ANALYSIS:
The global e-taxi battle took another interesting turn this week when Didi Chuxing — by far the largest ride-hailing company in China — invested in Careem, an Uber rival that’s popular in dozens of cities across the Middle East, Africa, and Asia.
The partnership represents the latest in a long string of collaborations, mergers, and investments between e-taxi companies from different locales, and it serves to highlight how such businesses are increasingly electing not to take on rival firms in their own backyard but to instead form alliances.
Uber may be among the most recognizable ride-hailing brands globally, but in local markets the company faces stiff competition from other players, including Gett, Ola, Didi, Grab, MyTaxi, Taxify, and Taxibeat. Indeed, Uber has already unfurled the white flag to a number of local rivals around the world. Last year it chose to be bought by Didi in a $ 35 billion deal rather than continue hemorrhaging cash in China. And last month, Uber and Russia’s Yandex merged their respective ride-hailing services to create a new entity targeting Russia, Kazakhstan, Azerbaijan, Armenia, Belarus, and Georgia, with Yandex owning 60 percent of the as-yet-unnamed new company.
Other examples of consolidation within the fragmented e-taxi market include automotive giant Daimler’s MyTaxi, which merged with the U.K.’s Hailo last year before going on to snap up Greek rival Taxibeat.
Money talks
Didi claims around 400 million users, though all of those exist within its domestic Chinese market and the brand is largely unknown elsewhere. But Didi has been raising crazy money to build what it calls a “sustainable global mobility ecosystem.” This effort includes the $ 5.5 billion raised a few months back and last year’s bigger $ 7.3 billion tranche, to which Apple contributed $ 1 billion.
Though we have seen a general upturn in mergers between big and smaller players in the ride-hailing realm, Didi’s been going all-in on its globalization efforts through investments in local companies.
Besides its strategic investment in Careem, Didi has tapped its gargantuan war chest to plow cash into Uber’s U.S. rival Lyft, while in India it invested in e-taxi giant Ola, as well as Southeast Asia’s Grab. And last week, Didi invested in Taxify, a company that operates in parts of Europe and Africa and which plans to launch in London later this year.
This all leads us to one question: What is Didi looking to get from its increasing investments in Uber’s local rivals?
Alliances
One of the major benefits of using an e-taxi service such as Uber is that you can touch down in a new city and hail a ride without really knowing how the local cab system functions. But this only works if your usual ride-hailing service is a) available in your target market, and b) has enough drivers on standby to pick you up. Short one of these factors, travelers are back to square one.
But is there another way around this problem?
When Didi put $ 100 million into Lyft back in 2015, it was more than a simple investment — it was a reciprocal agreement whereby Lyft and Didi customers could access each other’s services while traveling. Lyft later inked a similar deal with Grab in Southeast Asia.
In many ways, this is like bringing the airline alliance model — including codeshare agreements through which multiple airlines share a specific flight’s route from A to B — to the ride-hailing industry. Except both these roaming deals are now dead in the water, which suggests there just wasn’t enough demand for such “cross-border coordination,” given that Lyft and Didi only operate in two markets, while Grab is only available in six markets.
“The roaming service was the first test of ways to provide customers with rides when they travel abroad, from which we have gained invaluable knowledge of cross-border coordination,” a Didi Chuxing spokesperson told Mashable back in March, before adding that Didi was now seeking “more flexible partnership with local innovators.”
Didi hasn’t given much of a clue as to what such “flexible” partnerships would involve, but the Careem investment represents part of a broader tie-up that will see the duo “share knowledge in intelligent transportation technology, product development, and operations,” according to a statement. So basically, they’re talking about a broad collaboration involving sharing each other’s technology and learnings from their own respective markets.
“Growing urban populations and economic and social diversity in the MENA (Middle East and North Africa) region present enormous opportunities for the ride-hailing economy,” said Cheng Wei, founder and CEO of Didi Chuxing. “Careem is the region’s technology and market leader. Through technology exchange and co-development, we look to support continued growth and transformation of the region’s transportation industry, tap into the significant potential of the local internet economy, and foster more innovative services for a broader network of communities around the world.”
Though Didi’s attempt at a reciprocal “user-sharing” model with Lyft didn’t work out, Uber is available globally in dozens of markets, and such a collaboration would perhaps make more sense in Uber’s case.
As it happens, when Uber jumped into bed with Yandex in Eastern Europe, it opened the doors to both companies in markets where they would otherwise struggle. As the two platforms are connected, the rider apps will be kept separate but the driver apps will be fully integrated, allowing them to pool each other’s drivers. This means that Yandex riders will gain instant access to Uber drivers not only in the six aforementioned markets, but also when travelling abroad — so a Moscow-based businessperson traveling to New York or London can tap Uber’s drivers from within the Yandex app.
This will work the other way around, too, meaning an Uber user from Melbourne, Lisbon, or Copenhagen can access Yandex drivers if they visit Russia or Belarus, for example.
“This creates one of the most convenient ride-sharing roaming agreements in the world,” noted Yandex.taxi CEO Tigran Khudaverdyan at the time of the announcement.
So the “airline alliance” model may have legs, and given that Uber and Yandex have actually merged their companies in the regions — rather than simply throwing money at the problem, as Didi did with Lyft — this model may stand a better chance of succeeding.
Tourism
Both Uber and Didi have also made moves to expand their appeal among travelers by focusing on language accessibility. Back in 2015, Uber announced a partnership with language-learning platform Duolingo to help match English-speaking riders with English-speaking drivers, giving riders an option within the Uber app that would limit their driver pool to those proficient in the English tongue. Uber also offers an UberEspañol service in some U.S. cities for those seeking a Spanish-speaking driver, but this bypasses Duolingo’s language-vetting services.
Similarly, Didi sought to appeal to business travelers and tourists by launching an English-language interface with real-time automated text translations between driver and rider. And in another push to draw revenues from travelers, Didi also recently partnered with Avis to sell car rental services to millions of Chinese riders while they’re traveling abroad.
Tourism, it seems, is central to both Uber and Didi’s philosophies on globalization.
The state of play
As the global e-taxi industry continues to evolve, what we’re seeing is the formation of alliances, some more rigid than others. There are full-on acquisitions, with Didi buying out Uber in China, and MyTaxi chipping away at various smaller local firms. But we’re also seeing new joint ventures between existing services, such as when Uber and Yandex joined forces.
While it’s not yet clear how all of this will play out in the long term, what is clear is that Didi is chasing Uber by investing in its rivals. Uber raised a lot of money early on and tried to aggressively grow its brand in countless markets around the world. But Didi has been playing catch up and is now funding Uber’s competition as it keeps its eye on rewards further down the line.
