Forget the US. China Is Uber’s Biggest Prize
China is already a fierce battleground for on-demand rides. But it’s becoming clearer that for Uber and its rivals, winning China means winning the world.
For evidence, look no further than the $1.2 billion in fresh funding just raised by Uber to pour into its China operations, with hundreds of millions more still expected before the round closes, according to the company. What does Uber plan to do with all that money? According to Reuters, Uber CEO Travis Kalanick revealed during a Beijing event held by Uber investor Baidu that the San Francisco ride-hailing company plans to enter 100 more Chinese cities over the next year, doubling a goal that was set just three months ago. Currently, five of Uber’s top 10 cities by ride volume are in China.
The news of Uber’s funding comes right alongside reports of another $3 billion raised by its biggest Chinese competitor, Didi Kuaidi, at a valuation of $16.5 billion.
In China, Didi Kuaidi is the definitive winner in car-hailing so far. The end result of a $6 billion merger between China’s two top taxi-hailing apps, Didi Dache and Kuaidi Dache, back in February, Didi Kuaidi reportedly employs 4000 compared to 200 who work for Uber in China. “It has a near monopoly on hailing traditional taxis via smartphone and more than 80% of China’s private-car-hailing market in June,” according to The Wall Street Journal, citing investment advice firm RedTech Advisors. And it’s backed by big-time investors Alibaba and Tencent, two of China’s biggest internet companies.
So Many Riders
These ride-hailing rivals have doubled down on their efforts dominate China for one good, obvious reason. With about 750 million potential riders, according to some estimates—roughly twice the total population of the US—the country represents the world’s biggest market for ride-hailing. In particular, Uber and Didi Kuaidi are gunning for the hundreds of millions of Chinese expected to enter into the middle class over the next decade.
But to capture this market, you also need drivers. Both Uber and Didi Kuaidi, with cash in their coffers to spare, have been aggressively offering bonuses to Chinese drivers to get them on board. This has led some drivers to game the system with fake rides, and rings of scammers using specialized software to automatically rack up trips have even reportedly cropped up. Both companies say they’re working hard to crack down on the racket, either freezing fraudsters’ accounts or demanding they pay a penalty.
In China, Uber is still behind. Few Internet companies tend to succeed in the country, in large part because the government prefers local players it can more strictly watch over. Instead of Google, for instance, the country has Baidu. Weibo stands in for Twitter in China, Alibaba for Amazon. So far, domestic companies have consistently won in China. But with a growing middle class eager to embrace the best consumer tech, Uber clearly believes it still has a chance. With another billion dollars to spend, it’s not giving China up without an all-out fight.
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