On 7th December, the day that Beijing pollution reached “red alert” status for the first time, a host of taxi drivers braved the air to protest outside the headquarters of Didi Dache, China’s biggest car-hailing service.
Launched as an app for finding licensed taxis in 2012, the company has recently focused on private car hire, something of a legal grey area in China. Earlier this year, it merged with its biggest domestic competitor Kuaidi Dache to form Didi-Kuaidi, which has an 80 per cent market share. The protests were over the company’s new Express Pool carpooling service, which on one day in December gave customers a free ride for a limited distance. Half a million rides were reportedly taken by the late afternoon.
When Didi Dache was launched, hailing a taxi off the street in cities like Beijing was becoming increasingly difficult—near impossible at peak times. Demand was so high that drivers had their pick of customers and often refused rides; rogue cabs roamed the streets at night. It was a market ready for disruption, and Didi-Kuaidi’s success has seen the company reach a valuation of $15bn. And now, the real competition is between Didi-Kuaidi and Uber, which launched in China in early 2014.
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Didi-Kuaidi has been relentless in undercutting costs with a host of bonuses and discounts for car owners and passengers respectively. Uber has fought back with its own range of special offers. For now, Didi seems to be one-upping Uber in expansion. While Uber recently announced it would move into 100 Chinese cities within a year, Didi-Kuaidi followed suit by saying it will expand into more than 400 cities within just three months.
Why is it so hard for Uber to replicate in China the meteoric rise it enjoyed in North America? It faces the same struggles that other foreign companies have experienced in trying to break the Chinese market. While Amazon continues to operate here, it falls far behind its local competitors Taobao and Jingdong. Naturally, Didi-Kuaidi has backing from local heavyweight companies Alibaba (owned by Jack Ma) and Tencent. However, Baidu—China’s biggest search engine—is supporting Uber. Aside from Didi’s headstart, the company claims that success over its rival comes down to knowing the domestic market more intimately and continuously changing to cater to consumer and demographic needs.
Uber’s app is seen as more reliable and easy to use, with an algorithm that automatically matches passengers and drivers so that there’s no waiting on drivers to respond. With Didi, it’s up to the drivers to “grab” the passenger, and when the conditions aren’t in their favour, you may have to wait a while for a pickup. Uber, however, operates a fee-deducting system that penalises those who cancel within five minutes of matching, something that Didi does not enforce and does not sit well with a population of users that generally value cost over loyalty.
Uber is popular with expats given that its website and app are available in both English and Chinese; Didi’s app only offers Chinese. However, content on Uber’s Chinese website is very limited with no direct access to customer services, unlike Didi, which has call centres throughout China.
Another big coup for Didi is the “anti-Uber alliance” of car-sharing apps announced on 3rd December. Grabtaxi, based in Kuala Lumpur, Ola, popular in India, and Lyft, the main rival to Uber in the US, are joining forces to create a cross-Asia platform that allows travellers to use their local app in nine countries. To this end, $6.9bn has also been raised from US investors. The four companies have also vowed to share resources and local knowledge as well as technology.
For both Didi-Kuaidi and Uber, there is still the obstacle of legality—profiting from private car sharing is illegal in China. Didi is better off since a large part of its business is licensed taxi hailing, and it is a registered Chinese company for that purpose. Uber’s status as (until recently) an overseas company, and as a private car service means it has borne the brunt of legal crackdowns. Earlier this year, Uber’s offices in southern China were raided for operating “illegal” transport services.
Uber faces a tremendous battle. What are the chances it can break Didi-Kuaidi’s firm grip over the Chinese market? With Didi going from strength to strength domestically and internationally—it has just announced that Yahoo’s co-founder Jerry Yang is coming on board as a “senior advisor”—Uber has a lot of catching up to do before it can think about overtaking its competitor.
