Didi buys Uber China. What’s in for India’s ride sharing market now?
We are in the midst of a confusing debate here.
A debate over future of Ola Cabs, Uber and Didi’s home grown competitor now that Uber India merged with Didi and created a new and powerful entity. What is next? What could happen with the largest desi taxi aggregator in India? What is the future of the ride sharing service in India?
The debate mostly goes around 2 camps — those in favor of Uber increasing it’s stake in Ola and strengthen Ola and those who believe that Uber will follow Amazon’s move as a next step and with a defeat in the largest Asian market it will give everything it got to conquer the second in size.
Both have their own arguments. Didi could too be interested in expanding in India and there is no more convenient way than Ola where the company already holds a minority stake. The company has already done even more audacious Anti-Uber step before by stamping a partnership with Grab Taxi which is in process of raising $1 billion of fresh investment and with Uber’s smaller competitor Lyft on American ground through it’s $100 million partnership in Lyft.
To put the situation of Uber in China into perspective. The company has been engaged in an aggressive price war with Didi since the first day it decided to enter China. That began to concern investors.
China’s protectionist politics towards her domestic companies ensured that Did gets a favorable treatment and was the only taxi hailing company recognized as legal by the Shanghai government, which was not the case with Uber.
Before the acquisition, early this year, Didi reported finishing 10 million orders in only one day, equals 115 orders per second. Didi completed 1.4 billion order in 2015 which almost double the Taxi rides in United State (around 800 millions as per All China Tech). That put Didi in a dominant position in the Chinese market holding over 80% market share.
Does this move make sense, and what can India expect out of it?
First of all the juicy amount Uber gets from the transaction will surely bless its financial books and its investors especially now in the presence of rumors of an Uber IPO going to happen this year.
This may mean bad news for Ola. Uber is already strengthening their presence in India with a more aggressive pricing strategy. Following the example of Amazon which deployed a huge $3 billion war chest to dominate India’s E-commerce, Uber is likely to adopt a similar strategy of winner takes all now that its war chest just got larger.
The only way that is left for Ola to counteract the juggernaut that is Uber may be exactly Didi. Now that the carnage is over in China, India may become the next battle front. Didi’s likely interest to strengthen Ola may be a preparation for battle that will nevertheless end in consolidation. In other words what Didi paid to Uber on Chinese territory may get repaid back on Indian soil.
There could be another scenario too. Didi holds a minority stake in Ola which means that after the merger Uber too has a minority stake in Ola. Could it be that the move will result in merging between Uber and Ola and a definite global domination by both Uber and Didi?
A third scenario may be that Uber with a fresh cash of 13 billion dollars after the merger will not initiate a direct market battle in India but instead shift it’s focus back home against Lyft, it’s local competitor. That may keep Uber at bay from South East Asia which is something Didi would love to see.
The Uber-Didi-Ola relationship surely seems tangled and we may have to wait before we extend further commentaries.