China Rideshare Update

A while back, I wrote an article about Didi Chuxing and their dominance of the rideshare market in China. Uber launched in the country to take marketshare – hoping that they would a) dominate and b) make a fortune. Didi made sure that was never going to happen taking 80% of the market!

Back in August, Uber bailed out of the market. They had spent a small fortune trying to persuade local people to use a US based service. Uber China will be absorbed in Didi and the parent US entity will take a 17.7% stake in Didi with the backers of Uber China receiving another 2.3%. Travis Kalanick, the founder of Uber will get a Board seat and the CEO of Didi will get one on the Uber Board.

Uber tried (and failed) to use a US style of business in China. They stuck with Google Maps when they weren’t that good in mainland China and they also wanted people to pay with credit cards which are not as popular in China as the US. Payments are often made using the WeChat app which is huge in the country and is owned by Tencent who are investors in Didi, so unsurprisingly, payments to Uber were often rejected! The Didi service was also integrated with WeChat making it even easy to use.

It also doesn’t help that the Chinese Government heavily favours local companies over international ones, especially US based companies. It is common for the Chinese Government to block the purchase of products from US companies and I could believe that many departments would have been unhappy with Uber on their soil. There was media speculation that the Government would have been unhappy with the deal, however, my experience is that they would like the fact that a Chinese company has taken a stake in a US company, providing a beach-head to buying a bigger slice in the future.

As I described in my previous article, Didi also had taxi-hailing and bus-hailing services and expanded into a few other areas. This meant that it was popular with many levels of the public, Government and commerce.

The battle for control of the China market meant that Didi not only attacked Uber on home soil, they also invested in rival services in the US (Lyft), India (Ola) and South East Asia (Grab) and encouraged them to share technology to attack Uber in their respective markets. These investments could now be a problem because there is a conflict of interest and the US Government for sure may start to have a concern about the investment in Lyft.

One way round this is for Didi to sell out of these smaller companies now that they have created the association for technology. Perhaps they could combine into a bigger competitor for Uber/Didi – they have the name already: GrabOla Lyft!