Uber teams up with Didi Kuaidi in car hailing space in China

Uber vs Didi Kuaidi

 


Uber’s war with Didi Kuaidi in ride hailing service has reached back to Uber’s home turf as Didi Kuaidi has opened up a new front by backing up Lyft, Uber’s biggest rival in America. Uber’s battle with Didi Kuaidi in Chinese car hailing market has been discussed in detail in my previous blog Uber’s epic battle with Didi Kuaidi in Chinese ride hailing market. Earlier some month back Didi had rejected Uber’s offer to invest in Didi and also said to Uber’s CEO that ““You are earlier than us” globally but there will be a day when we will surpass you.”

Didi Kuaidi along with Alibaba, Tencent holding and billionaire Carl Icahn has recently invested in Lyft’s latest funding round valuing the company at $2.5 Billion. This investment will increase competitive threat for Uber vis a vis Didi Kuaidi as Uber will have to put its focus back on its home turf.  Uber is facing similar thread in Asian market wherein investor’s such as Soft Bank from Japan, Tiger Global have put their money in favour of local players and Didi has also invested in Grab Taxi.

Uber and Didi are involved in a very costly struggle in China and Didi’s investment in Lyft will put Uber’s situation bit worse in that Uber will have to put its focus back on USA rather than focusing on China, which as per Uber’s statements was Uber’s biggest prize.

Along with investment in Lyft, Didi Kuaidi has recently rebranded itself as “Didi Chuxing” and even changed its logo for the same reason.  This move is aimed to showcase itself not only as car hailing service provider but a serious player providing broader commuting services. Earlier Didi used name “kuaidi” which meant quickly while its new name “Chuxing” in Chinese means commute.  For this purpose, Didi has entered into services like taxi hailing, premium driver service, car pooling and bus sharing reinforces its goal of moving into broader commuting services.

The turn of these events had made Didi’s fight with Uber more interesting in car hailing space with both players bleeding due to intense competition. Uber had already pumped $ 2 Billion in China to catch up with Didi Chuxing which already had 2 years of head start in China. Finally long running battle between the two companies got over with Didi Chuxing acquiring and merging Uber China with itself, Didi Chuxing investing $ 1 Billion in Uber global and Uber China investors getting 20% stake in Didi Chuxing.  Quest for profitability was the main reason for leaving China as per Uber CEO Travis Kalanick. Economics and profitability won over Uber’s desire to solve transportation problem for one fifth of humanity. Hope consumers are going to be the ultimate victor in the final battle.

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Uber’s epic battle with Didi Kuaidi in Chinese ride hailing market

Taxi hailing service in China: Uber and Didi Kuaidi

 

Uber has conquered the world in ride hailing service but it has to still conquer Chinese ride hailing market where it faces stiff competition from its rival Didi Kuaidi. We have already discussed in detail Uber’s car aggregation business and its attempt to set high standards in personal transportation market in my previous blog Uber in tough business of Car Aggregation. Uber has Baidu has its investor while Didi Kuaidi has Alibaba and Tencent as its investor and this make this battle more fierce. The main reason for such a battle is the presence of very large commuter market in China consisting twice the total US population and an anticipated influx of 100 million people in China’s middle class. Recent days have also seen incessant inflow of cash to these two start-ups reinforcing investors readiness to bet on world’s largest transport market and thus spend heavily for subsidising car rides to in gain market share.

In this race, Didi Kuadi seems to racing ahead of Uber due to several factors like Didi’s presence in 80 cities compared to Uber’s presence in 16 cities, Uber’s fund raising of $1.2 Billion for the Chinese market along with Didi Kuadi’s latest $3 Billion fundraising (mainly from Tencent, Alibaba, Temasek Holdings, Coatue Management, Pingan Ventures, Capital International Private Equity Funds’ (CIPEF), China Investment Corporation).  Further Didi is much larger organization with 4000 employees (excluding drivers) compared to only 200 employees of Uber in China. Also, Didi Kuaidi has a near monopoly in China’s car hailing market with a total 80% market share in China’s car hailing market.
Expansion in China was not very smooth for Uber as Uber has there have been some news of Uber’s office being raided by Chinese police. Further, there was some news of Uber’s drivers getting arrested for illegal use of vehicles. Uber is also facing difficulty over their blockage on WeChat, China’s hugely popular mobile messaging platform and run by Tencent. Uber’s accounts on WeChat have all been shut off including its official account and search results in WeChat have started hiding Uber results from users.
Uber has taken many steps to catch up with its rival. Uber has created a totally separate entity named UberChina for its expansion in China. This may help Uber with respect to local Chinese government as creation of local entity will provide a sense of being local and Chinese to the ride hailing service. Uber has also got investment form Baidu and this collaboration with Chinese search and mapping giant will help in more accurate mapping and increased range of services. Further, this collaboration will help Uber in achieving a major goal in terms of building an excellent local partner.
Further, Uber’s recent $1.2 Billion fundraise is expected to continue with some additional funds yet to be raised in days to come. Also, Uber is planning to enter 100 more cities over the next year, doubling a goal set 3 months ago. Uber is also planning to launch major promotional campaign and get more and more drivers into its ambit by offering large bonuses to drivers.


But, Uber is still behind its Chinese competitor in car hailing space and it will be interesting to see if Uber is able to succeed in Chinese market as Chinese government has always a tendency to prefer local players over foreign internet players as has been seen in cases like Google and Baidu, Weibo and Twitter, Alibaba and Amazon. In all of these cases Chinese companies have won over foreign companies. In case of Uber, time will tell if Uber is able to conquer the battle called China.