What Just Happened to Uber in China?


Ride-hailing app Uber isn’t used to taking “no” for an answer. Since bursting onto the scene a few years back, the company has enjoyed geometric rider and driver growth. It’s not operational in several dozen countries and several hundred individual markets, including virtually all major U.S. cities that haven’t banned ride-hailing outright.

In the U.S., Uber has only one real rival: Lyft, a much smaller operator that positions itself as a driver-friendly alternative and benefits from a close partnership with automaking giant GM.

Internationally, the ride-hailing market is a bit more competitive. Thanks to that competition, Uber recently suffered what’s widely believed to be its biggest non-regulatory setback to date. In July, Chinese ride-hailing giant Didi Chuxing bought out Uber’s Chinese operations in a multi-billion-dollar deal that included a nine-figure investment in Uber Technologies, Uber’s global holding company.

“This is really the first time that a competitor has gone toe-to-toe with Uber and come out on top,” says international business expert Scott Vollero, who ran a successful multinational company out of China for more than a decade. “The situation probably says more about the Chinese market than about the specific companies involved, so it’s a useful case study for other American and European companies looking to compete in the Middle Kingdom.”

Stemming Big Losses, at a Price

The backdrop to the Didi-Uber China deal: a vicious, two-year price war between the two giants. Uber basically wrote off billions in advance under the assumption that it would have to take huge losses to compete on Didi’s turf. According to reports, that assumption was correct: Uber lost some $2 billion in China since entering the country in earnest back in 2014.

Obviously, this deal ends the bleeding for Uber. It also removes the largest remaining cloud of uncertainty from the company’s Asian operations and, according to market-watchers, paves the way for an IPO as early as next year.

That said, Uber misses out on direct exposure to the world’s largest ride-hailing market — a cautionary tale for foreign companies that assume they can bend the will of the Chinese market to their whims. It’s usually the other way around.

Where Uber, Didi & Ride-Hailing Go From Here

Barely 48 hours after the announcement that Didi and Uber China were officially hitched, this bombshell crossed the wires.

Yep, you read that right: After fighting Uber to a gentlemanly surrender in Asia’s largest market, Didi decided to open a new front in their Eastern war and invest some $600 million — in partnership with Japan’s Softbank, but still — in Uber’s principal Southeast Asian rival outside China.

This deal is mainly noteworthy because of its timing, not its content. The Asian ride-hailing market is much more competitive than its North American counterpart, and Didi has long invested in companies that directly or indirectly challenge Uber on foreign turf. In fact, Didi is a minority owner of Lyft, which has to rub Uber the wrong way.

Still, the fact that Didi allowed this news to come out before the ink on its Uber China deal had dried suggests that it sees itself as the main rival to Uber in Asia — and, perhaps, the only thing standing between the American ride-hailing giant and total global domination.

Anyone who says they know where the ride-hailing industry will be five years from now has a bridge to sell you somewhere. (Probably a self-driving bridge.) One thing isn’t up for debate, though: it’s going to be one heck of a bumpy ride.

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