Imbalanced Profit Margins of Urban Online Car-hailing Services: A Case from Didi Service Platform of China

Abstract

Online car-hailing services are driven by the emergence and development of network technology and information sharing, which breaks the traditional balance of Chinese taxi market and reconstitutes profit allocation, bringing new opportunities and challenges to the development and management of traditional taxi industry. To improve the operation efficiency of taxi and promote the effective utilization of resources, this study presented a calculation method for the capacity utilization rate and constructed a taxi service profit rate model. Taking Beijing and Shanghai of China as examples, the profit margins of ride-hailing and online taxi services using the Didi trajectory data from December 22 to December 24, 2017 were compared and analyzed. Results demonstrate that the profits of different car-hailing services in China are imbalanced in terms of time and space dimensions. The search costs for drivers and passengers are high, especially during morning and evening rush hours. The low capacity utilization rates for taxis and ride-hailing services resulted in a conflict between low supply and high demand. The profit margins of taxis are much higher than those of car-hailing services. Moreover, profits on weekends are higher than those on workdays. Long distance orders (>15 km) and relatively short ones (<3km) generate higher profits. Relevant departments should rationally plan the holding volume of online car-hailing services and coordinate the service profit margins in different service modes to realize the sustainable development of the new and old taxi industry.

Keywords

• capacity utilization rate
• profit margin
• ride-hailing service
• taxi
• trajectory data