Didi Kuaidi CEO and Co-Founder Cheng Wei admitted that he doesn’t know how to drive at the World Internet Conference held last week in Wuzhen, south of Shanghai, NetEase Tech News reported on Tuesday.
Many people may find this surprising, but for those tech watchers who follow closely how China’s leading ride-hailing giant expands its business, this should come as no surprise as Didi Kuaidi’s ultimate goal is to let everyone commute without owning a car.
Didi Kuaidi is a rising unicorn tech company with one of the highest valuations in the world. The immediate valuation for Didi Kuadi reached USD six billion after its two parent ride-hailing companies merged in February. In September, the company raised USD three billion, joining the tech unicorn family with a valuation of USD 16.5 billion.
The company began in 2012, utilizing the growth of the mobile web to connect passengers with taxis and solve the problem of insufficient taxis and unsatisfying customer service in Beijing. Three years later, the startup has expanded its business to include express cars, premium cars, carpooling, chauffeurs, buses, a designated driver service for third parties and most recently online car-selling.
Cheng Wei told NetEase that there are no boundaries for Didi’s business. He said anything that improves a user’s commuting experience, Didi is interested in. NetEase interviewed Didi’s President Jean Liu (or Liu Qing) in June, she emphasized Didi’s new position as an all-encompassing commuting platform. NetEase said it’s clear that Didi aims to become for commuting what Alibaba is for e-commerce.
Although it all sounded positive with the company experiencing tremendous growth, the 33-year-old CEO Cheng Wei candidly explained that deep down he feels an impending crisis. He sees Didi with more difficulties ahead than before.
The difficulties he mentioned include the rising threat of his company’s biggest rival Uber; other smaller competitors for Didi’s product lines; the conflicts between new and traditional industry; new government policies implemented to regulate the private car hailing business, and the continued burning of cash through subsidies.
Cheng Wei and his young team are all facing these challenges. “Didi has only built a commuting ecosystem, this is only the beginning,” Cheng told NetEase.
Didi and Uber were never the same type of company
Cheng Wei said that Didi and Uber were never the same type of company. He refrains from referring to Didi as the Chinese Uber. “We connected 80% of the taxis in China, and Uber didn’t,” Cheng said.
Uber was founded in San Francisco in 2010 and its initial service was hailing premium cars. Two years later, Didi Dache (a constituent company Didi Kuaidi) launched in Beijing with a taxi-hailing service.
Cheng thinks since Uber and Didi have a different starting point, therefore they have different end goals. Similar to the e-commerce industry, the U.S. has Amazon, eBay, plus the king of online payments PayPal, Alibaba largely represents all three services for the China market. Uber focuses on premium cars whereas Didi has since diversified its business.
Cheng Wei thinks the business prospects for Uber and Didi are determined by the different markets in China and the United States.
With places more spread out in America and car insurance generally higher than China, chauffeur service and premium cars can solve most commuting problems.
China’s population however is more dense and car insurance is lower, relatively speaking, chauffeurs and premium cars can only solve part of the commuting problem. That’s why after Didi launched its private car and premium car service, it also launched other services including express cars, carpooling, bus and designated drivers, to fulfill different needs in different scenarios.
Uber and Didi will always be each other’s biggest rivals
Judging from their business models, Uber and Didi are not exactly the same company, but in China, they will always be each other’s biggest rivals.
Uber Co-Founder and CEO Travis Kalanick’s trip to China in summer emphasized the importance of the China market to Uber. To occupy the market, which counts for as much as 30% of Uber’s global orders, Kalanick made an exception to set up the independently operated, Uber China. Kalanick said Uber China raised USD 1.2 billion in September.
Uber priced their premium cars (The People’s Uber) lower than average as a strategy to enter the market in China. Their orders began to soar because of their lower starting price (RMB 1.5 per kilometer in Beijing) and highly subsidized drivers and passengers. In May, Didi reacted by launching a competing service, “Express Car” and began another war of subsidies.
Didi specifically launched its economic car-hailing service to compete against Uber in China
Cheng Wei said the idea behind launching the express car service, an economic car-hailing option, was to compete against Uber’s arrival in China. He said the pricing of the express car service was influenced by competitors. “As an American company, Uber has a global vision and bigger ambitions,” Cheng told NetEase.
“Last year, Uber burned USD 1.5 billion in China, but Didi’s premium car service still occupies 85% of the market. American companies cannot just simply burn cash to beat their Chinese competitors.”
Cheng also thinks that an Uber shortcoming is that it is not localized enough; the management of multinational companies lacks advantages when faced with local startups. It has forced Cheng Wei to think about what Didi should do when it decides to expand the business outside of China.
“We like partnerships, respect local startups and share our technology, experience and capital, in order to build a globalized commuting platform,” Cheng said. This explains why Didi partnered with Uber’s U.S. rival Lyft, India’ Ola and Southeast Asia’s GrabTaxi.