Backers of the car hailing app Didi Kuaidi say that it embodies some of the best traits of each of China’s big internet trio: comprising Baidu’s technological edge, Alibaba’s managerial talent and Tencent’s financial resources.
All useful now that Didi Kuaidi is upping its battle with Uber, the American firm that has been disrupting taxi markets worldwide.
One half of the Chinese start-up (i.e Didi Dache) was founded in 2012 by Cheng Wei, who spent eight years with Alibaba before becoming Jack Ma’s youngest regional manager.
Cheng convinced Zhang Bo, then a key researcher at Baidu to become the start-up’s chief technology officer.
It then grew quickly with the financial backing of its biggest investor Tencent.
Then on Valentine’s Day last year, Didi announced a surprise merger with its local archrival, the Alibaba-backed Kuaidi Dache. The tie-up looked like a private sector equivalent to the Chinese government’s recent M&A strategy – where it has combined rival state-owned enterprises to create even bigger giants to compete globally (such as the merger of its trainmakers CSR and CNR).
Didi Kuaidi now controls more than 80% of the car hailing market in China. According to its own count, it is already the largest ride sharing firm in the world, after completing 1.43 billion journeys in 2015. That is 1.4 times Uber’s total orders worldwide for the past six years, Cheng told staff in a company event in Beijing last week.
“We used to think that the battle with Kuaidi Dache was the final. But after the merger, we realised that it was just a qualifying match. Now we will compete globally,” Cheng said. “Our goal is to build a Chinese-led global leader… Our objective is to allow anyone to have a ride within three minutes, anytime, anywhere in the world, within three years.”
That means that Didi Kuaidi is going head-to-head with its better-known rival from the US. Indeed, after Uber announced in mid-January that Chinese investors had stumped up $2 billion to value its Uber China division at $7 billion, Didi immediately responded with a fresh fundraising plan. China Merchant Bank (CMB) put $200 million more into Didi, valuing the four year-old firm at $16.5 billion.
Car hailing is just the beginning of Didi’s ambitions. It is already operating one of the country’s biggest internet transaction platforms, second only to Alibaba’s consumer-to-consumer shopping portal Taobao. Now the alliance with CMB seems to be promising new access to financial services for Didi’s growing customer base.
For instance, a number of Didi’s drivers would like to buy their own cars. In the past they wouldn’t have incomes that were regular enough to qualify for bank credit. Now that is changing, and Didi and CMB say their plan is to offer car financing, initially targeting Didi drivers with track records of using the app to earn a steady income.
“This plan will enable these drivers to get a car in a more economical way,” Jean Liu, president of Didi Kuaidi, told a press conference last week (for more on Liu, see Red Star). “From the CMB perspective, they love this business because they worry about risk control and they want a steady revenue income. The credit profile needs to be safe for them and our drivers fit this criteria.”
The pair also plan to roll out credit and debit cards in the second quarter, with CMB offering special benefits to Didi’s customers.
In October Didi launched a test drive service too. This allows its users to try out cars from 19 brands, including Toyota, Mercedes Benz and Ford’s Lincoln. By the end of 2015 the pilot scheme had garnered more than 1.8 million users.
During a trial sale on December 12, Didi also said that it sold 200 cars in two hours on its new e-commerce platform. The company didn’t disclose details of the pilot but confirmed that it has been cooperating with leading carmakers and dealers on the scheme. The test drive service has already accumulated a huge pool of data on consumer preferences, China Daily says, and the online platform will illustrate how well Didi’s understanding of consumers can be converted into sales.
According to CBN, selling cars online is no longer a “marketing gimmick” and the newspaper expects Didi will soon offer a matching service for its clients and car dealers.
Playing matchmaker is a wider theme in Didi’s commercial approach. Its ride-sharing product will soon allow drivers and passengers to select one another based on shared interests too, helped by information from WeChat, the dominant social media and messaging app, owned by Didi shareholder Tencent.
“The intention of such initiatives is that white-collar workers, who often endure daily commutes of an hour or two, will have more fruitful journeys during which business, friendship and maybe even romance will develop,” The Economist has noted.
In the meantime, Didi boss Cheng is sounding confident about seeing off the challenge from Uber, his only real rival. “Chinese internet companies have never lost any battle in history. And Didi Kuaidi is determined to maintain this proud tradition,” the Didi founder proclaimed last week.
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