Uber’s ​biggest​ Asian competitors have already raised about $7 billion—and …

28 Sep 2015 | Author: | No comments yet »

China’s Didi firms up anti-Uber alliance, invests in Ola.

New Delhi – Chinese giant Didi Kuaidi has invested an undisclosed amount into Ola, as part of the Indian taxi hailing app’s latest fundraising round. China’s most popular ride-hailing app company Didi Kuaidi said it has invested in Indian peer Ola, forging a new alliance within a network of companies challenging US rival Uber Technologies Inc.

Among the recipients are Ola, a Bangalore-based startup popular in India; Didi Kuaidi, a Beijing-based company whose service is popular in China; and GrabTaxi, a Kuala Lumpur company that has offices throughout Southeast Asia. Even worse for Uber, these companies are starting to show signs of cooperation, a move that could slow Uber’s progress abroad—and perhaps indicate that some or all of them could merge into a single company that’s bigger than Uber itself. The investment in Ola – which controls nearly 80 percent of India’s taxi-hailing business and reportedly completes more than 750,000 rides per day – is the latest in a series of bets made by Didi Kuaidi to apply brakes to Uber’s frenetic growth. It steps up the heat for close competitor Uber, which now counts India as its second largest market worldwide and has pledged a billion dollars in investments here.

Didi has also invested in Uber’s US rival Lyft, which shares common investors with the other companies, including Chinese e-commerce titan Alibaba Group Holding Ltd. The two were also rumored to be working on similar partnerships with Ola and GrabTaxi, the main player in Singapore, though Lyft co-founder John Zimmer declined to answer when asked during a press event to announce the deal with Didi Kuaidi. Its primary benefactors include Tiger Global, a New York-based venture capital firm that invests heavily in India; Softbank, a Japanese telco that’s quickly becoming one of the most aggressive investors in Asia; and Coatue Management, an American hedge fund with tech assets in the US and China.

Asian countries like India and China have recently become a new focus for ride-hailing companies that are hoping to capitalize on the large populations and low car ownership rates. Uber and its biggest rival Didi are locked in a subsidy-intensive fight for market share in China, one that is costing them each hundreds of millions of dollars. In China, for example, there are 100 cities with populations of 1 million or more, but less than 10% of the population owns a car, according to Didi Kuaidi. Uber’s China arm is closing a $1 billion fundraising round, according to Reuters, a sign it is ready to keep expanding in the country despite strong competition.

Not surprisingly then, Uber announced earlier this year that it plans to invest at least $1 billion into its expansion in India, and the same amount in China, and is well along in its fundraising goals. Since Uber, Didi Kuaidi, GrabTaxi, and Ola are competing against each other and have yet to go public, they are incentivized perhaps to inflate their numbers to the media. The company recently announced a plan to invest $75 million in a new car leasing program, which is expected to add 10,000 additional drivers to its national network. Under the program, the subsidiary will buy cars and lease them out to Ola drivers, helping Ola to attract more drivers and giving it greater control over its fleet.

Ola has also differentiated itself by offering supplementary services including a shuttle run, cashless payment and Wi-Fi in some cars, as well as a cafe service available through the app. If this marks an industry-wide pattern, then the presence of Ola, Didi, and GrabTaxi in smaller cities might not help their bottom line all that much. Uber, meanwhile, has generally shunned traditional taxis and instead recruited private vehicles and drivers unaffiliated with municipal taxi organizations.

While that number has likely increased significantly, Didi now says it’s logging over 3 million daily rides, not including traditional taxi service. But widespread driver fraud in China makes these numbers questionable among all parties. (Didi also includes in its numbers shuttle bus and driver-drives-your-car services.) In India, Uber and Ola have worked with a supply base that’s largely the same. Unlike other countries, 95% of India’s taxi market consists of “individual owners” or small operators (pdf, pg. 7) who have already obtained permission from the government to drive a vehicle for commercial purposes.

Didi, despite about half of its rides happening in taxis, does not charge a booking fee or commission for rides in municipal cabs; however, as of a year ago it also offers private-car rides, and it does charge passengers a commission for those. In Southeast Asia, GrabTaxi uses an outlier model, charging drivers (not passengers) a modest fee per booked ride. (Also unusually, it uses a top-up system, similar to the kind used with SIM cards, for its transactions with drivers.) As overlap among investors continues, Uber’s competitors have begun making public references to “global alliances.” While it’s possible that such rhetoric is merely meant to stir up controversy in a competitive industry, it’s also possible that consolidation is looming for GrabTaxi, Ola, and Didi Kuaidi.

Reilly Brennan, executive director of the Stanford University’s Revs Program, an interdisciplinary research program that tracks the automotive industry, says that consolidation among ride-hailing companies would bring several benefits.

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