Business, Investments

After Lyft, Didi Kuaidi to Invest in Ola – It’s Officially Uber Versus Everyone Else

Travis Kalanick, Founder & CEO, Uber

Uber Co-Founder & CEO Travis Kalanick. His company is in competition globally with rival firms joining hands together  – Image Source

Travis Kalanick must be one proud man as he managed to create a business that pretty much changed the definition of the word he named his company after, for many people. In the growing startup bubble, both investors and startups talk about ‘Uberization’. Multiple businesses have come up as Uber for groceries, home services and so on. And at the same time, technology led cab aggregation businesses following the Uber model have risen globally, competing against this 2009 established American company.

In the most recent update, Uber’s Chinese rival Didi Kuaidi is going to make an investment in its Indian rival Ola, to take on the company together. Ola is in process of closing the second tranche of $200 million of its $500 million financing round led by GIC, Singapore’s sovereign wealth fund, Didi Kuaidi, and Baillie Gifford, a Scottish investment firm, at a valuation of $5 billion. This is happening while Uber is investing close to $1 billion in its Indian operations.

Ola claims 80% of the market share - Image Source

Ola claims 80% of the market share – Image Source

In order to give a stronger rebellion to Uber, Ola acquired its rival Taxiforsure in March 2015. And at the moment it claims to own 80% of the market share of app led cab hailing businesses in the country. Ola has currently raised a total of $900 million in funding at the moment, stacked up against $8.2 billion Uber has raised in total and the above mentioned $1 billion it is putting into Indian operations. India and China are the world’ most populous countries, and hence the biggest markets for these firms. Didi Kuaidi too wants to go global, and hence this could be a good strategic investment for the Chinese firm.

To give a little background on why Uber should feel threatened with this, lies in its competition with Didi Kuaidi in China. Founded in February 2015, Didi Kuaidi is the result of the merger of China’s biggest app led taxi hailing businesses Didi Dache and Kuaidi Dache, which are backed by Alibaba and Tencent respectively with a net worth of around $15 billion. The company is having a market share of roughly 80% in China, and is yet in a stiff competition with its US based counterpart. Also, the company has just rebranded itself to ‘Didi Chuxing‘ earlier this month as it plans to go global. Below is a screen shot of its new website with the new ‘sideways-D’ logo.

Didi Kuaidi has rebranded itself to Didi Chuxing to appeal more to the consumers - Image Source

Didi Kuaidi has rebranded itself to Didi Chuxing to appeal more to the consumers – Image Source

Additionally, its not just the Indian and Chinese cab hailing firms that are joining forces to fight off Uber. In its homeland, USA, ride-sharing app company Lyft is also giving Uber a good competition. Valued at a $2.5 billion, while Lyft’s model is slightly different from Uber, it is still giving heat to the company which is currently valued at $51 billion.

Lyft has raised $100 million from Didi Kuaidi, and has recently partnered with the Chinese company to allow their respective users to hail rides from drivers of the other app while they are traveling to the other country. This again has been done in order to battle against Uber, which is the only player that is operating in 60 countries worldwide.

These international alliances don’t end here, both Didi Kuaidi and Lyft are also in talks with Singapore’s GrabTaxi Holdings Pte. Ltd for the same partnership. GrabTaxi is operational in Malaysia, Singapore, Thailand, Vietnam, Indonesia and the Philippines, and is also in trying to fend off Uber to become the number one in South East Asia region. It raised $350 million in August 2015 from investors including Didi Kuaidi, bringing its total funding to $680 million.

Company Founded in Headquarters Funds Raised (In $Bn) Current Valuation (In $ Bn) Investors # of Countries Operational
Uber 2009 San Francisco, USA 8.2 51 Baidu, Blackrock, KPCB, Fidelity, Menlo among others 60
Didi Kuaidi 2015 Beijing, China 4.4 16 Softbank, Tiger Global, Alibaba, Tencent among others 1
Ola 2010 Bengaluru, India 0.9 5 Softbank, Tiger Global, FalconEdge among others 1
Lyft 2012 San Francisco, USA 1 2.5 ICahn, Alibaba, Didi Kuaidi, Tencent, A16Z among others 1
Grab Taxi 2011 MidView City, Singapore 0.68 1.5 Softbank, Tiger Global, Didi Kuaidi among others 6

The table above shows how Didi Kuaidi and its allies stack up against Uber. Where their total funding together is substantially less than what Uber has raised, almost all of them have common investors among each other- Softbank, Tiger Global, Alibaba and even Didi Kuaidi itself (soon to invest in Ola too). Is it likely that these stakeholders will consolidate all these companies into a single group to compete against Uber? Also, since they are already creating alliances for the same purpose.

If we talk about the revenues, then a recent report by BI showed that Uber is highly unprofitable, hence it clearly requires a lot of funding to sustain its behemoth of operations. Ola too isn’t profitable, as mentioned in a statement by its CEO Bhavish Agarwal in March this year. Similarly Didi Kuaidi too has been running into losses.

While profit doesn’t seem to be an area of prime concern for these players, its customer acquisition that matters. And regarding this, Uber has had a fair share of legal nuisances in different countries it has been operational. So its not only these players but different Government around the globe as well Uber has to deal with. Now that things are moving at such a rapid pace, it seems Uber has to first win the local battles, should it want to emerge as the global winner.

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