small sample size. However, regardless of the platform, even a 1% change in the commission rate will directly affect the working hours of drivers and the air quality in ride-hailing vehicles.

Encouraging drivers to take on an extra ride each day is not just about the commission.

What the aggregation platform has changed

In 2020, Didi proposed an "0188" plan, with one of the key goals being to achieve a daily order volume of 50 million by 2023. However, as of the third quarter of last year, Didi's quarterly order volume hit a new high, but the daily order volume was only around 31 million.

Over the past three years, the biggest problem plaguing this industry is that the growth in order volume is very limited, but the number of drivers is growing rapidly.

According to the data from the Ministry of Transport, from 2021 to 2023, the monthly order volume for ride-hailing vehicles has remained at around 800 million, but the number of driver's licenses has increased from 2.08 million in May 2020 to 6.572 million in December 2023, a staggering 216% increase.

Using the annual compound growth rate as a measure, the growth rate of driver's licenses is 8.25 times that of the order volume.

The number of monks is large, but the porridge is insufficient, so the number of orders obtained by the driver is reduced.

Like Meituan Takeout, the characteristic of the online car-hailing platform is the "two-sided scale effect":

Both supply (drivers/couriers) and demand will gather towards the larger platform. In other words, users are more willing to place orders on platforms with more drivers, and conversely, drivers are also willing to pick up passengers on platforms with more orders.

During the period of stable growth in online car-hailing orders, platforms actually tend to stabilize the scale of drivers through subsidies. As long as there is no large-scale loss of drivers, users will naturally gather to the platform.

In 2017, Meituan claimed to "not cap" and entered the online car-hailing market, but after two rounds of fierce attacks, it quietly abandoned its self-operated model. During the 18 months of the app being removed, Didi's market share was hardly affected, due to the stable scale of drivers.

However, two factors have changed this competitive model:

The first is the "macro environment" mentioned above: the growth of orders has slowed down, while the scale of drivers has grown rapidly, leading to the platform's subsidies tilting towards the user side.

The second is the emergence of aggregation models like Gaode, which has greatly reduced the entry barrier for online car-hailing platforms.

Before the emergence of aggregation platforms, creating a large-scale supply of drivers required astronomical subsidies. But aggregation platforms provide stable sources of customers. Theoretically, even with only a few dozen drivers, they can access the aggregation platform to obtain orders.

In Guangdong, there is a local taxi-hailing platform called Quanmin Go, which once had only a few hundred orders. After integrating with Gaode and Ctrip in 2020, the capacity and completion volume increased several times, and the operating radius gradually expanded from Guangzhou and Shenzhen to the entire province.

Currently, Gaode Taxi has integrated with more than 160 platforms.

In 2018, there were only 78 online car-hailing platforms, but by February of this year, the number had surged to 341. After the entry barrier was trampled, cost became the only competitive factor.

According to Gaode's bidding mechanism, low-price capacity will be prioritized for display, and small and medium-sized platforms have responded by pushing the fare down to one yuan per kilometer. In order to maintain market share, Didi has offered subsidies that were only available before 2019.

In this situation, the time required for drivers to earn a unit income inevitably lengthens. The changes in the overall environment will uniformly affect every individual living in it, and the odor will also be evenly distributed in every ride-hailing car.

In February of this year, the Guangzhou Transportation Department disclosed a set of data: local drivers average 124 kilometers per day and earn 409 yuan in revenue.

The biting cold persists.

The documentary "Hot Stream 2" interviewed 8 ride-hailing drivers in Beijing. One of them is a 50-year-old man from Anhui who has been living in Beijing for 30 years.

Originally, he ran a small restaurant, but later the storefront was demolished, making it difficult to find work. His child wanted to get married and asked for 100,000 yuan from his father, so he turned to driving a ride-hailing car.

After 3 months in the industry, he drives as much as possible every day, "feeling like stepping on the brake all day, making my foot ache."

A Douyin blogger "Ride-Hailing Car Master Xiangzi" recorded his day in a short video:

- 5:53, the sky brightens, it's drizzling, he gets up, opens the car door to air it out, and goes online to accept orders.

- 11:49, he parks the car to charge, eat, take a nap, and continues driving in the afternoon.

- In the evening, he goes to a restaurant called "Chao Yixing" to eat eggplant rice and fills his water bottle.

- 19:40, he continues driving, and finally stops by the roadside, lays a hard board on the back seat, and sleeps on the spot.

He accepts orders from 3 platforms simultaneously, stays online for nearly 13 hours, and earns less than 500 yuan in revenue.

Beyond "Fast and Furious," the primary motivation for most people stepping on the gas pedal is to defend their humble lives.

In Beijing, 80% of drivers choose to rent cars to operate. There are many reasons for this, such as the difficulty in obtaining household registration and licenses, the plummeting prices of new energy vehicles, and the lack of money to buy a car. Once they rent a car, they can't stop.

Many people have mastered the "sleep-driving" technique on their own. The driver interviewed by the YouTuber "Night Run Diary" sleeps for 13 minutes during the mandatory 20-minute rest period on the platform, because most parking lots start charging after 15 minutes.

Some people simply live in their cars, driving when awake, finding cheap eateries when hungry, or buying food to eat in the car. They freshen up in the restrooms of charging stations, or shower at the service areas on the expressway. When eating, drinking, and even using the restroom all happen in the car, the smell inside naturally won't be too pleasant.

In the winter of 2023, the topic of "ride-hailing cars becoming increasingly smelly" first entered the public eye. The chief economist of Northeast Securities, Fu Peng, made a video specifically discussing this issue. His conclusion was:

In the summer, it's convenient to open the windows, and the drivers have places to shower. It's not difficult to buy a bar of soap and shower at the charging stations or gas stations.

But in the winter, there are fewer opportunities to open the windows, and more importantly, the places where drivers can shower for free have nearly disappeared. The average cost of an SPA in Beijing, Shanghai, and Guangzhou is several hundred yuan, and few drivers would go specifically to shower.

Finally, the summer took away the smell in the ride-hailing cars. But for some people, the biting cold wind still remains.

Reference:

[1] Ride-hailing platform: Please provide an explanation to the public, Xinhua News Agency

[2] Ride-hailing platform "layered tactics" deducting driver commissions, who is touching the 30% invisible red line? China National Radio, Central Radio and Television General Station

[3] Ruqi Travel, Caocao Travel prospectus

[4] Exclusive: Didi reiterates growth plan, aiming to reach an average of 40 million daily orders in China by 2025, LatePost

[5] Basic statistics on the operation of the ride-hailing industry, Ministry of Transport

[6] Ride-hailing competition enters a turning point: price wars shift to refined operations, aggregation platforms become mainstream, Southern Metropolis Daily

[7] Guangzhou City's February 2024 Network Reservation Taxi Market Operation Management Monitoring Information Monthly Report, Guangzhou Traffic

[8] Didi's past, Geek Park