By Elise Anderson
He said it could happen, and it did.
Christopher Tang, UCLA Distinguished Professor of Decisions, Operations and Technology Management and the Edward W. Carter Chair in Business Administration, questioned early whether Uber could compete successfully in China with Didi-Kuaidi (now Didi Chuxing), the country’s dominant ride-sharing company, valued at $15 billion with one million drivers in 360 cities.
In his piece published in the September 2015 issue of Fortune, “Will China Be Uber’s Waterloo?” Tang pointed to a number of business model adaptations that Uber faced in its efforts to “dominate the mobilized sharing economy worldwide.” After losing $1 billion annually while operating in China, Uber is calling it quits and selling its stake in the ride-sharing business to its rival, Didi Chuxing.
Tang recaps some of the reasons he thought Uber never had a chance in China and what led to its not-so-surprising departure from this market:
- Uber is a U.S.-based company; Didi is a home-grown Chinese company with strong backing from Alibaba, Apple and others.
- Uber wanted to displace the taxi business in China, while Didi was more inclusive of that industry, encouraging cooperation with drivers in its business model.
- Uber’s U.S. model works well domestically, but Didi leverages its deep understanding of Chinese consumer needs, providing access to a pool of vehicles and options that include: SUVs (Chinese typically travel in larger groups); tour buses (for even larger groups); hitch (for ride sharing); concierge (hiring drivers to drive an individual’s care home, avoiding possible drunk driving charges).
- Uber was the new kid on the block; Didi merged with Kaudi to ensure more than 80 percent market share.
- Uber was late to adopt Alipay (mobile payment system in China with 85 percent market share), while Didi and Alipay had embedded service within WeChat, a social media platform with more than 700 million users in China. Most consumers in China find it easier to use one mobile app, WeChat, to use Didi and Alipay to hail and pay for the taxi service in a seamless manner.
And there you have it.