Background of Didi Chuxing
Didi Chuxing was founded on September 1, 2012, by Bo Zhang and Cheng Wai. It is headquartered in Beijing, China. This mobile transportation platform offers a full scope of driving choices to 400 urban areas in China. The organization provides a full range of portable tech-based portability choices for near 300 million clients crosswise over more than 400 Chinese urban communities, including taxi hailing, private vehicle hailing, Hitch (social ride-sharing), DiDi Chauffeur, DiDi Bus, DiDi Test Drive, DiDi Car Rental and DiDi Enterprise Solutions.
Uber entered the Chinese market in 2014. In July, Uber China as a backup organization, which was set up and propelled activities in Beijing and Shanghai. For some potential Chinese clients, Uber changed to an increasingly confined business approach. That was connecting the Baidu guide to finishing the situating and route capacities, similarly finished the installment work by Alipay and UnionPay charge cards. Following two years of advancement, China has turned into Uber’s biggest market on the planet. In October 2015, Shanghai Wubo Technology Company which was the main autonomous organization outside the United States was built up, and Uber China’s activities were moved to servers in China
Cheng shot to worldwide distinction for a solitary reason. He shined as the main business-man to stop Uber’s tireless development. After consuming billions of dollars trying to repress its Chinese opponent, Uber conceded rout. In August 2016 Kalanick offered the organization’s China unit to Didi for $1 billion in real money, alongside an 18% possession stake in the consolidated element, which is esteemed at $35 billion. Cheng and Kalanick have joined each other’s sheets, without democratic rights. For Cheng’s role as operator and consolidator, he was named as FORBES ASIA’s 2016 Businessman of the Year. According to Didi’s co-founder and angel investor Wang Gang, “Uber is like an octopus. China is one of its tentacles, and simply lashing out at it is useless. We must cut Uber’s core U.S. unit and make it bleed there.” (Forbes Asia, Dec.2016).
Uber’s CEO and co-founder, Travis Kalanick, said that Uber China has “exceeded even my wildest dreams,” praising its fast growth as “no small feat given that most US technology companies struggle to crack the code there.” (Golliher.N, August 2016). This merger is not a monetary disappointment for Uber, however illustrative of US tech organizations. Regardless of early gains, Google and eBay were additionally incapable to proceed with their initial accomplishments in China and were outperformed by local contenders. To end Uber’s push into the China market, Uber China merged with its Chinese rival, Didi Chuxing.
Overview of Uber’s Entry into the Chinese Market
The merging took place in between Uber China and Didi Chuxing took place as Didi was instrumental in purchasing the Chinese operations of Uber. Uber China is a joint venture in between main Uber business, internet giant Baidu along with the outside investors. Uber was responsible in taking a 17.7 stake in that of Didi. Uber along with the investors within the Chinese business was valued at that of $ 28 billion and the value of the combined company was held to be $ 35 billion (Chinadaily.com.cn., 2019). The deal has helped Didi in gaining a stake in many ride-sharing companies within the planet. It has helped the company in operating within 400 cities of China. The agreement has helped Uber China in keeping the independent branding and helped in its business operations. It has helped in ensuring the stability along with the continuity of the service that catered to the needs for the passengers along with the drivers. It has helped the companies in emerging to be stronger and helped them in spreading their influence in the market. It has helped Didi Chuxing in taking over the Chinese operations that has strengthened market share of company on the Chinese mainland. It has also helped in expanding the company in the international arena. It has helped the two companies in operating in the cross shareholding that has helped the companies in becoming the minority shareholders that can cater to the needs of the two companies (Techspot.com., 2019). Didi Chuxing accounts to be only enterprise which has received the investments from the internet companies of China- Baidu Inc, Alibaba Group Holding Limited along with the Tencent Holdings Limited. It has made the process of getting a ride within China more difficult and it has made the service very expensive.
The company Didi Chuxing found out that getting a vehicle in the Chinese cities of Beijing, Shenzhen along with Guangzhou has become more difficult by that of 12.4 %, 17.7 %, 13.2 % and that of 22.5 % respectively. It has been found that the response rates for the rides from the second along with the third tier cities have been decreased by average of the 30 % annually. The merging made Didi cut down on the bonuses that was being given to drivers so that they would go ferrying passengers within the town. It can help in cutting down on discounts which was being offered to the consumers. National government was instrumental in lifting the ride-hailing out of grey zone in the tear 2016 that made the cities impose the own rules that dictated who was eligible for the driving (Businessinsider.in., 2019). The two biggest cities within China imposed the strict rules and it compelled the drivers to possess local “hukou” which is a significant residence permit of China.
Didi Chuxing had to face the difficulties as the daily completing rides were decreasing in number and the core services of the company were not in the growth mode. The company has raised the funds so that it can carry out research in relation to the autonomous car research and investing in the area of bike-sharing. The company has thrown the money towards the overseas Uber competitors. The post-merger scenario that took place had a future in relation to the ride-hailing in the global arena. The company was facing the well-funded competitors along with the leadership crisis that made Uber to focus on US so that it can stay lucrative within the market. Uber merged the Russia unit in the month of August with that of the local rival called Yandex (Ft.com., 2019). The dearth of the competition that took place due to the merging of the companies was instrumental in increasing the price of the app-hailing ride. It was responsible for turning off the customers as the price surged on account of lack of the competition. The investors of Didi and the Uber want to put an end to that of cash-burning competition that can help the companies in emerging to be profitable within the market. The profitability can help the business in building the sustainable business which can serve the interests of Chinese riders.
References:
Businessinsider.in. (2019). Uber’s China subsidiary is reportedly merging with its biggest rival in a $35 billion deal. Retrieved 13 October 2019, from https://www.businessinsider.in/tech/ubers-china-subsidiary-is-reportedly-merging-with-its-biggest-rival-in-a-35-billion-deal/articleshow/53486168.cms
Chinadaily.com.cn. (2019). Didi Chuxing confirms merger with Uber China – Business – Chinadaily.com.cn. Retrieved 13 October 2019, from https://www.chinadaily.com.cn/business/motoring/2016-08/01/content_26298821.htm
Ft.com. (2019). How Didi Chuxing plans to beat Uber in ride-hailing race | Financial Times. Retrieved 13 October 2019, from https://www.ft.com/content/2212fc06-17ae-11e8-9376-4a6390addb44
https://www.crunchbase.com/organization/didi-dache
https://www.crunchbase.com/organization/uber-china#section-overview
Techspot.com. (2019). Uber China completes merger with Didi Chuxing. Retrieved 13 October 2019, from https://www.techspot.com/news/67193-uber-china-completes-merger-didi-chuxing.html
Uber China and Didi Chuxing merge into new $35 billion ride-sharing company, Golliher Nicole,August 2016
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