Pando

Is Didi prepping for a coming regulatory battle in China?

By Sarah Lacy , written on July 20, 2016

From The Travis Shrugged Desk

In recent weeks, Didi Chuxing has made some interesting and little talked about moves that portend a coming regulatory battle in China over ridesharing.

At a minimum, Didi is laying the foundation to compare favorably with Uber should one arise.

First, it released a set of new features aimed at making passengers safer including real time, automated itinerary sharing, a one-touch SOS button, biometric authentication, a feature to hide actual numbers from drivers and passengers and claims of stronger background checks.

We’re protecting Chinese consumers better!

Then this past week, it also cozied up with the Chinese commission that rules over the Sharing Economy Commission and Didi got cozier, jointly releasing background check criteria.

We want to work with the government!

Didi also established a fund to help subsidize taxi drivers who “upgrade their services and [support] social welfare initiatives that benefit taxi drivers.”

We don’t want to displace or disrupt anyone!

Individually none of these announcements are that interesting. But taken together they are incredibly shrewd moves to start distancing Didi from the many knocks against its American rival.

The obvious take away here is just how different this approach is from the battle for ridesharing in the US, where Uber and Lyft have worked in lockstep together when it comes to regulations, seen most recently in Austin where both companies pulled out deeming further safety measurestoo damaging to their network effects.

In general, Lyft is happy to just be a smaller, pinker version of the same thing.

Then again, neither Lyft nor Uber have to make a case for why they should not be banned, but perhaps their American rival with all those CIA connections… well…

Up until now Didi and Uber have been lumped into the same bucket, and potential new regulations in China are said to affect both equally. But with these moves, Didi is carefully carving out what makes it different, more responsible to the Chinese people.

It’s less about giving China “a reason” to potentially ban Uber. The former head of the CIAchairs a not at all creepy sounding division called “Uber Military,” and Uber has a history of using drivers to incite political action. State agencies are even direct investors in Didi. There’s no pretense the government would feel neutrally about these two rivals.

But Didi is certainly helping make a case for itself that a government regulation that adversely impacting Uber wouldn’tjust be about those things.

Travis Kalanick gets this, too, which is why he dropped his usual libertarian talking points to give a speech in China echoing Communist talking points last year.

The driver’s fund bit is particularly interesting. I’ve noted before that the Uber boasts of eradicating cabs and then later eradicating drivers won’t fly in China, a country where destroying jobs can lead to economic and political instability. As I’ve noted nearly a year ago, Didi has been extremely careful on the subject of self driving cars:

“We do believe that transportation should be transformed with technology however we think that transportation should be done in a more collaborative, peaceful, and constructive way in regards to millions of people’s livelihoods. Our mission is to increase the average pay of taxi drivers, and achieve collaborative reform from within and avoid abrupt termination.”

She continued to say that approach is why Didi is confident it can find “common ground with regulators and stakeholders.”  

Lyft’s comments about respecting drivers is just some nice brand positioning. But for Didi it is a clear message that it isn’t about disrupting, ripping and replacing, or in anyway firing or dislodging taxi drivers or moving to an era of self driving cars because “drivers are expensive!” That message is key to not getting shut down in China. Because if the fear that a US company with deep ties to the state department controlling urban infrastructure isn’t enough to get Uber shut down (and it almost certainly is), there’s that message: Uber will kill jobs in China; Didi will not. And there’s no way Uber can climb back from its position on “disruption,” destroying the “asshole called taxi” and a full-throated celebration of the impending robot-car revolution.Q

On one hand, Uber getting shut down in China could save more than a billion in annual burn and give the company a face-saving way to exit a market it’s failing badly in. On the other hand, China is the largest ridesharing market in the world many times over already. Even a 10% stake represents a shit load of rides and value.