Didi Kuaidi spends $161M to give customers free rides as China’s taxi app price war ramps up

China’s taxi and ridesharing app market is a battlefield, both politically and commercially. But market leader Didi Kuaidi is taking the fight to the next level starting this week with a new program that allows its app users to use 15 RMB (US$2.42) discounts twice a day if they use Didi Express. Each 15 RMB discount can cover about 10 kilometers, meaning that Didi Express customers can ride up to 20 kilometers per day for free using the service.

The heavily-discounted rides are available in 12 major cities, including Beijing, Guangzhou, Shenzhen, Chengdu, Wuhan, Xi’an, and Nanjing, but not including Shanghai (which is scheduled to get the promotion at a later date). Needless to say, offering these kinds of discounts doesn’t come cheap; Didi Kuaidi will reportedly have to cough up RMB 1 billion (US$161 million) to cover the month.

The expensive promotional move is aimed squarely at combating competitors like Uber and Yidao Yongche, who will have to make a similarly-large cash splash in order to compete with what Didi Kuaidi is offering – which is essentially free short-distance taxi rides for a month. Didi Kuaidi, which is backed by both Tencent and Alibaba following the Didi/Kuaidi merger earlier this year, is apparently betting that it has the financial backing to take losses for longer than many of its competitors do.

But of course, many of its competitors are also very well-funded. In particular, Uber has the backing of Baidu in China and is globally valued at more than US$40 billion – it probably has the cash to go toe-to-toe with Didi Kuaidi if its US-based management team decides that China is a significant enough market to warrant the expense.

Complicating those calculations will be the fact that it’s still not clear exactly what China’s regulators plan to do about Uber and ridesharing apps in general. After public proclamations that Uber’s model will never be legal and government raids on its offices, Uber may already be wondering whether it will be allowed to succeed in the Middle Kingdom. The latest bad sign: Shanghai’s government recently announced that it will allow ridesharing apps in a new pilot program. That program won’t include Uber, but it will include Didi Kuaidi, Uber’s largest competitor in China.