Home
Apps
Apps Features
Uber Didi Global Duel Intensifies as Each Raises Billions

Uber-Didi Global Duel Intensifies as Each Raises Billions

By Eric Newcomer and Jing Cao, Bloomberg | Updated: 3 June 2016 10:42 IST

Highlights

Rivalry between ride-hailing leaders Uber and Didi has intensified.
Uber Raised $3.5 Billion From Saudi Investment Fund.
Didi has formed coalition with Lyft in US and Ola in India.

The rivalry between ride-hailing leaders Uber and Didi just intensified.

Uber Technologies raised $3.5 billion from Saudi Arabia's sovereign wealth fund the single biggest investment in the San Francisco company to date. The investment brings the total of Uber's latest financing round to $5 billion. Didi Chuxing, meanwhile, said it's working to close a funding round of more than $3.5 billion, which includes a $1 billion investment from Apple last month.

The new capital injections give the two companies extra firepower to duel each other for global dominance. Nowhere is the competition fiercer than in China, where Didi is based.

"For both of these guys, it's still a land grab," said Anand Sanwal, the chief executive officer of research firm CB Insights. "It's really, how do we get customers to adopt this user acquisition on both the rider and driver side is probably where they're going to be spending most of their money in China."

While Didi has formed an international coalition with the likes of Lyft in the United States and Ola in India, it's mostly focused on its home market. Didi is in 400 Chinese cities and said it has signed up 14 million drivers.

"It gets expensive to recruit drivers because the incentives escalate when multiple players are trying to recruit them," Sanwal said. "It's likely we'll see many drivers ride for both, but you want to become the favored providers, and people do that in different ways. They charge lower fees, some people do it by saying, 'Listen, you'll get a lot more rides by driving for us, because we have all the passengers."'

Backed by Alibaba and Tencent, the country's two most valuable technology companies, Didi is targeting an initial public offering in New York next year, people familiar with the matter said last month. The timing will depend on how the battle with Uber plays out, the people said.

Both companies are spending aggressively in China to expand, partly by subsidizing the costs of rides. Didi has handed out incentives to attract drivers and free rides to win over commuters, though drivers report that the subsidies have decreased in recent months.

"Uber has been fighting a losing battle against Didi for a couple of years now," said Arun Sundararajan, a professor at New York University's business school. "This is a multi-trillion market, and they're each trying to get a small slice of the trillion dollars."

Uber is spending at least $1 billion a year in China and has raised capital there that, as of January, valued the Chinese operations at $7 billion. Yet Uber has a long way to go to catch up with Didi. The US company has set a target of operating in 100 cities this year, a quarter of Didi's reach, and is losing money in China.

"They want to saturate the market with their own cars," said Evan Rawley, a professor at Columbia University's business school. "Cities are big, and the density of Uber varies."

Meanwhile, US rival Lyft is gaining on Uber in its home country. Lyft said in January that it had raised $1 billion, money it's using on promotions, including $50 vouchers, to steal market share from Uber. While each company offers differing market-share numbers, they agree that Lyft is gaining in major US cities.

Uber Chief Executive Officer Travis Kalanick promised shareholders that Uber will become profitable in North America by the second quarter of this year, a milestone it said it has reached in the US and Canada. The profit push may be constraining the company's ability to take on Lyft and other rivals.

Still, the $3.5 billion infusion from Saudi Arabia means Uber has plenty of cash to stay private longer and to grow without having to manage Wall Street's expectations. Valued at $62.5 billion not including the latest funds, Uber has $11 billion on its balance sheet to drive its global expansion, and take on Lyft and Didi.

Comments

For the latest tech news and reviews, follow Gadgets 360 on X, Facebook, WhatsApp, Threads and Google News. For the latest videos on gadgets and tech, subscribe to our YouTube channel. If you want to know everything about top influencers, follow our in-house Who'sThat360 on Instagram and YouTube.