Try saying it aloud: China, a nation of 1.4 billion people, isn’t big enough for two ride-sharing companies.
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With its fresh Uber truce, Didi has “effectively stabbed Lyft in the back, and it’s not clear Lyft can survive this [long term]”, a Silicon Valley investor said.
Over the past two years, Kalanick says their battle to dominate the market has left both Uber and Didi struggling to succeed.
“The combined market share of Didi and Uber in China’s chauffeur service is more than 80 percent”.
Other companies have played up their local knowledge. Didi, however, claims 87 percent of the Chinese market for private vehicle ride-hailing. As one industry source said to me, China’s internet space is littered with the corpses of American tech firms.
While investing in China via stakes in Chinese companies may so far be the smartest way for US companies to make money in the Chinese market, it can also be loaded with potential risks. TWTR, +0.00% due to censorship, while Apple Inc.
“The environment has become more challenging”, said Jeremie Waterman, executive director for greater China at the U.S. Chamber of Commerce.
China is extremely important to many companies.
While Uber will walk away from operations in China, it is taking a significant stake in the largest player there.
So does this mean that U.S. internet firms are doomed in China? Almost a third weren’t planning to expand their investment in China, a higher percentage than during the global financial crisis of 2008-09.
Didi, which claims nearly 90 percent of China’s ride-hailing market, said last month it had recently raised $7.3 billion – $1 billion of which came from Apple – in one of the world’s largest private equity financing rounds.
Didi counts two of the most powerful, best capitalized Chinese Internet companies as backers; has tight connections with local government; made an ally of local taxi drivers and expanded into services such as buses that Uber ignored; and exploited its knowledge of local culture and consumers. The Beijing-based company is the major ride-hailing service in China and has made it hard for foreign services to get a significant foothold there. Uber was losing more than $1 billion a year to compete in China – money it can now spend in other markets, Carlson said. The proposed deal also brings together five ride-hailing app rivals, via Didi’s investment in Lyft and its partnerships with Ola and Grab, and could be a bit of dicey one.
Didi said it would maintain the Uber service and brand separately in China. “This merger paves the way for our team and Didi’s to partner on an enormous mission, and it frees up substantial resources for bold initiatives focused on the future of cities – from self-driving technology to the future of food and logistics”.
Mr. Kalanick, in a statement Monday, acknowledged the challenge Uber faced in entering China. “We were a young American business entering a country where most USA internet companies had failed to crack the code, ” he said. Uber had worked hard to localize in China, setting up UberChina as a Chinese company and giving high autonomy to the local executives at its helm.
“It is only natural that passengers will find decreasing subsidies when hailing rides via the apps”, she said.
Didi said in its posting it will look to expand its worldwide business and enter markets like Hong Kong, Taiwan, Macau, Japan, South Korea, Europe and Russian Federation. Kalanick will join Didi’s board, with Didi Chuxing chief Cheng Wei joining the Uber board.
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Uber will continue to operate independently in China.
