A new route for ride-hailing companies in China

The ride-hailing market in China is saturated and smaller players are now entering into new markets like electric and logistics vehicles to avoid direct competition with the dominant players.

Regional ride-hailing company Wuhan BMKP Technology (BMKP) announced on Tuesday that it has raised Rmb300 million ($43 million) from Beijing Qianjiayuan Capital for business expansion.

BMKP also signed a partnership agreement with Shenzhen-listed Chinese car maker Zotye Auto for alternative energy vehicles and fuel-engine cars.

BMKP chief executive Li Jia has said that proceeds will only be used for company operations, and not for the purchase of cars.

Founded in 2015, BMKP already has 125 municipal licenses in China to operate. It is ranked second to rival platform WscarEcar which boasts operating licenses in 139 cities. Still BMKP has almost double the number of licenses of ride-hailing unicorn Didi Chuxing, which only has 66 of them.

Ride-hailing companies are having a hard time, especially this year. Didi Chuxing has a dominant market share in first and second-tier Chinese cities. But regulations have tightened following two murders commited by Didi’s carpooling drivers this summer. For other small players, they must either shift their focus to niche markets, or switch their attention altogether if they want to survive.

For BMKP, the way out is to catch the momentum of electric car and logistics vehicles.

Yang Yue, chairwoman of Beijing Qianjiayuan Capital, told FinanceAsia that this round of funding for BMKP is a strategic investment. Qianjiayuan has also invested in car battery manufacturing and, with the car design capablities of Zotye, BMKP could be a good platform for its battery-making technology. 

Yang said that BMKP will launch its logistics vehicle service after February next year, and that it will focus on first and second-tier cities. Users will be able to book logistics vehicles online via BMKP's platform.

She said that BMKP also intends to provide ride-hailing services. To be launched next year, these will use a self-developed electric car with a range of about 500km in one charge - as much as a Tesla Model S. Yang didn't reveal the battery company that provides the technology.

Some investors have concerns about ride-hailing companies. They say that the huge demand only exists in first and second-tier cities, which are already saturated with top players like Didi, Car Inc, Yidao Yongche and Caocao.

As a second-tier player, BMKP has an advantage with its operating licences. This means an easy start if its partners want to promote electric car ride-hailing and logistics services in small Chinese cities.

Pressure to survive means that the company has trialed many types of business, such as logistics, bus and even bike services. We will still need to wait and see whether this approach can help ride-hailing companies in China.

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