Yidao Yongche, one of China's earliest ride-hailing apps, marked its return to the market by announcing yesterday that it will offer subsidies to drivers in Shanghai.
Starting from yesterday, Yidao offers Shanghai drivers a subsidy of up to 120 yuan (.2) for each car every day to encourage them to pick up passengers. The subsidy will soon be offered in other cities including Beijing, Guangzhou and Shenzhen.
Yidao users had previously grumbled that drivers were unwilling to accept bookings while drivers complained they couldn't get income in their accounts because of a cash shortage faced by LeEco which was replaced by TWC Group as the new controlling shareholder of Yidao in June.
In 2017, the ride-hailing service is expected to attract 411 million people in China, according to research firm CNIT Research.
The ride-hailing market will grow eightfolds by 2030, five times the size of the taxi market, justifying huge valuations of companies like Uber's billion and Didi Chuxing's billion, according to a Goldman Sachs report published in May.
But Yidao still faces challenges even with the new investor and capital support.
"Ride-hailing companies need to recruit drivers to grow, and need to subsidize those drivers to attract new customers," the Goldman Sachs report said. "This costly growth is the primary reason why no ride-hailing company has so far been able to enjoy an operating profit."