I guarantee Uber isn't losing any sleep over this Alibaba-backed "challenger"
Kuaidi Dache, the Alibaba-backed global ride sharing service, today announced that its recently launched luxury limo service, Kuaidi ONE, has crossed into 32 cities in China. This expansion positions Kuaidi as the largest car-service app in terms of market share and transaction volume, confirming the company’s ambitions to expand beyond China into parts of Asia, Europe and the US.The truth is, Uber and Lyft have plenty to worry about, but competition in their core markets from Kuaidi Dache is not among them, no matter what the company and its PR team would have you believe.
It’s not surprising that, as the Alibaba IPO approaches, the Chinese ecommerce giant is keen on giving investors one more area of growth to be excited about. And headlines of Uber-killers are nothing if not exciting. But the reality is, Kuaidi is still a relatively nascent service even in China, and even the best laid plans for global expansion will mean very little in markets where either Uber or Lyft are already established, particularly in the US.
After two years in operation, Kuaidi Taxi is currently serving 6 million rides per day at its peak and has 100 million registered users and 1 million registered drivers across 306 Chinese “mega-cities” (those with populations of 1 million people) the company reveals. As mentioned above, the Kuaidi ONE luxury service is now available in 32 cities. In addition to its backing from Alibaba, the company has raised capital from Matrix and New Horizons, and gained the support of Alipay, Ctrip, AutoNavi, Baidu Maps, Quinar, and Beijing’s ‘96106” government platform.
This is no small feat and indicates that Kuaidi will likely become a large and valuable business within China. But it has no bearing on the company’s ability to expand into the US, or much of Europe – Asia may be another matter. Uber has expanded into the majority of major metropolitan areas across North America and Europe. And in doing so, the company has proven itself capable of onboarding new drivers and riders in these (often foreign) markets at scale. Kuaidi has yet to prove it can do the same.
When Uber entered each of these new markets, it had a number of advantages working in its favor. In the vast majority of cases, Uber was the first ride-sharing service available, making its only competition traditional taxis. The company also had the benefit of being a large, Silicon Valley-backed company that put the on-demand transportation category on the map (if not invented it entirely – sorry Zimrides and Sidecar). This halo-effect has made “uber” the default verb for all things on-demand, not just transportation but for any type business services – as in “we’re the Uber for X,” where X is maids, pizza, massages, and on, and on. Hell, even Kuaidi’s PR team defines the company as an “Uber competitor,” with no mention of the far smaller Lyft.
Nationalistic as it may sound, Uber also benefits abroad from being an American brand, which carries its own prestige in many markets and which Kuaidi can’t match. By the reverse, Chinese businesses don’t have the best reputation among US or European consumers (or regulators), meaning Kauidi is going to face an uphill battle in these markets stealing market share from Uber. Imagine the uproar in New York and Berlin if a Chinese company were to disregard the local transportation regulations in these markets the way Uber has. Again, political correctness aside, my bet is that the backlash would be far more fierce.
None of this is to say that Kuaidi won’t be “successful” in select markets – certainly China, likely elsewhere in Asia, and possibly in Latin America – but the idea that it’s an actual Uber challenger, let alone Uber killer, is laughable. What today’s announcement does suggest is that Uber’s ambitions to expand into China will face real opposition. But if the history of US internet and technology companies is any guide, that would have been true regardless. (And both companies need to compete with Tencent-backed Didi Dache in China.) Uber likely doesn’t need to be huge in China to live up to its lofty valuation, but if it’s not successful in this major market, it needs to be that much more dominant elsewhere around the globe.
In a sense, Alibaba and Tencent are filling the role of Europe's Rocket Internet in this category, cloning popular US internet companies in international markets. But there's a couple problems with this approach. First, Uber is already in dozens of the most attractive global markets, whereas Rocket tends to attack the whitespace and hope to get big before the originators of a concept come to town. This worked for Kuaidi and Didi in China, but won't be the case elsewhere around the world. Second, as Groupon and Fab each found out, Rocket's approach of blindly copying other innovators had a similar deteriorative effect to making a photo copy – they get the outlines right, but many of the core details and nuance are missing, leaving the resulting company as just a blurry approximation of the original.
The bottom line is, I guarantee you no one at Uber HQ or the various regional US taxi and limousine commissions are losing sleep over Kuaidi’s expansion ambitions. For as hard as Pando is on Uber, pointing out its founder’s questionable ethics, recurring driver disputes, regulatory battles, and anti-competitive tactics, there’s no arguing that it’s an amazing company from a size, growth, and efficiency perspective. And given this foundation, the reality is that Uber’s biggest threats are global regulators and itself, with Lyft coming in a close third. Kuaidi hardly even registers.