Didi Chuxing: China moves into the transport sector, in a big way

The media has been awash in recent days with stories about Didi Chuxing, formerly known as Didi Kuaidi, the Chinese company that has copied Uber’s business model, and that was created out of the merger between Didi Dache and Kuaidi Dache, backed by the country’s two internet giants, Tencent and Alibaba.

The size of the company, backed by Alibaba (which itself is a copycat of models that have been previously successful in other markets), along with its growth potential should be enough to impress anybody. Some 14 million drivers are registered on the app, who make around 11 million journeys a day (which suggests that many of them are part-time), and it has an 87 percent market share, operating in four hundred cities throughout China, in half of them already close to break even, and with plans to move into the black overall.

On May 12, Apple announced during a visit by Tim Cook to China (transported by the company), a $1 billion investment in Didi Chuxing with the aim, among other things, of “understanding the Chinese market better.” Rumors immediately began spreading that the company was to go public as soon as 2017, or maybe in 2018, once again following Alibaba’s model of securing US investment: Jack Ma waited sixteen years before launching Alibaba’s IPO, but did so precisely when he started to take its international expansion seriously). The company has denied the rumors for the moment.

Back in September 2015, Didi Chuxing bought a $100 million stake in Uber’s competitor Lyft in a bid to create an international alliance, but the magnitude of its possible IPO, now valued around $26 billion after Apple’s investment, could signal a round of acquisitions. Faced with Uber’s $62 billion valuation, Didi Chuxing could be the first to attract investors in the Transport (Mobility) as a Service market, TaaS or Maas, which has shown considerable growth potential, and which could be dramatically modified by the development of self-driving vehicles.

Uber has said that for the moment it has no plans to go public any time soon, meaning that Didi Chuxing could find the way open to attract significant investment, in the same way that Alibaba did in the United States, along with buying local competitors, and expanding rapidly, all of which would position it well for international expansion.

If you haven’t heard about Didi Chuxing, or to use its official name in China, Xiaoju Kuaizhi Inc., then start reading up. As Uber knows all too well, the Chinese are not to be taken lightly: the US company attracted $1.2 billion in September 2015 for its Chinese operations through Baidu Investments, compared to the $3 billion that Didi Chuxing managed, and is in fierce competition with it for market share, one city at a time (Uber operates in 100 Chinese cities) that is bleeding them both.

The transport sector, whether moving people or goods around, is going to be transformed in the coming years. If you have any doubts or you just thought this was about one company, then think about the scales we are talking about. This is a fascinating market, one until now relatively unstructured, and in which we can expect to see a lot of movement.


(En español, aquí)

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