INTERNET: Didi Kuaidi a Paper Tiger with US Lyft Deal

By on

Bottom line: Didi Kuaidi’s Lyft investment looks smart but will disappoint those hoping for a more aggressive move into the US, while a new taxi app backed by 2 Beijing fleet operators is unlikely to pose a major challenge to private rivals.

Didi Kuaidi drives into US with Lyft investment

Anyone with big hopes for Chinese hired car services leader Didi Kuaidi following its latest mega fund-raising will be disappointed to hear the company’s highly anticipated move to the US is coming through a minor investment that’s unlikely to yield much results. Many were hoping for bigger things from this aggressive Chinese company, but instead Didi Kuaidi looks set to enter the US through an investment and strategic tie-up with local partner Lyft, a rival of the more high-profile and very aggressive Uber.

My view that many will be disappointed by this move is sincere, but at the same time I would also add that Didi Kuaid’s decision to avoid the US for now looks quite shrewd. History has shown that Chinese start-ups have far better prospects when they make developing markets the first stop on their global expansion road maps, rather than focusing on western markets that are lucrative but also far more competitive.

At the same time, a separate headline is saying that Didi Kuaidi will soon face a big new rival in their home China market, as 2 major Beijing taxi operators unite to launch their own ride hailing app. I’m mentioning this headline since it’s in the hired car services space and could technically pose some challenges for Didi Kuaidi and Uber in Beijing. But the bottom line is that state-run companies have a terrible record at innovation, and I seriously doubt this new tie up between Shou Qi Group and Beijing Xianglong Taxi will pose much of a challenge.

Didi Kuaidi has been a regular fixture in the headlines since its formation earlier this year through a merger of China’s 2 largest taxi app operators. Not only is the company a clear leader in its space, but it’s also backed by China’s 2 largest Internet companies, Alibaba (NYSE: BABA) and Tencent (HKEx: 700). Add to that the major challenge it’s facing in China from Uber, and it’s easy to see why Didi Kuaidi has drawn so much attention.

Didi Kuaidi’s strong position helped it to close a new funding round worth a massive $3 billion just last week, as it looks to consolidate its position at home and also embark on a global expansion. (previous post) The company looked set to drive into Southeast Asia earlier in the year, when reports emerged that it was in talks to invest in GrabTaxi, which operates taxi apps in 17 cities throughout the region.

US Hiring Campaign

But Didi Kuaidi drew the most attention in July, when media reported the company had begun a US hiring campaign that hinted it might be planning a move into Uber’s home market. (previous post) Now it appears that such a move won’t be coming quite so soon, following announcement of this latest deal that saw Didi Kuaidi invest $100 million and sign a strategic partnership agreement with Lyft. (company announcement; English article; Chinese article)

The tie-up looks quite standard and not very exciting, with Didi Kuaidi and Lyft promising to cooperate in development of technology and services for travelers between the US and China. Lyft’s valuation reached $2.5 billion at the time of its last funding in March, meaning Didi Kuaidi is probably getting a very small stake of around 5 percent or less with its new investment.

We’ll close with news of the new alliance between Shou Qi and Xianglong, which launched their mobile app in Beijing this week. (English article; Chinese article) I have to at least commend these 2 companies for responding to the private sector challenge with this kind of move. But that said, such taxi apps are already quite common in the market, and I doubt this new one will have many advantages or innovations to win over customers who already use Didi Kuaidi, Uber or other existing services.

Related posts:

(Visited 161 times, 1 visits today)