Earlier this week, Didi Kuaidi — Uber’s biggest competitor in China — and Lyft, Uber’s biggest US rival, announced the two companies were teaming up to take on Uber.
The strategic partnership will let the companies share technology, product development, and local resources, and when US users of Lyft go to China (or when Didi users come visit the US), they will be able to pay in their native currency on each app.
At a press conference earlier this week, Lyft founder and president John Zimmer called the partnership “the first step toward global coverage.” It’s no secret that this partnership is intended to let the companies overtake Uber.
Taking on Uber
Uber has been heralded as a ride-hailing giant; as of June, the company operated in 311 cities in 58 countries globally. And Uber has been investing heavily in China.
Uber’s China branch recently closed a $US1.2 billion round of funding. Uber is aggressively expanding its Chinese footprint, with plans to operate in 100 more cities in the country in the next year. And Uber’s top three most popular cities — Guangzhou, Hangzhou, and Chengdu — are all in China.
Uber’s service is taking off in China much faster than it did in the US; nine months after launching in Chengdu, Uber had 479 times the trips it had in New York after the same amount of time.
Up until this partnership was announced, Lyft did not seem a formidable enemy to Uber. Lyft operates domestically and, although it is valued at an impressive $US2 billion, that still pales in comparison to Uber’s aggressive, international expansion and eye-popping $US51 billion valuation.
But now that Lyft has teamed up with Didi, the two companies seem better suited to take on Uber. Didi recently closed a $US3 billion round of venture capital funding, and it’s valued at $US15 billion, so it’s well-equipped financially — in total, Didi Kuaidi has amassed a $US4 billion war chest of venture capital funding.
Didi Kuaidi was created in February when competing apps Didi Dache and Kuaidi Dache merged to cut the costs of competing with each other — and more importantly, with Uber. Didi’s finances have also come into question. The company is losing buckets of money, according to leaked financial documents surfaced by the Financial Times.
Forming a global alliance
In addition to just the US and China, the Lyft-Didi partnership could signal an aggressive plan for taking on ride-hailing at a global scale. If you’re bullish on Uber and don’t believe in a ride-hailing market big enough for two players, that plan may sound crazy.
But Lyft and Didi’s approach has something Uber’s doesn’t. US-based Lyft can now reach Chinese customers through an app native to their own country. Some of Uber’s backlash in Asia stems from the fact that Uber is not a service native to Asia, and has subsequently struggled with adapting its service to suit laws in these countries.
In fact, South Korea has vowed to shut down Uber’s operations in the country. As TechCrunch notes, “Korean law doesn’t allow technology companies to store payment data as part of their purchase workflow, but instead requires consumers to retype their information with every purchase, ostensibly for security reasons.”
But this global alliance against Uber could extend beyond just the US and China, ostensibly giving Uber a run for its money.
According to The Wall Street Journal, Lyft and Didi are in talks to expand their alliance with other Asian ride-hailing companies: India’s Ola and Singapore’s GrabTaxi.
Ths isn’t entirely unexpected. Earlier this year, BuzzFeed News reported that Softbank Capital, which has funded on-demand ride-hailing startups GrabTaxi and Ola, was behind a global alliance to take on Uber. Executives at both GrabTaxi and Ola, which are Asia-based companies that use taxis instead of private drivers, told BuzzFeed News they were working on “forming a global alliance of regional players.”
Didi Kuaidi invested $US100 million in Lyft months prior to the two companies’ partnership. Didi Kuaidi has also invested in GrabTaxi. So it’s easy to see how the partnership could extend to Singapore — where GrabTaxi is based — and to Ola, which is Uber’s main Indian rival.
So besides the US and China, an expanded partnership would let Lyft, Didi, and its potential new partners — GrabTaxi and Ola — operate in India, Singapore, Thailand, Vietnam, Malaysia, and the Philippines. This would provide a distinct advantage to Lyft/Didi/Ola/GrabTaxi over Uber as GrabTaxi already operates in regional cities that Uber doesn’t, like Thailand’s Chiang Rai and Malaysia’s Kuching.
At the press conference earlier this week, Zimmer declined to comment on adding more companies to its partnership. “We’ll announce different parts of our global strategy down the road,” he said.
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