Mobile Commerce

Uber Driving $1 Billion Into China

Uber is getting serious about its investment in a market that hasn’t been always welcome to U.S. tech companies: China.

Serious, for Uber, means committing to invest a billion dollars in the country this year, the Financial Times reported, citing a letter from Uber’s CEO Travis Kalanick. He addressed investors recently in letter, saying China is a key market for Uber’s global expansion — particularly because Uber estimates it already has secured nearly half of the ride-hailing market of the region.

In fact, Uber is close to turning out 1 million trips on a daily basis. Just to put that into context, as of Uber’s six-month mark in Chengdu, its ride volume was 46 times larger than New York City when comparing the same time frames.

“We are achieving a level of success in China that few other U.S. technology companies have ever enjoyed. Our early success derives from an organic approach to the market,” the CEO wrote in the letter.

“This kind of growth is remarkable and unprecedented. To put it frankly, China represents one of the largest untapped opportunities for Uber, potentially larger than the U.S. Success in China, however, takes commitment over the long haul and a strong will, coupled with a unique understanding of the differences in China,” Kalanick said.

As The Wall Street Journal points out, the local competition is Didi Kuaidi Joint Co., which is only about four months old and was created when two major companies merged. That merge, of course, came when Chinese companies Alibaba and Tencent agreed to a rare truce in the taxicab industry and combined Kuaidi Dache and Didi Dache into one entity to gain a better market share in the ride-hailing industry.

The two taxicab companies were seen as a mini battleground for the two payments companies given that consumers could hail and pay for rides using their smartphones, paying through Alibaba (Kuaidi) or Tencent (Didi) systems, depending on what cab was being hailed. At the end of 2014, Kuaidi had the advantage with a 57 percent market share, but according to research firm Analysys International, as reported by WSJ, they were too closely matched for that statistic to be meaningful in a market that attracted 172 million users last year.

And Uber appears to be ready to take on that battleground to see who can dominate the ride-hailing market, and hopefully with a leg up on the competition.

“One competitor has cloned our core product line and is attempting to transition from its legacy taxi business to a similar P2P model,” Kalanick wrote in the letter.

Alibaba and Tencent’s interest in the ride-hailing market stems primarily from the fact that the two companies are trying to leverage their mobile payment services to more industries. Those mobile payment services being Alipay and WeChat, respectively. And with somewhere around 500 million consumers using smartphones, it’s certainly not a market for companies like Alibaba and Tencent to miss out on.

Uber has now made it clear it wants a slice of that ride-hailing pie. To help leverage its own service, Uber teamed up with Baidu, the Chinese search engine, in December to help the two form a commercial partnership in the region. That also helped Uber scoop up $500 million in investments from Chinese tech, finance and insurance companies, The Wall Street Journal reported.

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