28 mar 19

The first real Didi challenger?

“It’s better not to upset the Chinese Government” is probably what the board of Chinese ride-hailer Didi is saying today. Some months ago, after (and supported by) the regretted assault and killing of 2 female users of Didi’s carpool service “Didi Hitch”, the Ministry of Transport started a crackdown campaign on the SoftBank (JP) and Uber (US) backed mobility vendor.

Since, Didi has been accused not to check its drivers, not handle deposits properly, not protect access to its user accounts correctly and deploy illegal cars (not registered in the correct city). A harsh social media campaign against Didi replicated the voice of the Government and Didi had to stop Hitch and started implementing measures to regain trust of its users.

No competition

In addition, the Government was not happy with Didi’s monopoly. New players have been popping up across the country, but with no or little regulation in place, Didi could maintain its leading market position.

This is changing now. Although Didi’s operating model must have been well known to the authorities prior to the death of the 2 girls, the public was not agitated and the Didi platform could get away with complaints by focusing on the drivers rather than on structural deficiencies.

Put the machine to work

When China moves, it moves fast. Three state-owned car makers (FAW, Dongfeng, Changan) have now joined forces with Suning, Alibaba (e-commerce) and Tencent (comms/tech) to form a ride-hailing joint-venture. It’s basically all of the big guns preparing for war against Didi’s monopoly.

A starting capital of USD 1.5 billion was quickly found and a new ride-hailer will be created, but not from scratch. Especially Alibaba and Tencent have some experience (read: investments) in autonomous vehicles and mobility. This JV will remove some of the frustrations – most of these investments supported non-Chinese companies. In some way, it’s the first time they see an ROI on Chinese territory.

Pay-back or a new trend?

China has suffered from the trade war, an economy in slow-down mode and the efforts put in transforming its country to a high-tech economy. It’s possible that this new JV is only the market asking for a new supplier, but usually, there’s a strategy behind this type of initiative. Downsizing a foreign-funded market leader, pushing forward local companies, riding the wave of public discontentment… It might be just a coincidence.

Authored by: Yves Helven