Internet & Tech

That didn’t go well

Why an anti-Uber campaign backfired

Photo illustration of logo of car-sharing service app Uber on a smartphone over a reserved lane for taxis in a street in Madrid

Hailstorm: Shenzhou miscalculates

Uber may soon be valued at $50 billion – if it succeeds in raising more funds from private investors. Still, it has attracted scrutiny everywhere from Europe to India. The reason: for launching new services without regulators’ approval. In China, for example, local authorities have raided Uber’s offices, questioning whether its service is legal because its drivers are not licenced (see WiC267).

But the legal ambiguity hasn’t dented Uber’s popularity in China. The service has proven very popular with passengers, who prefer Uber over traditional taxis because their cars are generally cleaner, drivers more courteous and fares could be as much as two-thirds cheaper than licenced cabs. Even drivers of traditional taxis secretly admit that they want to join Uber, which offers more money for less work. In Chengdu, the average licenced driver takes home about Rmb4,000 ($645) monthly, but Huaxi Metropolis Daily says it is only about half of what an Uber driver stands to make.

Uber says it now offers close to 1 million trips every day in China. That’s as many daily rides as the company claimed to be hitting in all of its markets, worldwide, as of the end of last year. Uber now pledges it will invest more than $1 billion this year in China to expand from 11 to 50 more cities.

Given its stellar performance, it should hardly come as a surprise that some of its competitors are looking on with envy. Last week, another rival car-hailing service Ucar, also known as Shenzhou in Chinese, ran an ad campaign that featured the slogan “Beat U,” hinting at how Uber is illegal and potentially unsafe for passengers.

Designed to show that Shenzhou – owned by China Auto Rental, the country’s leading car rental site – is a much safer alternative, the campaign shows stern-faced Chinese celebrities holding up signboards bearing the words “No U”. Each poster also had a tagline denigrating illegal cabs like: “Reminder to be responsible fathers: don’t let your family members get into an unlicenced car.” Another poster said: “Black uncle, please stop your illegal car-hailing services.”

Shenzhou operates its own fleet of licenced vehicles and all of its drivers are salaried workers. Uber, meanwhile, draws from a pool of drivers without official taxi permits. So essentially, Shenzhou is “proudly reminding the public” that its business is fully licenced and legal, says Beijing Youth Daily.

But that marketing message has backfired. In just a few hours after the campaign was launched the posters went viral online, but for all the wrong reasons: the comments from netizens were largely negative. Many slammed the campaign as totally shameless and slanderous. The celebrities that appeared in the posters were also denounced as money-grubbers. Faced with a landslide of criticism, Luo Changping – one of China’s most famous journalists and one of those appearing in the ad – claims that he was misled by Shenzhou and he doesn’t stand by what is said in the campaign.

“The biggest winner from Shenzhou’s campaign turns out to be Uber. Not only did it gain publicity, it has also won many sympathy points. It’s like Shenzhou throws out a pile of crap that ends up hitting its own face,” one netizen wrote.

Some say the campaign itself was an act of desperation by Shenzhou. Unlike Uber, which has made significant headway in China, the Chinese firm has struggled to stay competitive. In January, the car-hailing service announced with much fanfare that it would spend Rmb2.5 billion to gain market share. Six months have since gone by and Shenzhou has gained little traction. Before last week’s debacle, its ranking on the App Store was only 148, says Beijing Morning Post.

But competition in China’s ride-hailing industry is about to become more intense. Last week, it was reported that Didi Kuaidi, which is backed by Alibaba Group and Tencent, has set a target for its latest round of fundraising of roughly $2 billion, to compete with Uber’s own fundraising efforts, says the Wall Street Journal. If successful, the terms of the new fundraising would give Didi Kuaidi a valuation of about $15 billion.

Didi Kuaidi currently dominates China’s car-hailing market with 78% of ride bookings compared with Uber’s 11%, according to data from research firm Analysys.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.