Recent fundraising for ride-share companies Didi Chuxing and Uber testify to the ride-share market's profit potential. According to a statement, Didi brought in 7.3 billion USD in fundraising. Investors include Alibaba
Major ride-sharing companies need billions to open new markets and release new products. In September 2015, Uber claimed to set aside 1 billion USD to open Asian markets and China in particular. In the past 5 years, Uber has extended its reach to over 300 cities and 60 countries. But despite spending millions on promotions, Uber is still subordinate to Didi in China. Didi controls over 80 percent of the Chinese ride-share market.
Major foreign tech companies can rarely compete with local Chinese businesses because the Chinese government blocks many foreign websites and services. Uber and Didi's competition plays out through a spending war resulting in billions of dollars of expenses. Expert commentators have suggested that the two companies' spending rates are unsustainable. Both hope to lower spending over time but their spending patterns suggests that this will be difficult to accomplish.
In September 2015, Didi Chuxing announced a partnership with Lyft, another American ride-share company and Uber competitor. Among other things, American Lyft users now can secure rides in China fulfilled by Didi drivers with the Lyft app, and vice versa for Chinese Didi users in America. This partnership allows Lyft to avoid cultural difficulties experienced by American companies in foreign markets. Jean Liu, Didi Chuxing's president, stated that she expected the partnership to shift industry paradigms.
In contrast, Uber's entrance into the Chinese market was marked by clashes with regional government. The Chinese Ministry of Transport increased its restrictions on ride-share applications, raiding a Uber office in Southern China in May 2015.
Potential drawbacks to the Didi-Lyft partnership includes the worry that providing easy access to home territory can pave the way for future rivalry.
Apple's recent investment in Didi Chuxing was unexpected. But success in the Chinese market is critical for Apple's growth. A drop in 2016 Apple sales in Greater China were correlated to increased government scrutiny. In April, Apple removed its iBooks and iTunes movie services from China. On May 19 Apple was barred from selling the iPhone 6/6+ models in Beijing. Many view Apple's move as an attempt to improve its relations with China, its second largest market.
The two rival ride-share companies Didi and Uber have at least four overlapping investors, including BlackRock
The global ride-share market is ripe for intervention from foreign companies. But all prospective foreign entrants to China must engage with Didi Chuxing. The industry's reliance on technological innovation means that no existing historical model can reliably predict what happens next.
