Uber Concedes China To Didi, Merges to Create $35 Billion Company

[cirr]

Uber Concedes China To Didi, Merges to Create $35 Billion Company

by Ben Frederick @mp_benfred, 11 hours ago

Ride-sharing app Uber has reportedly merged its China business with Didi Chixung, Uber’s main rival in China. The merger will result in the creation of a $35 billion company, and Uber will receive a $1 billion investment.

Uber China investors will receive a 20% stake of the new company.

“As an entrepreneur, I’ve learned that being successful is about listening to your head, as well as following your heart,” Travis Kalanick, CEO of Uber, wrote in a blog post reported by Bloomberg.

“Uber and Didi Chuxing are investing billions of dollars in China, and both companies have yet to turn a profit there. Getting to profitability is the only way to build a sustainable business that can best serve Chinese riders, drivers and cities over the long term.”

Uber has sunk more than $2 billion in China to little effect, and neither it nor Didi have seen profits from their investments in the country. China has only recently passed a law legalizing ride-sharing businesses, which it previously suppressed. will allow for expansion of the businesses.

The U.S.-based company is reportedly planning to spend $500 million on a global mapping project, which will wean its dependence on Google Maps. This will also make it more accurate in countries where there is a high volume of passengers, but less accurate maps.

Uber appears to be consolidating its resources as it makes vertical moves toward driverless cars and proprietary mapping tech.

http://www.mediapost.com/publicatio...ncedes-china-to-didi-merges-to-create-35.html

 

[cirr]

Uber’s Efforts to Build Chinese Business Ultimately Fail Against Homegrown Rival Didi

So far, no U.S. internet-based company has succeeded in conquering the Chinese market

Car-hailing app service Uber's office in Cheung Sha Wan, Kowloon, Hong Kong. Photo: European Pressphoto Agency

By Eva Dou

Updated Aug. 1, 2016 8:22 p.m. ET

BEIJING—Uber Technologies Co. entered China with billions of dollars to spend and ambitions to dominate the world’s biggest market for ride hailing. It wasn’t enough.

After almost three years, Uber agreed to sell its China business to rival Didi Chuxing Technology Co., the Chinese company announced Monday. Despite launching private ride-sharing services in China a full year before Didi, Uber has been outmaneuvered by the homegrown player, which added localized features, landed powerful investors and wooed Chinese regulators and press. Uber and outside investors in UberChina will get 20% in the merged company, which has a combined valuation of $36 billion.

U.S. internet companies have long struggled in vain to capitalize on the allure of China’s enormous population and growing wealth. Some have been stymied by strict government licensing and censorship, which contributed to Google Inc.’s decision in 2010 to shutter its China-base search engine and has effectively barred access to Facebook Inc. FB 0.30 % and Twitter Inc. TWTR 0.00 %

Others have been bested by deep-pocketed local rivals that adapt quickly to Chinese consumer preferences. Amazon.com Inc. AMZN 1.18 % and eBay Inc. EBAY 0.29 % both faced off unsuccessfully against Alibaba Group Holding Ltd. BABA 2.26 %

“So far we haven’t seen a foreign internet company that has made it big in China,” said Andrew Teoh, managing partner of Ameba Capital, an early investor in Didi.

Uber is swapping its China operations for a big stake in its $28 billion homegrown rival, Didi Chuxing. WSJ’s Rick Carew shares what you need to know about the deal in the world’s largest ride-hailing market. Photo: AP and Getty Images
Other companies in the technology industry and beyond have struggled with a range of hurdles in China, including government policies that favor domestic players. Apple Inc. AAPL 1.77 % and Microsoft Corp. MSFT -0.18 % , for instance, have felt a sales chill in China amid Beijing’s growing focus on using “secure” domestic equipment.

“The environment has become more challenging,” said Jeremie Waterman, executive director for greater China at the U.S. Chamber of Commerce. “There’s no question that there are Chinese companies that are more competitive than they were five or 10 years ago, but there’s also no question that new ride-hailing regulationsthe government has and is increasingly putting its thumb on the scales to benefit Chinese companies.”

China is extremely important to many companies. General Motors Co. GM -0.76 % , which used decades-old alliances in the region to become one of the largest players in the world’s biggest light-vehicle market, counts on Chinese operations for about $2 billion in operating profit annually and has committed to spend 100 billion yuan ($15.1 billion) between now and 2020 on new car development. Although less profitable than U.S. operations, China accounts for about a third of vehicle sales and its position has grown in 2016 as the wider auto market shakes off volatility.

Still, a survey released in January by the American Chamber of Commerce in China found that only 64% of the U.S. companies surveyed were profitable in 2015—the lowest level in five years. Nearly a third weren’t planning to expand their investment in China, a higher percentage than during the global financial crisis of 2008-09.

