China’s challenges with ‘zombie’ companies have been in the headlines for a while. In a new twist, the Chinese are confronting the living dead once more – but this time, it’s zombie taxi drivers.
More accurately, the reports describe “ghost drivers” that have been damaging the reputation of Uber China in several cities.
These drivers, ThePaper.cn reports, have edited their profile pictures to give themselves pale skin, dark lips and darker eyes. Sometimes they warp the proportions of their facial features, creating an even more ghoulish appearance. Faint-hearted customers are so disconcerted when they see the photos come up on their phones that they have been cancelling their trips, forfeiting a small fee to the deranged drivers.
In other cases the problem is ghost rides, when dodgy drivers have been cancelling the rides themselves only a few seconds after accepting the fare, resulting in a small fee again being incurred by the passenger. ThePaper.cn reports that in some cases the fraudsters have been using virtual positioning software to trick Uber’s operating systems into registering the journey as complete, when in fact it has never even started. The customer is then charged the full fare and the driver gets his payout. Uber says that it has a “zero-tolerance attitude to scamming behaviour” and that it has been refunding customers who have been defrauded.
China Business Journal says that some of the scammers have been drawn to Uber because of the relatively high bonuses it pays new drivers. After the first 20 trips are completed, drivers get a Rmb300 ($44.99) payout, although in some cities the reward can be higher. So making 20 ‘ghost’ trips can prove lucrative.
Uber China’s technicians have developed software to combat some of the more common ruses. Earlier this year a photo ID system was introduced to tackle the problem of drivers not matching the profile pictures of their registered accounts. Facial recognition software requires drivers to take a live video with their phones, which is then compared with the registered profile picture. But the successes of the ghost drivers have demonstrated shortfalls in the software.
Uber has just been acquired by local rival Didi Chuxing (see WiC336) in a deal in which it gave up its branding, operations and customer data in exchange for 20% of the merged company. An industry insider told China Business Journal that the takeover means that Uber will stop providing its own customer support this month, and its operations will be integrated into Didi’s, thus migrating the ‘ghost’ problem.
The combination of the industry’s two biggest rivals is also likely to see a reduction in the monetary incentives offered to drivers. Even before Uber took Didi’s offer, the Financial Times was reporting that both firms had dramatically reduced their driver subsidies, and the trend may continue as they merge their market shares, taking some of the heat out of the competitive landscape.
Perhaps that might prompt more of the ghosts to instead haunt Yidao, the third largest player in the ride-hailing business.
Didi’s purchase of Uber means that Yidao is poised to become the largest subsidiser in the market and a document circulating online has claimed that it has been losing Rmb37 on each of the journeys arranged through its app. An employee laughed off the story, telling China Business Journal that the leaked file was fictitious. That’s just as well, as Yidao does have a history of giveaways. Last year LeEco bought a 70% stake for $700 million, and since then it has been offering customers and drivers LeEco smartphones and televisions as rewards for higher usage. “Yidao needs to acquire more active users, and subsidies are the simplest, crudest, yet most effective solution,” commented a researcher at Analysys.
Of course, if Yidao does opt to incentivise its customers further, it sounds like it will need backend controls more sophisticated than Uber’s in order to ward off those marauding ghosts.
© ChinTell Ltd. All rights reserved.
Exclusively sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.