It’s no secret Uber wants to conquer China as its next big market.
“Simply stated, China is the #1 priority for Uber’s global team,” Uber CEO Travis Kalanick said in a leaked email.
But doing business in the world’s most populous country is anything but simple, especially for a disruptive startup. From government raids to taxi driver protests, here’s a rundown of what you need to know about Uber in China:
1. Uber’s three biggest cities are all in China.
Guangzhou, Hangzhou, and Chengdu are now Uber’s three largest cities on a trips basis. After only nine months operating in Chengdu, Uber has 479 times the number of trips it had in New York after the same time. Hangzhou is only slightly behind that, at 422 times more trips than New York had in the same period. And the potential market in Hangzhou is expanding rapidly, with the city adding 200,000 new residents every single week.
2. China will likely surpass the U.S. as Uber’s largest market by the end of the year.
China is already the largest market outside of the U.S., with riders taking over 1 million trips per day, but it’s poised to claim the top spot. “At the current growth trajectory, [China] will most likely surpass the US before year-end,” Kalanick wrote.
But they still need more money to do so.
3. Uber is raising $US1 billion to expand in China.
Uber operates in 11 cities in China already, but wants to dramatically increase that number. It plans to launch in 50 more cities by the end of the year, all of which have a population of more than five million. Uber is targeting cities that are comparable in size to Miami, Kalanick said.
To do it, Uber is raising $US1 billion in a formal round starting June 22.
4. But Uber’s main Chinese rival just raised $US1.5 billion.
China’s top taxi app company, Didi Kuaidi, is raising $US1.5 billion to fight against Kalanick’s dream of a massive Uber expansion in China. Didi Kuaidi was formed when China’s two leading (and competing) Uber competitors merged.
But now they need to raise more money to counter Uber’s aggression in the market. Didi Kuaidi previously said it would give away $US161 million in free rides to undercut Uber.
5. “People’s Uber” loses Uber a lot of money.
People’s Uber is Uber’s Chinese version of UberX. It uses regular drivers and cars, and is made to appeal to China’s socialist tradition by having fares that only cover the driver’s cost. It has no profit by design. So how does it make Uber money? The short answer is, it doesn’t.
LinkedIn’s Isabelle Roughol reports that Uber loses about three dollars for every dollar it bills on People’s Uber. But the prices are cheap. The most Roughol herself could spend at night in Shanghai was 15.20 yuan (less than $US2.50) — and that’s with surge pricing. And this means that People’s Uber is seriously undercutting China’s taxi business, perhaps in an Amazon-like bid to drive its competitors out of business.
6. Uber will fire its Chinese drivers if they go to protests.
Last week, Uber sent out messages to its drivers instructing them not to go to the scene of taxi driver protests, The Wall Street Journal reported. Uber said that it would use GPS to identify those who had and terminate their contracts.
The messages were sent in response to an altercation between Chinese Uber drivers and taxi drivers in the city of Hangzhou — one of Uber’s largest markets. Taxi drivers in many parts of China continue to protest the “illegal” competition from services like Uber. Uber said its policy was meant to “maintain social order,” which shows a certain deference to the local government.
7. Uber’s offices in China were raided by police.
In May, Uber’s offices in Guangzhou were raided police, who reportedly “temporarily confiscated” several mobile phones.
A statement from the city’s transport commission said the police had “inspected a company which is suspected of organising private cars with are not qualified to provide passenger services, and of not having registered with the commercial authorities.” However, no further action seems to have been taken against Uber by these authorities.
8. Uber has big Chinese backers.
While Uber faces stiff competition in China, the company does have some powerful friends of its own.
The most prominent of these is Baidu, China’s largest search engine company, which invested $US600 million in Uber in late 2104. This investment meant Uber was able utilise “Baidu Map,” which is a heat map of people’s travel patterns that tracks 240 million monthly users.