The ridesharing industry is gearing up for real competition, marked as it is by more firms entering the arena, given its low barriers to entry.
Those are among the sentiments of 11 economists polled by Reuters, with a consensus that seemed to be at odds with the recent news of consolidation out of China’s ridesharing market. As has been widely reported, Didi Chuxing agreed to buy Uber Technologies’ China operations, with the deal thought to be, in some circles, evidence of a “winner-take-all” industry that will likely be dominated by a single player.
Yet, the economists surveyed by the newswire stated that the industry, which has been estimated by UBS to be a roughly $40 billion market, see that there could be a few large players, with room for competition from smaller firms. The aforementioned barriers to entry are relatively easy to hurdle, with contract workers relatively plentiful and low switching costs for consumers. There’s no need to invest in infrastructure on a giant scale, such as might be seen with a telecom company, and with apps that can be downloaded onto a mobile device for free, there’s no real specialized ordering mechanism.
Reuters quoted Global Economics Group Chairman David Evans on competition, as the economist told the newswire that social status may not deter competition. “You may not want to try a new social networking site if your friends aren’t on it, but you don’t care what app your friends use for ride-hailing.”
And according to Max Wolff, an economist with Manhattan Venture Partners, competition can also thrive because the drivers themselves do not necessarily make enough money to cement loyalty to a given firm.