Delivering food and manufacturing cars. Why does Didi want it all?

by Owen Guo

 

The ride-hailing giant DidiChuxing has started working with Beijing-based car maker BAIC  to develop electric vehicles. It has also made forays into China’s booming food delivery scene. On top of that, in a push to match Uber’s ambitions in driverless technology, Didi has tested autonomous cars. What exactly does DidiChuxing want?

As the leader in China’s ride-hailing market, DidiChuxing provides about 25 million daily rides to customers across the country. With a market share of about 87%, Didi is almost synonymous with city taxi services. But cutthroat competition and regulatory hurdles have forced the giant to look elsewhere for revenue streams.

Furthermore, competition in the ride-hailing sector is intensifying. Last December, Meituan-Dianping announced plans to launch ride-sharing services in seven Chinese cities including Beijing, Chengdu and Hangzhou, an unusual move for a food-delivery company. On March 21, Meituan officially launched its ride-hailing services in Shanghai, solidifying its ambitions in the transportation sector.

Didi, however, seems unfazed. In an interview with Chinese financial magazine Caijing, Cheng Wei, the company’s founder, acknowledged that Meituan-Dianping was a competitor but added that the addition of just one company wouldn’t be a game changer. However, he likened the fierce competition – he said there were 350 car-hailing companies in China – to “a war”, and said that the company was keen to invest overseas. Then he offered a candid admission: the profit margin of Didi’s ride-hailing will remain thin in the long run and a far cry from the estimated 36% profit rate for its counterparts in the United States.

As the Chinese media churns out headlines declaring a pending war between Didi and Meituan-Dianping, Didi is hitting back with a similar playbook: expanding into the core businesses of its the competitors. After a new round of fundraising, the company is planning to launch its food delivery service in early April in nine Chinese cities and is promising its drivers a decent base salary plus sales-based bonuses.

At the core of Didi’s strategy is a desire to foster a business model built around its fleet of drivers and its expertise in transportation.

“In the future, we believe that not only will everyone need a car, but also that car use will be shared with help from the Internet and smart regulation. This will reduce congestion and created a greener and more sustainable development,” said Cheng Wei, Didi’s founder, in a speech at a UN event in New York last November.

To achieve that goal, Mr. Cheng said that at least 1 million cars deployed by Didi would be new energy vehicles by 2020. Earlier this month, Didi announced it would team up with BAIC, a Beijing-based car marker, to develop charging stations and electric vehicles. This followed Didi’s move to emulate Uber by testing its own driverless cars. In January, it also rolled out its shared bikes in the western city of Chengdu.

As Didi tries to navigate the evolving environment at home, it has also snapped up assets abroad as part of its diversification efforts. In January, it bought a controlling stake in the Brazilian car-booking app 99, banking on a thriving market in South America which has seen an increase in shared car rides.

However, Didi’s ambitions extend far beyond new business ventures and acquisitions. It is now searching for talent to join its research lab in California in order to develop artificial intelligence-based security and driving technologies, thereby pitting itself against the likes of Google and Amazon.

“We aim to attract top engineers and researchers with the skills and passion to drive a revolutionary transformation of the global transportation industry,” reads Didi’s LinkedIn recruitment message.  

(Top photo from Baidu Images)

Owen Guo
Owen Guo

Owen is our columnist. He's pursing a masters degree in public policy in Canada. Before returning to school, he was a researcher and writer in the Beijing bureau of The New York Times. Prior to that, he covered energy and environmental issues for The Financial Times in Beijing.

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