INTERNET: Didi Cruises With Lyft, LeEco with Aston Martin

By on

Bottom line: A new integrated car-ordering platform being rolled out by Lyft and Didi looks like a smart and low-cost move to expand their geographic reach, while LeEco’s electric car venture with Aston Martin is likely to sputter.

Lyft co-founder John Zimmer in Beijing for Didi announcement

Two of China’s top Internet companies are in car-related headlines today, led by a rapidly cozying relationship between Didi Kuaidi and US counterpart Lyft that has the pair preparing to roll out a joint platform for their signature hired car services. The other news has online video giant LeEco (Shenzhen: 300104), formerly known as LeTV, rolling out a joint venture to make electric cars with super luxury brand Aston Martin.

Both of these deals are incremental, since the original Didi-Lyft partnership was formed last year when the former invested in the latter. Likewise, LeEco was rumored to be near a tie-up with Aston Martin as early as last April. From a broader perspective, both moves show a growing confluence between the Internet and cars, which has opened up a wide range of new services that often incorporate GPS technology.

Let’s begin with the Didi-Lyft news, which looks squarely aimed at Uber, the arch-rival of both companies. Didi began life as a taxi-hailing app, and later moved into the private car services that are Uber’s main business. It merged with top Chinese rival Kuaidi last year to create an undisputed Chinese leader, but lacked the international reach of Uber. To address that shortfall, it formed a number of cross-border strategic tie-ups last year, including its purchase of a $100 million stake in Lyft. (previous post)

I was originally skeptical that the 2 companies would be able to achieve many synergies, but now it looks like maybe I was a bit too hasty. According to the latest headlines, Didi and Lyft have been working overtime these last few months to link their platforms, a move that will allow users of both services to order cars in the other’s market using a single app. The new integrated function will launch in the next 2-3 months. (Chinese article)

Lyft co-founder John Zimmer made the announcement at an event at Didi’s Beijing office, reflecting how closely the pair have worked together since announcing their original alliance. Zimmer also disclosed that Lyft doesn’t plan to follow Uber’s lead with its own global expansion, and instead will rely on tie-ups with companies like Didi and India’s OlaCabs to provide a more global offering to its customers.

Low-Cost Expansion

Commenting as a neutral observer, Lyft’s strategy looks advantageous because it allows the company to provide a global product without the billions of dollars in investment Uber is making. But the approach of using cross-border alliances also carries quite a bit of risk, since clashes can easily occur between partners over different visions, and integrating technology can also cause headaches.

Next there’s the LeEco deal, which has the company formerly known as LeTV formally announcing the partnership to build Aston Martin’s first electric car. (English article) The pair said their first project will be to develop an electric car based on Aston Martin’s current Rapide S model. More models could follow, including one potentially branded with the LeEco name.

LeEco announced its plans to move into the car business more than a year ago, and since then has announced a steady stream of initiatives in the space. It announced last spring it would make an electric car in partnership with domestic producer BAIC Motor (HKEx: 1958). (previous post) So perhaps that venture was aimed at the mainstream China market and this new one is more aimed at global luxury rival Tesla (Nasdaq: TSLA).

At the end of the day, I personally think that LeEco is simply a company with too much money and is trying to imitate China’s biggest Internet companies by forming a wide array of partnerships and equity tie-ups that lack a major strategic focus. I still like LeTV’s core online video service and its strategy for movement into related smart TVs and smartphones. But that said, I really think these new energy car initiatives are mostly hype and will quickly fizzle without ever finding an audience.

Related posts:

(Visited 200 times, 1 visits today)