Pando

Didi has long been the largest ridesharing company in the world. Now it’s also the second largest ecommerce platform in China

By Sarah Lacy , written on March 22, 2016

From The China Desk

On the heels of news that Didi Kuaidi is another $1 billion despite claiming it still has last year’s $3 billion over-subscribed round in the bank, it released another piece of insane-if-it’s-true news today.

That it is now doing some ten million rides per day. For perspective, some eight times the daily rideshare market in all of North America.

We knew already that, by rides, Didi is the largest ridesharing company in the world. It announced in January that it did 40% more rides in 2015 than Uber had done in its entire history of operations. The news today shows that run-rate is only escalating.

Which stands to reason. Uber is many things but the management there isn’t stupid. There is a reason Uber has risked a meaningful percentage of the money it’s raised on a hail mary of carving out anything meaningful in China-- and risking that it wouldn’t just be shut down by the government if it did. Because everyone knows this will be the largest ridesharing market on the planet. A company with the market share and ambition of Uber had to try, right?

Case in point: Even though Uber hasn’t been able to get out of low double-digit market share, many Chinese cities are its largest markets.

From Didi’s release today:

Recent research from Roland Berger Strategy Consultants suggests the size of the Chinese private-car hailing market will increase at a compound annual growth rate of up to 129.3% between 2015 and 2020. 

But this particular milestone for Didi isn’t just big in terms of ridesharing. It isn’t just big because… well, China. It is big even in the context of China. The company has also announced that Didi is now the second largest online transaction platform in China, after just Taobao.

I’d questioned before whether Didi’s ridership claims could possibly be accurate. Afterall, Uber continually makes statements that are-- to put it generously-- spun. So it’s noteworthy that Didi included this in its release today:

Industry sources such as CNNIC, Nielsen and Analysys recognize Didi Kuaidi as the leader in the private-car hailing market and confirm it is China’s and the world’s largest mobile-based transportation platform. 

Uber has never offered the press any third party confirmation of boasts that it’s less dangerous than cabs or that it somehow great market share in China from 11% to 30% in the space of a month despite operating in a couple dozen cities at the time.

The magnitude of how big Didi is winning underscores a few points. The first is just how strategic of an investment it is for both Tencent and Alibaba. For a while they represented a potentially limitless supply of capital for Didi, and two very powerful platforms essential for any ridesharing company to operate in China: WeChat and Alipay. But the momentum shows that Didi itself is becoming a highly strategic asset for the two Asian titans. Given the power of those two platforms and the influence those companies have in China, that’s nothing but bad news for Uber’s continuing Napoleon-through-Russia like multi-billion dollar campaign.

It also gives some clues about why Uber hasn’t yet been banned in China: Because it isn’t coming close to meaningful market share. Indeed, as I’ve speculated before, I don’t think Didi and its backers want Uber to be banned. Softbank, Coatue, Alibaba, and Didi itself are also investors in other global Uber challengers including Grab, Lyft, and Ola. All that happens the longer they can operate in China is they bleed out billions in capital. And since Uber isn’t even profitable in the United States, that means they have to replenish their coffers by raising even more billions of dollars. And last time, they had to turn to sketchy Russian Oligarchs to do so.

With Uber China clearly not succeeding, it spending another $1 billion a year on trying to win India, a ban in most major European markets, a looming class action lawsuit on behalf its drivers, and pressures to unionize around the country, it’s hard to imagine the valuation goes up again.

If you were Didi or any of its backers, would you want China to ban Uber? This is the most significant challenge it’s ever faced, just as its valuation is the highest it’s ever been.

One wonders what the new narrative Rachel Whetstone will cook up to spin what’s happening in China.

The first story was was Uber is crushing it. Then it was poor Uber is the victim of a free spending, unprofitable competitor that is forcing it into a subsidy war that would only erode the value of the Chinese ridesharing market. “I wish the world wasn't that way," Travis Kalanick even bemoaned.


Welcome to 2016m Uber. A lot of things in the world aren’t turning out the way you wanted them to be this year. Nor as Uber promised investors they would.