E-COMMERCE: Alibaba Beefs Us Koubei, Preparing to Ditch Didi Kuaidi?
Bottom line: Alibaba’s new tie-up with Car Inc hints at a looming divorce with Didi Kuaidi, while a major new funding for its Koubei unit foreshadows a major new push that will further heat up intense competition in take-out delivery services.
Just days after reports emerged of a massive new funding for its Ant Financial unit, e-commerce leader Alibaba (NYSE: BABA) is back in the fund-raising headlines with big plans for its Koubei take-out dining unit. At the same time, an intriguing new story about a strategic Alibaba alliance with an aggressive new player in the hired car services space hints that the company may also be contemplating a divorce with national leader Didi Kuaidi.
Both of these stories reflect the catch-up game that Alibaba is playing in two important growth areas of the Internet. Alibaba previously had a presence in both through investments in hired car service provider Kuaidi and group buying site Meituan. But both of those partners entered mega-mergers over the last 6 months with their major rivals. As a result, Alibaba has divorced itself from the current Meituan Dianping, and is looking to build up its own rival Koubei take-out dining service. (previous post)
That divorce made headlines back in January, and now the latest headlines announcing a new strategic tie-up with the hired car services unit of Car Inc (HKEx: 699) hint that a similar divorce could be brewing between Alibaba and the current Didi Kuaidi. The new alliance will see Alibaba work closely with Car Inc, a traditional car rental specialist that has recently undergone a major shift as it aggressively builds up its UCar hired car services that compete with Didi Kuaidi and Uber. (Chinese article)
The reports are all coming from Car Inc, and stress that there hasn’t been any equity exchange yet as part of the new strategic tie-up. Car Inc was in headlines just last month, when it was formally divorced by one of its oldest strategic shareholders, US car rental giant Hertz (NYSE: HRZ), which had owned 10 percent of the company. (previous post) The stake sale has been part of a broader shuffle that appears to have UCar adding new investors as it slowly becomes the major stakeholder of Car Inc.
This new alliance looks far broader than just hired car services, and will also include a wide range of other potential cooperation involving cars, such as data and cloud services. It’s unclear if Alibaba plans to eventually buy an actual stake in Car Inc or UCar, but that would be the logical next step if the partnership works well. That would almost certainly imply that Alibaba may be preparing to sell its stake in Didi Kuaidi, much the way it did with its Meituan Dianping stake after those 2 companies merged.
Koubei’s Appetite for Money
Next there’s Koubei, which is reportedly in the process of trying to raise up to $2 billion in new funding. (English article; Chinese article) The reports on the deal are a bit sketchy and slightly confused, and all appear to derive from an article in the young financial news app Jiemian. They quote an unnamed insider saying Koubei is looking to raise $1.5 billion to $2 billion, and that the company would then merge its operations with Ele.me, the industry leader that is also backed by Alibaba.
The only problem with that is that Ele.me said very clearly last month that it had no intention of being owned by Alibaba, meaning this kind of operational merger seems highly unlikely. What’s more, I suspect that figures in these latest reports probably overlap with a massive $3.5 billion fund-raising by Alibaba’s Ant Financial affiliate that has been in the headlines these last few days. (previous post) Koubei itself appears to be a unit of Ant Financial, rather than the New York-listed Alibaba.
While the actual facts behind the latest headlines are a bit jumbled, the bigger story appears to be that Alibaba plans to fatten up Koubei with lots of money, in a bid to challenge rival services from Meituan Dianping, Baidu (Nasdaq: BIDU) and also possibly even Ele.me. That means the already intense competition in the space will only grow rather than ease, causing big losses for all these companies to accelerate.
