Uber's China Rival Close to Raising $2B in New Funding | Hacker News Reader

Uber's China Rival Close to Raising $2B in New Funding

bloomberg.com

54 pointsdavidiach50 comments

I have used Didi quite a bit, it's somewhat easier to arrange custom deals with the drivers, like all-day-driver, etc. But the Uber experience was a lot smoother for simple rides from A->B, at least for foreigners. This is in Shanghai/Beijing and surrounding cities.

couple of notes, uber is backed obviously by google, but also by baidu which has deep governmental ties in china (sorry no reference, but the fact that it's the number 1 search engine in china all these years should tell you enough). uber, in fact, uses baidu maps in china for gps.

didi is backed by tencent which is the whatsapp clone maker (wechat) and i think alibaba.

essentially it's very easy for the chinese government to block out foreign web apps/services, just create a rule on the great firewall followed by regulation to enforce large fines. but they havent done it yet, why? because imho uber and didi help to solve one of the government's biggest urban problems, efficient transportation. yes, sometimes they have small scale crackdowns at airports and train stations to catch uber drivers, but that's just for show to calm down the taxi companies which are government backed and didi, taxi companies have been known to go on strike causing the government to have to resolve things.

it used to also be that uber was only paying taxes in usa, but now they're also lawfully paying taxes which should be another revenue stream for the government which is needed in this current economy.

I have used DiDi quite often when I was in Shanghai last year. It was a very pleasant experience comparing using Uber in China.

I'm very confident Didi will have a much larger impact than Uber, at least in Chinese market.

I'd heard that the Chinese government unfairly favors local companies. Is this no longer the case?

Seems like it'd be difficult for uber to compete in a rigged game.

It is still the case, as it is in nearly all countries (albeit to a greater degree than most).

It is still the case, as it is in US(Huawei looks at you).

I don't think it's worse in China compared to how it is in the US or anywhere else.

They still do. Indeed Carl Icahn recently dumped his Apple stock for this exact reason. Your market status in China is temporary, until the government can replace you. More interestingly there are few Western companies that have actually made a net positive cash flow out of China, even those that today have large market shares ( such as automotive).

The relationship has consistently been unilateral free trade in the long term, with investors giving money for market share and getting little in return.

Your argument doesn't hold. Apple is pretty replaceable in China, yet they are making yuge money from this one market.

The argument is that regardless of Apple's current profits it could all be gone tomorrow without any recourse.

“Your market status in China is temporary, until the government can replace you”

China has 2-3 (due to different standard) of the top smartphone manufacturers in the world, I don't think govt cannot replace Apple. Yet apple is still there.

China just cut off some of Apple's services without any warning:

http://www.nytimes.com/2016/04/22/technology/apple-no-longer...

> Last week, Apple’s iBooks Store and iTunes Movies were shut down in China, just six months after they were started there. Initially, Apple apparently had the government’s approval to introduce the services. But then a regulator, the State Administration of Press, Publication, Radio, Film and Television, asserted its authority and demanded the closings, according to two people who spoke on the condition of anonymity.

The biggest threat may be a security/encryption related court case similar to the one the US just backed down on. Apple would be put in a very tough place.

Apple had a 2016 Q1 YoY decrease of 25% for revenue in China. They are still making good money but the future is very uncertain for those cash flows.

Because 6S is a boring phone, and people didn't want it as bad as 6.

The reason Apple's sales in China are slowing is not because of local favoritism. It has more to do with new iPhones being not much different than older models, much more expensive than similar hardware with Android, and competition (like Huawei, Xiaomi, Oppo, Samsung) catching up.

Yes and the future for Apple in China is looking pretty grim since the government has recently just shut down the iTunes movies and books stores. It's only a matter of time before music and apps get similar treatment.

A government willing to block gmail of all things is not going to have qualms about killing an app store they can't control.

It is a myth that Chinese government bans foreign companies for the explicit goal of protecting local players. Chinese businessmen are better at figuring out what works in China, than some arrogant foreigners - that & few other factors is why they win in China[1].

The goal of banning certain companies is not protectionism of local companies, but protection of Chinese government and the bureaucrats(by censoring certain media and disabling channels that could be used for forming groups, which could upset social order). Remember, Chinese government doesn't respond to people or commercial entities. They don't need the money for political campaigns from entrepreneurs, which is why they don't need to promise them anything like ban of foreign companies.

[1]https://www.linkedin.com/pulse/20130605230952-18448-why-ebay...

