Uber hikes driver pay in China to fight back against Didi
Uber has come up with a new way to fight back against its fiercest Chinese competitor, Didi Kuaidi, by offering huge financial incentives to drivers. Uber is said to be offering massive bonuses to Chinese drivers to ensure there is always enough supply to meet demand, in some cases paying out 130% above standard fares. Currently, Uber China is paying drivers a 60% bonus on the fares they earn over the weekend, 80% on money earned during the afternoon rush hour and 110% on their earnings between 7am and 10am, according to the Australian Financial Review. If a driver can achieve over 50 bookings in a week, the bonus can grow to 130%.

"The reason I chose to work for Uber over Didi was because my friends told me Uber pays the highest subsidies," says Chen as he drives around downtown Shanghai, with a red Chairman Mao pendant rattling on his dashboard and a pair of Ray Ban aviators hanging down from the sun shade.

In it for the money

The 34-year-old has been working for Uber for three months and is generally happy although he says he will stop driving if the subsidies are significantly reduced.

Both Uber and Didi Kuaidi are spending up big to win market share. Didi Kuaidi reported a net loss of over half a billion US dollars in the first five months of the year, according to the Financial Times, which cited fundraising documents. At the same time, Uber chief executive Travis Kalanick​ has pledged to spend more than a billion US dollars this year on the company's China expansion.

The commitment follows unexpectedly rapid growth in cities like Chengdu, a technology and manufacturing hub in China's west, that has become Uber's top location globally in terms of average daily completed rides.

Uber chief executive Travis Kalanick has pledged to spend more than a billion US dollars this year on the company's China expansion. Facebook

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In some ways China is just like any other market for Uber. The company is adopting a similar strategy to its rollout in other parts of the world; paying drivers extra during peak times to ensure there are enough cars to meet demand. Uber is also charging fares that are often lower than taxi-rides to win over customers.

The problem lies in the competition. In China, Uber is up against a competitor with state-backing and investors that have deep pockets, including the country's sovereign wealth fund, China Investment Corp, and internet giants Alibaba and TenCent.

Working in its favour are a superior technology system and the backing of another internet giant, Baidu, China's equivalent to Google.

Chen is generally happy with the extra income. However, he says the big salaries talked about by his friends, who took home around 20,000 yuan ($4464) a month last year, have been greatly reduced. That's because Uber is gradually lowering subsidies in more established cities as it looks to move toward profitability and has also cracked down on a scam by which drivers would buy up to ten phones and book phantom trips during peak times.

Chinese media have reported that Didi users and drivers fear the company's virtual monopoly will mean pricier rides and lower wages. iStock

Now, salaries for full-time drivers are around 10,000 and 12,000 yuan, he says.

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Diminishing pay

According to Chen, drivers in Shanghai pay Uber 20 per cent of the fare as a fee for using the technology system. After that, Uber currently pays drivers who complete a minimum of 25 orders a week, 110 per cent of the fare between 7 and 10 in the morning, 80 per cent of the fare during the evening rush hour and 60 per cent of the fare over the weekend. For normal working hours, drivers are paid a 40 per cent subsidy.

The bonuses vary depending on what car you drive and how many rides you complete per week. If you manage a minimum of 50 orders, for example, those subsidies increase to 130 per cent and 100 per cent for the morning and evening rush hour periods, 80 per cent over the weekend and 60 per cent for normal fares.

At Didi, according to drivers interviewed by The Australian Financial Review, the subsidy system is more fluid. If there is a promotion, the company can pay much more than Uber while at other times the subsidies are far less. Generally, drivers are paid a flat fee of up to 100 yuan if ten orders are completed during a peak period.

Jack Chen says Uber currently pays Chinese drivers who complete a minimum of 25 orders a week, 110 per cent of the fare between 7 and 10 in the morning, 80 per cent of the fare during the evening rush hour and 60 per cent of the fare over the weekend. Dave Tacon

Tang, who offered only his last name, worked for Uber for one week before deciding to return to his job with Didi.

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Didi more busy

A former waiter and factory worker, the 23-year-old spent 160,000 yuan to buy his Skoda car and began driving for Didi in May.

"At Uber I had to wait for orders but at Didi you never wait," he says.

"Didi is for the mass market while Uber is more for high-end clients, who are more polite and patient, but at the end of the day, there is less income."

Li Dong, another Didi driver, explains he chose the local player over Uber, because of job security.

"I was worried Uber would not be around for a long time and I don't want to change companies too frequently," he says.