Here's Why One of Uber's Biggest Competitors Just Received A $US700 Million Funding Boost

Beating the traffic cheaply in China is big business. Picture: Getty Images

One of Uber’s biggest competitors this week closed an investment round worth more than $US700 million.

Didi Dache is one of several apps competing for the top spot in China’s ridesharing and taxi-calling market.

To say it’s a big market is something of an understatement. As of August 29, Uber was operating in 200 cities across 45 countries. Right now, Didi is operating in 300 cities – in one country.

Didi is a taxi-calling service, as opposed to ridesharing. It has one million registered drivers using its app, handling an estimated five million transactions every day.

And competition for taxi-calling services in Beijing is tight. One reason is that since February, taxi drivers in Beijing are legally only allowed to have one taxi-calling app on their smartphone for safety reasons. Shanghai followed suit with a similar policy.

Didi co-founder Zhang Bo said earlier this year the company will “definitely do an IPO” within 3-5 years, preferably in the US. That was in May, when Didi was claiming it would increase transactions to 15 million by the end of the year.

At the time, it had its sights on its main competitor in the taxi-calling market, Kuaidi Dache, which is backed by the Alibaba Group.

Kauidi is currently in 358 Chinese cities. Between them, they claim 99 per cent of the country’s taxi-calling app market and hit 154 million users in Q3, according to Chinese data-tracking firm Analysis International.

“The battle between the two of us has entered the final round and only one will take the lion’s share,” Zhang told Bloomberg in May. “The largest player will win greater support when it comes to raising capital and that will in turn help us attract a better team.”

Since then, Kuaidi’s owners Alibaba completed the biggest IPO in history, valuing it at $170 billion.

And after a soft launch in February, Uber officially launched in July and now operates in the country’s four “tier-one” cities – Beijing, Shanghai, Guangzhou and Shenzhen.

Along with the regular Uber, Black and UberX services, it has People’s Uber, a nonprofit rideshare service which offers lifts in exchange for clients covering the driver’s fuel and toll expenses.

It’s a play that on the face of it, seems purely based on getting people into the Uber app and possibly using the paid service some time down the track.

The huge injection for Didi increases the stakes in a game that has only exploded ever higher in China in 2014, while onlooker focus has been trained on the daily political, financial and allegedly criminal twists and turns of ridesharing updates in media everywhere else.

The majority of the $700m comes from investment groups DST and Singapore’s state-linked giant Temasek, along with a funding from Didi’s juggernaut owner Tencent.

It’s ball that really started rolling in January, when Tencent gave it $100m and added Didi’s hailing feature to its huge messaging app WeChat.

In the month that followed, WeChat users booked 21 million cabs through Didi Dache.

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