Interesting - if you're still getting banned, but the cause is censorship and control rather than protecting local companies that's arguably even worse.

I guess it might only affect information companies though so maybe it's less widespread.

Yes - Startbucks, Walmart, McDonalds and many other International companies are NOT banned in China. One thing these companies that are not banned have in common is that they do NOT threaten the social order of the country. Could Starbucks help start a revolution, like Facebook could? No, that is why Startbucks is not banned and Facebook is. You know, there are many local competitors of Starbucks, so why isn't government banning Starbucks to protect Chinese companies? Because they don't care about opinions of people or local_entrepreneurs. Their goal is not protectionism. Uber will not be banned, since it is harmless to government.

What would they do with that much money?

User acquisition costs (lol)

Transfer 1% to their personal accounts in Bahamas and puf - disappeared.

(Buy companies.)

  Both need capital to pay for recruiting drivers and subsidizing customer fares.

Last sentence, 3rd paragraph.

Yes, but... $2B?!

It costs a lot of money to give away rides to millions of people. They're trying to keep the market unprofitable in the hopes that competitors like Uber think the price of subsidization is too high. They want to buy liquidity and make it too expensive to compete.

Once they have liquidity and no competitors it will be almost impossible for a competitor to come in. Customers want the quickest ride. At scale, didi could provide a car in less than 5 minutes for most places. Competitors would have trouble gaining traction (even if they gave away free rides) if they can't get a car to riders in less than 20 minutes. So their strategy is to buy market share now to get to liquidity and to keep the burn going long enough that they're the only ones left standing. Then they dial back the incentives and have a large and hopefully profitable business without any competitors.

Or just last three words "subsidizing customer fares" is probably the bulk of it

Recruiting drivers is also fairly expensive. I've seen a ton of "Get $500 to start driving for <service>" all over the place. I'm sure similar campaigns are being run in China as well.

I think they should include training and teaching manners, as recently for both Uber and Didi there have been many reports of harassment during late hours... and even a murder of a teacher by a driver.

Keep subsidizing the service until Uber is exhausted out of the Chinese market, either competitively or through governmental means.

Sounds like they looked at page 1 of Uber's playbook.

Not a huge amount.

For about 300 million users (just in China) that's about $6.66, or about 40 Yuan, or about 4 minimum fares (paid fare) per user depending on city/type of car.

I've received far more than that in promotions (where the promotional difference from regular and promotional fare isn't deducted from the driver).

It's sad when they write about you on Bloomberg and instead of your name there's only "Uber's China rival"...

Especially when that makes it sound neck on neck when in reality Uber is trailing Didi Chuxing (formerly Didi Kuaidi) by a wide margin.

Didi Chuxing has 87.2% of the market according to research from the China Internet Network Information Center.

http://news.xinhuanet.com/english/2016-01/11/c_134998758.htm

I feel like that is expected. Uber can't win China if they don't want it too. The Chinese state and people naturally want to produce this service (and others, i.e. search engine) themselves, they don't need or want foreign companies taking their market.

Disagree. Uber is not winning in China for one reason only - Didi is better than Uber. It has nothing to do with Chinese government or people. Chinese people love foreign brands, which are seen as being better and higher quality. They buy iPhones, go to Startbucks etc.

Why is Didi better?

I see you, with a new account, post a lot of protective comments about the Chinese government, do you work there?

Uber's China rival has a name.

Yes, and the story doesn't even use the correct name, it's now Didi Chuxing (滴滴出行), it was formerly Didi Kuaidi (滴滴快的).

What's the difference between the two names? And was there any reason for this name change?

滴滴出行 -> Didi Travel & Transportation

滴滴快的 -> Didi Fast Taxi

Given that they changed their name, I am surprised they left in the part which when romanized is the slang for penis (didi).

Does that seem odd to you, given how much the Chinese enjoy those sorts of linguistic games?

But how many Bloomberg readers would be able to identify that name in a headline?

It is a billion dollar company, just because it is not US based, we should know it's name.

Right, but we don't. If you took a poll right now I'd bet the vast majority of HN does not know its name. So IMO Bloomberg are absolutely right to not use the name in a headline - they do use the name in the article, which makes total sense.

There are a lot of billion dollar companies. We should know all of their names?

Both companies are hemorrhaging cash by operating in China. Its a game of who can survive longer, capital infusions are a way to lengthen the runway. Seems like an ugly battle.

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