Granting a leading role to small-medium sized enterprises, fostering innovation and encouraging domestic consumption are at the core of the new economic model China should embrace. Nonetheless, in order to take this next step, Chinese society and its companies should evolve in order to let entrepreneurship flourish. In the meantime, pioneer start-ups like Duducars are taking action with the help of angel investors. These entrepreneurs prefer to take the risk. They don’t want to miss the opportunities offered by a market like China, which is constantly developing. Duducars is a service company ready to think outside the box. They aim at stealing hearts and minds of a thrifty Chinese society that sees car ownership as the way to show the achievement of a certain social and economic status. Duducars’ founder, Yun Tao, thinks that the key to success entails knowing to react quickly. In China an entrepreneur needs to be ready to rethink its business model quickly to readapt it to the evolving needs of the Chinese consumer. His first try was a failure. Now, with the help of their angel investor, he is ready to conquer the market with a business model aimed at standardize something which is the norm in China, the hiring of cars with a driver, or the so called “black cars”.
In a nutshell, how would you define Duducars? Duducars provides its customers with a mobile app that allow the booking of pick-up services by private cars. Our rates are very cheap (0.3€/km), just a 30% higher than taxi fares. Our business model is taken from the American-based company Über. However, we don’t target upper-end consumer but low and middle-end consumers.
Why the world’s biggest auto-market should use services like the ones you provide? Because taxis are not an option good enough in China. The proof is that in our country there are many private cars that are informally offering these pick-up services just to earn some extra money. We aim at standardizing our business model in order to integrate these resources to satisfy people’s transportation needs with our pick-up services.
Not very good news for automakers… You need to bear in mind that our model does not threaten automakers. Instead, Chinese policies aimed at restricting vehicles are indeed the real threat to them. For instance, license-plate lottery and odd-and-even license plate rule.
Duducars is a pioneer in China. How is it for a start-up to develop innovative projects in China? Starting a business is indeed very difficult in China. If, in our case, one wants to start a private car business, the taxi industry will watch you very closely due to a lack of licence. Thus we are only left with the option of negotiating with the Chinese government and expect them to approve a business like ours. In other words, in China an entrepreneur doesn’t argue with the government, one negotiates with the government. Regardless the limits we still have to face, we still decided to start a business in China because it is a extremely attractive market.
Are cars in general still an option in China? Those living in big cities prefer to buy their own car or taking a taxi. In smaller cities, the use of public transportation is still the first choice. Notwithstanding, in the foreseeable future, people would be inclined to own a vehicle to show their social status. A tendency very difficult to counteract. Our initial model based solely in car-sharing failed. Being successful with such models seems more difficult in China than the United States or Europe. In our case, it served its purpose. The car-sharing model helped us experiment with this business model. Luckily we reacted quickly, and we decided to change to a model based in private cars with drivers. We made the change three months ago. Now we already have the support of our angel investor.
Tell us a bit more about your angel investor and the importance of their existence in China… In China, when a business model doesn’t work you absolutely can’t continue following it expecting the market to mature. You need to react quickly and change the model as soon as possible. Angel investors like our new model because is more dynamic. Moreover, angel investors see our ability to react quickly as a proof of our highly reactive skills. From a financial perspective, without their investment we’ll have less than 100.000RMB (12.437 €). Right now, for us the most important thing is to keep growing. Thanks to this new source of funding we aim to expand our fleet to 500 cars.
We tend to refer to China as a market economy with Chinese characteristics. Do you think in China there exists an “entrepreneurship with Chinese characteristics”? The greatest challenge for an entrepreneur are the limitations imposed by Chinese policies. To some extent, these ‘Chinese characteristics’ would mean that the company has to negotiate with the government For instance, in the case of the internet. Many young entrepreneurs start their businesses online. But the internet is monitored and controlled by the government which results in lots of limitations. Therefore, we have a very active market but very limited. I think it’s easier to start a business in the US than in China.
Would you start a company in a Western market? No. I don’t think the Western market is one with opportunities for a Chinese. It would be impossible for us to settle a brand outside China. Thus we focus ourselves in our market.
Do you think being innovative in the Western market differs greatly to what it entails in China? In the West, innovation is true innovation. Companies can embrace very new business models. In China, innovation is a form of micro-innovation. Under current economic circumstances, innovation is tight to Chinese policies. In other words, this micro-innovation arises mainly due to the fact that Chinese internet is controlled by the government and therefore detached of the rest of the world. Western Internet companies do not manage to penetrate the Chinese Market because our internet has it’s very own characteristics. It’s an extremely peculiar environment, managed by the government and alienated from other markets.
What kind of logistical problems did you encounter? Taking into account China’s traffic control measures, we offer a series of packages to our clients. For instance, if there are 4 days a month that a client can’t drive his own car, they might hire our service in a monthly basis. Moreover, everything is managed from a mobile app and the payment can be done by credit card.
What features of Duducars are exclusive of the Chinese market? Our payment method is a bit different from the Western one. In Western countries people can book a service and pay for it afterwards. Conversely, in China, if we were to follow this model it would cause a rather uncomfortable feeling of debt among our clients. Therefore, we use a prepayment system.
Why the use of these services is better than owning a car? Because there are too many people in China. It’s simply impossible that each and every Chinese could have it’s own car. In big cities like Beijing, every family wants to have their car. Which results in terrible traffic jams. We believe that models like car-sharing are the solution to this problem.
But the Chinese like to own things. Specially when we talk about cars, which show a certain social status… Yes, it’s too early for the Chinese to massively accept our products. The Chinese prefer being the owners of their things instead of sharing them with others. In this context, it’s too early for them to accept car-sharing broadly. Something that also makes financing more difficult.
How much a Chinese can save with Duducars? 1500RMB a month (187 €).
The message of saving is specially important in China… Austerity is indeed very important. Our clients became keen on our services as soon as they checked how much they could save. In China the key point is to offer cheap products instead of convenient products. In our case, the message of saving is highly appealing to the Chinese.
Is China ready to green initiatives? Not yet. The Chinese are not aware of the importance of environment protection and most of them dream about owning their own vehicle.