A collection of leading Chinese tech companies have partnered to test Didi Chuxing in China’s ride-hailing market.
Didi currently holds a 90% market share in what is thought to be the world’s largest ride-hailing market, estimated at more than $30bn. However, the likes of Alibaba, Tencent and Suning have announced a joint venture with car manufacturers FAW, Dongfeng Motors and Chongqing Changan Automobile, to challenge the company’s dominance.
A total of 9.76bn yuan ($1.5bn) has been put towards the venture. Suning will be its biggest shareholder, with a 19% stake. Chongqing Changan, Dongfeng anf FAW will each hold a 15% stake, with the remaining 36% shared between Alibaba, Tencent and a number of smaller investment funds.
In comparison, Didi Chxuing is valued at more than $50bn and counts the likes of SoftBank Group, Uber and travel comparison website Booking among its investors.
Driving Didi off the road
Since buying Uber’s China division in a $35bn deal in 2016, Didi Chuxing has been largely unchallenged in the Chinese ride-hailing market. Even in the face of backlash over the murder of two of its passengers last year, Didi’s dominance hasn’t waned.
Since then, Didi has successfully fought off pressure from rival service Meituan Dianping, which began testing a pilot ride-hailing service in Shanghai and Nanjing in early 2018. Despite planning to expand the service to three more cities, the company has since accepted that “current market dynamics” would stop it from expanding the service further.
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Yet, competitors continue to try their luck. German automotive company Daimler AG began operating a premium ride-hailing service in Chengdu late last year, while Chinese car manufacturer SAIC Motor announced a similar move soon after.
By combining the customer-facing expertise of Alibaba and Suning, the technology expertise of Tencent and the automotive industry experience of FAW, Dongfeng and Changan, this latest venture hopes to form “business synergies which will help enrich the companies’ ecosystems,” that will give it the upper-hand over Didi and the many rivals that are emerging in China’s ride-hailing market.
Car sales in China fell for the first time since 1990 last year, down 2.8% from 2017, and ride-hailing is viewed as a possible cause.
“They see that moving forward, if car-hailing is going to be the future, they want to tap into this market sooner rather than later,” Wijaya Ng, an analyst at Ipsos Business Consulting, told Reuters.