B2C better model for China's ride-booking sector: UCAR

Information about customers calling for car service pops up on a map in UCAR app, Shanghai, Feb 11, 2015. [Photo/IC]

I believe only a B2C model can guarantee the service quality. The UCAR rents cars from CAR Inc, and therefore is as asset-light as C2C players. However, we are operation-heavy, as the company trains new drivers every two weeks and veterans every month, whereas C2C players subsidize customers and drivers and collect a percentage of fares on their platforms.

Our cost is relatively stable, as the company doesn't need to subsidize on the driver's end. The B2C model has a long-term advantage against the C2C model in China's ride-booking sector, and that's the key difference. The UCAR are like iPhone, which comes handy and whose price is acceptable given its utility.

In the next stage, we plan to upgrade our services. Our drivers will stay with headlights on when female passengers get off and wait for them to reach their place. They will also hold umbrella for our customers in rainy days. The company will monitor in distance via On-Board Diagnostics (OBD) system on whether our drivers fasten seat belt.

Q: There are some comments on the draft rule, saying it pushes back sharing economy. What is sharing economy like in your eyes? How would you see the policy impacts?

Lu: Sharing economy is a general trend, however it varies in different sectors. Sharing doesn't necessarily mean that they have to be private cars. The B2C model is also one way of sharing. I believe safety issue comes first in public transportation such as drivers' health condition and their driving skill.

Second, there's fundamental difference between the US market and China's. There are few taxis in the US, and the fare is relatively expensive, while taxis in China are cheaper.

Any business logic that the price of car-on-demand service can be lowered below taxi fares doesn't make sense. Cars ownership is higher in the US and the cost of maintaining a car is comparatively low, therefore the time value for US car-owners is about the same with taxi drivers. however, the time value of China's car-owners are higher than that of local taxi drivers, for only a smaller portion of Chinese have their own vehicles. Without high subsidies, only a limited number of Chinese would take on ride-sharing orders.

I believe the core behind sharing economy is to improve the efficiency of car usage. The B2C model can achieve the same goal by enabling business elites to tap on a pool of cars instead of maintaining their own vehicles.

Q: How does the UCAR plan to expand in your next move? Under the fierce competition, when will the company become profitable?

Lu: The UCAR recently announced it would hire another 10,000 ex-servicemen to supplement our 40,000-driver scale. But the overall expansion target will exceed 25 percent. The reason we like ex-servicemen is that they are disciplined and passed through solid background check. Veterans will account for 20 to 25 percent of the crew drivers.

It's still a bit early to share our profitability timeline. Hopefully, the media will see our updates in 6 to 9 months. But, the UCAR does have a very clear profit model. It's not difficult to calculate our car and gas expense as well as labor costs. As long as customers are satisfied with our services, the company can charge a certain amount of premium. And overall cost will be brought down, once business scale picks up. We will adjust our price level accordingly to leave some room for profits.

I don't see any peer companies as our competitors. Frankly speaking, we were lagging in team and system construction. Now we've achieved a lot. I believe our biggest competitor is ourselves, whether we could lower the cost and improve efficiency as well as customer experience.

Differentiation is our motto, and what UCAR will put to extreme. There are differences between B2C and C2C and in products and customer experience. When others brag about their market scale, their full-coverage and their speed, we focus on our reliability, stability and precision.

Q: Will there be any plan for the company to go public or to be acquired by the Hong Kong-listed CAR Inc?

Lu: The question has been asked by many. The UCAR Technology and CAR Inc have different shareholder structure. We will respect investors' will. There might be an independent listing or acquisition in the future. Shareholders' interest is our priority. As for now, we will optimize the synergy effect between the two. UCAR now rents cars from CAR at a fair price based on third-party evaluation.

We currently don't have any financing plan. The company is "loaded", with 1 billion yuan cash balance . Our "bullets" are many, and it's nice to keep some. I believe there will be market players cut off from the race. The car-booking sector is definitely one of the most interesting ones to watch.