Didi Kuaidi & China’s Car-Hailing Market

Didi Kuaidi is an example of competitive advantage derived from effective alignment between business and operating models.

The traffic situation in many of China’s major cities is well-known: queues of people line up as if at an airport, but instead outside of the most mundane locations such as restaurants, national and historical parks, and even business plazas. Public transportation is no better, as even squeezing onto a subway car or bus requires a level aggressiveness bordering upon rudeness.

Enter Didi and Kuaidi, two taxi-booking application-based companies that merged in February 2015, in an effort to head off Uber’s expansion throughout China. Their business model? Straight from the mouth of the President Jean Liu:

jeanliu-quote

That is, Didi Kuaidi creates and captures value by developing and offering taxi/carshare products that meet the unique demands of the Chinese people. To this end, Didi Kuaidi has been very effective at aligning the company’s business model and operating model. Specifically, two major facets underpin its operating model, as it relates to its overarching business model:

1. To meet the unique demands in China, Didi Kuaidi listens to its customer base and its needs, and responds with corresponding products.

While Didi Kuaidi started out as a taxi-hailing app, today, over half of its trips are executed via the private-car service. This is an outgrowth of the extent to which Didi Kuaidi leadership responds to what it identifies as needs…it created a hitch product as a carpooling service for commuters who are already driving to and from work and want to make a little extra cash, and it created a higher-end chauffeur product to satisfy customers looking for a driver to ferry them around in their own vehicle. It even recently launched Didi Bus, in which leased buses run a shuttle service between popular points of commute that are currently under-served by public transport.

All these products, while not necessarily specific only to the Chinese market, are in response to the needs communicated by those living in the sprawling, traffic-laden cities of China: where it’s impossible for the public transportation system to adequately service every route in a direct fashion, given the speed of change, the number of people, and the size of the cities.

2. Didi Kuaidi also meets its customer base where they are already operating – on platforms such as WeChat, which boasts over 600 million active users. Through WeChat, customers can book taxis or other rides seamlessly while chatting with friends and securing tickets to an afternoon movie. WeChat enables Didi Kuaidi once again to give customers what they want (an unparalleled, smooth experience with all their travel needs, whether it be bus or taxi or chauffeur, in one place) while accessing feedback to customers’ needs.

wechat

Both of these aspects have led to Didi Kuaidi owning a considerable chunk of the private car-hailing market, with 83% share (versus Uber, a far second at 16%). Thus far, Didi Kuaidi has been able to 1) respond more quickly than Uber, 2) offer more services across the spectrum of customer needs (from budget to high-end) on a single, integrated platform, and 3) leverage existing social networks (such as the traditional taxicabs and the WeChat platform) as a source of competitive advantage.

didikuaidi-share

Of course, questions remain regarding the long-term outcome of the Didi Kuaidi versus Uber rivalry. Neither company is profitable, partially because of the large subsidies they are offering drivers in order to stay competitive; efforts to phase them out have alienated their driver base. Moreover, it is unclear how Uber’s position in second place will change – given Uber is only available in 20-odd cities versus almost ten times that for Didi Kuaidi, it’s possible that over time (and with expansion), Uber could capture significant market share at the expense of Didi Kuaidi. As the Chinese private car-hailing market further matures, the evolution of these two companies will be interesting to watch.

Sources:

South China Morning Post: “Leading taxi apps […] to counter Uber’s advance in China” (February 2015) www.scmp.com/business/china-business/article/1713463/leading-taxi-apps-kuaidi-and-didi-us6b-merger-counter-ubers

Wall Street Journal: “Jean Liu Reveals How Didi Kuaidi Is Beating Uber” (August 2015) www.wsj.com/articles/jean-liu-reveals-how-didi-kuaidi-is-beating-uber-1438715398

TechCrunch: “Didi Kuaidi, Uber’s Biggest Rival In China, Launches Personal Chauffeur Service” (July 2015) techcrunch.com/2015/07/28/home-james/

TechCrunch: “China’s Largest Taxi On-Demand Company Introduces Shuttle Bus Services” (July 2015) techcrunch.com/2015/07/16/didi-bus/

Venture Beat:”Uber’s WeChat drama exposes the unique challenges of winning in China” (August 2015) venturebeat.com/2015/08/24/ubers-wechat-drama-exposes-the-unique-challenges-of-winning-in-china/

Tech In Asia: “Didi Kuaidi slaps down Uber, claims 83% of China’s private car-hailing market” (November 2015) https://www.techinasia.com/didi-kuaidi-uber-china-market-share/

Forbes: “Meet Uber’s Mortal Enemy…” (September 2015) www.forbes.com/sites/liyanchen/2015/09/23/meet-ubers-mortal-enemy-how-didi-kuaidi-defends-chinas-home-turf/

 

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4 thoughts on “Didi Kuaidi & China’s Car-Hailing Market

  1. Solid effort. Look up the anti-Uber alliance across the world between cab aggregators. Also, WeChat has gone on a crusade against Uber yesterday. We are living in interesting times

  2. Interesting read, thanks Tara! I’ve been curious to see what Uber is doing in countries like China; I had not known about Didi Kuaidi until your post. I find it fascinating that over half of its trips are in the private-car service, quite similar to how Uber started out in the US. I wonder if both Uber and Didi Kuaidi would follow similar U.S. service expansion trends such as UberX and Uber Pool.

    In addition, since Kuaidi is backed by Alibaba, it would be interesting to see if there’s any synergy that could be achieved with ridesharing from Didi Kuaidi and goods-delivering from Alibaba. As Uber in the US is exploring food/package delivery services, I can see similar opportunities that would be tremendous given the existing infrastructure that we learned about in the Alibaba case.

  3. Very interesting article Tara! I am curious to know if Didi Kuaidi is the only taxi app on Wechat? Do they have an exclusive agreement with Tencent since Tencent is their investor? On the hand, Uber has Baidu as their strategic investor so Uber can get access to map in China. Do you think it is a significant advantage over Didi Kuaidi? China is infamous for being protective of their Internet companies due to national securities reasons. How can Uber mitigate the risk of being discriminated as a foreign company in China?

  4. This was an interesting post, Tara! You explained clearly how Didi Kuaidi creates value by directly listening to customer feedback and adapting its product offerings accordingly, and it is evident that the company understands the unique needs of the Chinese market. Is Uber so far behind because its core product fundamentally does not fit with China, or are there other forces at play. For example, during the Alibaba case in FRC we had discussed the regulatory landscape and other potential reasons why a local tech company would fare better than a US one trying to penetrate this market.

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