Uber Chief Executive Travis Kalanick’s decision to capitulate in China came on the heels of new ride-hailing regulations there, which were announced last week but had been in the works for two years and were known to companies in the industry in advance.

http://www.wsj.com/articles/ubers-e...ately-fail-against-homegrown-rival-1470056431

 

[C130]

I read that Didi is soaking up a lot of the workers who lost jobs in the coal and steel industry.
http://money.cnn.com/2016/07/29/news/economy/china-steel-economy-transition/
quite surprise to see neither Uber nor Didi is profitable in China.

 

[chauism]

I read that Didi is soaking up a lot of the workers who lost jobs in the coal and steel industry.
http://money.cnn.com/2016/07/29/news/economy/china-steel-economy-transition/
quite surprise to see neither Uber nor Didi is profitable in China.

Didi is not profitable due to its Taxi subsides and rapid expension. Other competitors in China like Yidao and Shenzhou service are actually profitable in their operations but has a small market penetration that mostly in first tier cities.

 

[qwerrty]

they should've waited for couple more years and buy it for $1

 

[TaiShang]

Not easy to compete in China's cut throat mobile applications market.

They were eventually be swept out of competition. Perhaps good for them that they have been acquired before entirely going down.

 

[cirr]

Not easy to compete in China's cut throat mobile applications market.

They were eventually be swept out of competition. Perhaps good for them that they have been acquired before entirely going down.

The same goes for AMD and a bunch of other US-originated tech companies.

 

[Śakra]

Interesting. Uber is also struggling in India against Ola. It would be ironic if the largest unicorn collapsed due to their hubris.

 

[gambit]

Interesting. Uber is also struggling in India against Ola. It would be ironic if the largest unicorn collapsed due to their hubris.

Not really interesting. In both China and India.

Have you ever delivered newspaper when you were young ? I have. Honolulu have two newspapers: Star Bulletin and Advertiser. I was the richest kid in the neighborhood. Not because my parents were rich, but because I had my own money. I bought my own clothes, shoes, bicycles, skateboards, surfboards, and even daily meals.

What daily newspapers are there in your city, India or Canada ?

So what would be the business model for daily newspaper delivery in residential neighborhood in the US, India, and Canada ? So much the same we might as well be identical. We go to a place to pick up our loads of newspapers, fold/roll each one, secure with a rubberband and/or in a plastic bag, put them all in a bag, then run from house to house. At the end of the week or month, we go from house to house and collect money. We pay the newspaper company a cut and the remainder is ours to spend.

The point here is that the Uber business model is REPLICABLE.

Is there a difference between replication and reproduction ? Absolutely, and it is not trivial. Businesses that fails to recognize this difference will be swallowed up by competitors.

https://politicalsciencereplication...een-replication-reproduction-and-re-analysis/

Replicability is stronger than reproducibility. A study is only replicable if you perform the exact same experiment (at least) twice, collect data in the same way both times, perform the same data analysis, and arrive at the same conclusions. The difference with reproducibility is that to achieve replicability, you have to perform the experiment and collect the data again. This of course introduces all sorts of new potential sources of error in your experiment (new scientists, new materials, new lab, new thinking, different settings on the machines, etc.)”.

The Uber business model was replicable at literally every level, from the humans to the cars and down to the programming codes. And there was nothing Uber could do about it.

All the basic experiments regarding the 'ride sharing' concept, greatly assisted by technology such as the Internet and cellular service, were done by Uber outside of China. Uber proved that people will use any alternatives to the taxicab and that business model. Major structural issues such as payment methods and scheduling were formalized by Uber outside of China.

Even if the Uber business model requires the more time consuming reproduction method instead of replication, there are no trade secrets such as those in chemistry or metallurgy. Programming languages are publicly available. The only difference is the human language and that is not a major obstacle. So regardless of which characteristic, Uber was already vulnerable.

What really gave Didi the real advantage, not the replicable business model, is that Didi is local. Didi know the first critical item: the Chinese language. Didi knows the many local social customs and physical landscapes of the 'ride sharing' business model in ways that Uber do not or know to a lesser degree. The only real risk for Didi is that if the company hired incompetent humans.

Now we have two companies with the same business model competing in the same closed market. It is closed in the sense that an American driver cannot pick up a fare in China, and a driver in Beijing cannot pick up a fare in Tallahassee. What would lead to the end of one competitor is the pricing war. It also looks like Uber's position in China was not as secure and wide in scope when Didi was formed.

Fashion as a business model is also replicable, but the difference is that fashion relies highly on individual tastes and they can be fickle. A dress style in a certain color combination maybe desirable in one market but abhorred the next. Taxicabs just need to be clean and reliable. Once I paid you for your service, whether you are a taxicab in a large company, or you are an individual Uber/Didi contractor, I do not care what your car looks like. Get me from A to B, please.