INTERNET: Didi Kuadi Eyes US, Uber Eyes China Spin-Off
Bottom line: Didi Kuaidi is likely to launch service in the US next year, while Uber’s decision to spin off its China operations shows its commitment to the market, as the rivalry between the pair intensifies.
A major global rivalry is shaping up between US hired car services pioneer Uber and its Chinese alter ego Didi Kuaidi, which both have extremely strong backing and are attracting billions of dollars in new funding. Just days after Didi Kuaidi was reportedly on the cusp of raising up to $2 billion in new money, media are now reporting the Chinese company has quietly begun hiring in the US for a move onto Uber’s home turf.
At the same time, Uber’s aggressive CEO Travis Kalanick has been quoted saying he’s planning to spin off his China business into a separate company. That move would be unique for Uber in its global strategy so far, and is aimed at better challenging Didi Kuaidi on its home turf. Uber also hopes the plan will allow it to respond more rapidly in a market that’s both extremely lucrative but also quite unique and challenging.
This latest news would help to explain why Didi Kuadi has suddenly been in a race to raise new funds, since a push into the US would be quite costly. Didi Kuaidi was formed this year with the merger of China’s 2 biggest taxi app operators, and earlier this week was in the headlines after a new funding round was so popular that it raised its target to $2 billion from an initial $1.5 billion. (previous post)
Now media are citing an unnamed company insider saying that Didi Kuaidi has begun hiring people in the US in preparation for setting up a locally-based product development center. (Chinese article) The reports are mostly limited to second-tier Chinese media, which always casts some doubts on their credibility.
But in this case Didi Kuaidi has issued a “no comment” in response. Anyone who has worked as a reporter in China knows that local companies regularly deny market rumors, even when the rumors are true. So the fact that Didi Kuaidi isn’t even denying the reports and is only saying “no comment” leads me to believe there’s a good chance the rumors may be true this time.
That said, it does take a bit of time between opening an R&D center and launching an actual product in a new market, especially one as big and competitive as the US. In this case, such an initiative would take a minimum of a year and possibly even more. That means that Uber will have plenty of time to prepare for the arrival of its Chinese rival into its home market.
Uber Responds with Spin-Off Plan
Meantime, Uber’s Kalanick is going on his own PR offensive to show he’s committed to the China market, despite slow progress and a number of setbacks since his company launched its signature private car service last year. Last month the company strategically leaked an email saying it had no plans to leave China, and was planning to spend $1 billion there this year despite all the difficulties it has faced. (previous post)
Now Kalanick is being cited in an interview with Chinese media saying that in response to the China resistance, he is taking the unusual step of spinning off Uber’s local operations into a separate company for the first time. (Chinese article) He is quoted saying Uber is taking the step because China is simply unlike any other market where Uber has gone so far.
It’s hard to say how much of this strategy is just public relations, and how much is substantive. It does seem clear that Kalanick will still call the big shots for Uber China, though I expect that most of the unit’s senior management would be local Chinese. Such a structure would not only make Uber look more local, but could also allow it to respond more quickly to the many challenges that are constantly cropping up for the company due to stiff resistance from local taxi drivers. We’ll have to wait and see how the situation evolves, but at the very least this latest move does once again show that Uber is committed to China for at least the next 3-5 years.
Related posts:
