The amazing expansion of Didi Chuxing

Enrique Dans
Enrique Dans

--

Didi Chuxing’s completion of the purchase of Brazilian urban transport operator 99 for a total of $1 billion converts 99 into the first Brazilian unicorn and confirms the Chinese company’s long-announced global expansion plans.

Entering Latin America, one of the regions with the strongest growth in ride hailing, offers the Chinese company run by Liu Qing (Jean Liu to use her Western name) the chance to establish a presence in more than a thousand cities around the world, potentially reaching 60% of the world’s population.

The conciliatory approach of Liu, daughter of Lenovo founder Liu Chuanzhi, has proved effective: the rise of her company came about through a pact between her company, Didi Dache, and her main rival in China, Kuaidi Dache in February 2015, sparking a tough race with Uber for domination of China’s cities that ended with Uber selling its operations in China to Didi in exchange for shares. Uber lost the battle: when the deal was signed, Didi was present in 300 Chinese cities compared to Uber’s 60, while the US company had already lost more than $2 billion through a failed strategy of discounts and promotional offers. Meanwhile, between August and September 2015, Didi reached agreements with other major competitors such as Grab, Lyft or Ola to participate in its operations and collaborate on product and technology development, accompanied by the Japanese SoftBank, which has also recently become one of Uber’s main shareholders. In August 2017, Didi negotiated stakes in Taxify and Careem, giving it a foothold in no less than Europe, Africa and the Middle East.

Didi Chuxing’s business culture reflects what some have dubbed “the new China”: ecologically and socially responsible, employing disadvantaged groups such as those laid off from traditional industries, as well as veteran soldiers, while acting as business incubator to more than four thousand innovative SMEs, along with initiatives to help women enter business management (40% of the company’s employees are women).

Didi Chuxing is growing fast, is now worth more than Uber, and its acquisition of 99 shows it is now able to acquire companies it had first established a stake in. It is developing its autonomous driving potential by creating laboratories in Silicon Valley and preparing for an IPO in the United States. The future of the taxi industry seems to be boiling down to a bunch of completely interconnected companies, or basically a two-horse race between Uber and Didi Chuxing in which the latter so far enjoys a comfortable lead. All the other runners will either be acquired or go out of business. What’s more, Didi has ambitions beyond the taxi transportation: it has also invested hugely in Chinese bike-sharing company Ofo. It’s strategy is very different to Uber’s, but is also set to change the face of urban transport. Given the pace of its expansion, it may well become part of your cityscape soon.

(En español, aquí)

--

--

Enrique Dans
Enrique Dans

Professor of Innovation at IE Business School and blogger (in English here and in Spanish at enriquedans.com)