TOKYO -- DiDi Mobility Japan is to cut back its service and try to trim losses by focusing on more profitable areas after use of taxis declined amid the spread of the new coronavirus.
The SoftBank-backed operator of the taxi hailing mobile app DiDi said it will halt service in 11 Japanese prefectures from July 1. The service will also be terminated in the city of Furano and the town of Biei, both in Hokkaido, and the city of Himeji, Hyogo Prefecture.
DiDi Mobility Japan also revealed a plan to charge an app usage fee of several hundred yen (several dollars), which will add to DiDi users' bills for ordinary taxi fares and fees for taxi cabs to travel to specified locations, starting on July 13.
The service will be entirely terminated in Aomori, Akita, Niigata, Gunma, Ishikawa, Shiga, Wakayama, Yamaguchi, Nagasaki, Oita and Miyazaki prefectures. It will now be operated in Tokyo and 13 prefectures.
Ride-hailing app operators typically earn fees from taxi operators for mediating between users and taxis, with fees set at several percent of fares earned. As ride hailing apps are yet to gain wide acceptance in Japan, app operators haven't earned enough to cover development costs. DiDi Mobility Japan decided it is necessary to secure an additional revenue source.
After starting service in 2018, DiDi Mobility Japan has aimed to expand operations by providing tablet devices, designed to access its service, to taxi companies.
However the spread of COVID-19 has brought headwinds, causing taxi usage to drop significantly. Total taxi revenues decreased over 60% in the first half of May, according to the Japan Federation of Hire-Taxi Associations.
DiDi Mobility Japan had aimed to target Chinese tourists with the DiDi service, which is widely used in China, but current restrictions on entry to Japan have dashed expectations for more demand from inbound tourists. The company now aims to bring its operation back to profitability by reducing costs and stabilizing sales through operations focused on more profitable areas and introduction of the new app usage fee.
Didi Chuxing, the Chinese parent group, is backed by SoftBank's $100 billion Vision Fund. DiDi's Japan operation is a joint venture with SoftBank's mobile arm. A separate, wholly owned unit of DiDi recently launched a food delivery service in Osaka.
Additional reporting by Wataru Suzuki in Tokyo