When Uber's global orders dropped sharply by 80% in April and employees were worried about being laid off, its competitor Didi Chuxing first announced that it was slightly profitable.
This is the first good news that Didi Chuxing ushered in after the collective "winter" in 2019.
On May 7, Jean Liu, president of Didi Chuxing, told the media that the main car-hailing business has achieved a slight profit, and Chinese business has recovered 60-70% after the epidemic.
Although Didi's profit is nearly two years later than founder Cheng Wei's prediction, it is a big step forward compared to its old rival Uber, which has experienced three consecutive rounds of layoffs.
In April, Cheng Wei announced to the public Didi's strategic goals for the next three years, which highlighted Didi's global strategy. Cheng Wei plans to serve 100 million orders per day in the world within three years, and the number of the global monthly active users exceeds 800 million, and at the same time, he will fully promote the international car-hailing business.
In early May, Qiu Guangyu, chief operating officer of Didi International Business Unit, further revealed Didi's globalization direction: it plans to acquire the payment companies, cooperate with licensed financial companies, expand the food distribution business and payment business. Meanwhile, Qiu Guangyu also said that the company is studying new markets such as Europe, the Middle East and Africa.
At present, Didi has cooperated with the seven major Chuxing companies in the world and has business in 8 countries. It is known as the "Global Anti-Uber Alliance" with other companies including Lyft , Ola, Grab, Careem, Taxify and 99 Taxi.
Compared with Didi's global strategy, Uber has experienced quite a tough time. After withdrawing from the Chinese market in 2016, Uber lost the Russian market the following year, and its Russian business was acquired by Russian local company Yandex. In 2018, Uber announced its withdrawal from the Southeast Asian market and sold all of its Southeast Asian business to the local platform Grab. At this point, Uber only has business in its North American market, Latin American market and European market. However, Uber has repeatedly faced security challenges in the European market. What's worse, it has renewed its war with Didi in the Latin American market.
Under the impact of the epidemic, Didi's business has gradually recovered, however, Uber is not so lucky. It lost US $ 2.9 billion in the first quarter, laid off 3,700 employees and closed its takeout business in 8 countries in order to survival.
Competition with Uber boosted Didi's development
Didi's globalization was enlightened by Uber. In 2014, Uber extended its business unit to China, which immediately gave Didi a warning: the battle with Uber is inevitable.
At that time, Uber was established for 4 years and Didi was established for 2 years. Uber started in San Francisco, USA, and soon established its foothold in the North American market as soon as it was established, and announced its entry into overseas markets the following year. It soon occupied overseas markets in Southeast Asia, Africa, the Middle East, Europe and South America.
After entering the Chinese market, Uber adopted a radical subsidy strategy, which was not afraid of losing money. At the time, Didi was fiercely competing with Kuaididache in the Chinese market, which did not have enough money to compete with it. Therefore, Uber and Didi's valuation differed by 10 times at that time.
Thanks to Uber's joining, Didi has an unprecedented sense of crisis. In May of that year, after acquiring Kuaididache, Didi turned around and started a head-to-head battle with Uber. And Didi also established a project to discuss operational plans.
Zhu Xiaohu, one of Didi's angel investors, vigorously made many efforts to promote Didi financing. At the same time, he also strongly recommended Didi to raise funds from Tencent.
The anxiety of Didi financing has greatly improved after Jean Liu joined the team.
Before joining Didi, Jean Liu worked for Goldman Sachs China as a managing director, and on behalf of Goldman Sachs and Cheng Wei, discussed the investment in Didi. What is interesting is that the investment did not succeed, Jean Liu instead joined Didi.
Didi aimed at Uber's North American competitor Lyft at the time, preparing to invest in Lyft. Then, it successively invested in Grab, Ola and 99 Taxi, step by step, which gradually cannibalized Uber's markets.
Until 2016, Uber, which lost 2 billion in two years, finally decided to end the battle with Didi. Under the cooperation of the joint investors Softbank, Uber decided to withdraw from the Chinese market and sell its market share to Didi in exchange for 17.7% of Didi's shares and board seats.
Didi began to take a large-scale international route
The competition with Uber made Didi realize the importance of internationalization, and then it began to take a large-scale international route.
In 2017, Cheng Wei revealed his international ambitions in an exclusive interview with Caijing magazine. At the time, Cheng Wei said that:"Didi will fully attack in 2018, and there will be fierce competition with Uber in the global battlefield. We have more than 10 billion US dollars on the account, and our opponents are only one-third of us."
A report from Financial Times supports Cheng Wei's confidence. In the past two years, Didi has raised more than US $ 17 billion in capital and has about US $ 12 billion in cash on hand for business growth or acquisitions. At the time, Uber's account was only $ 5.75 billion.
In an interview with the Financial Times, Didi's chief technology officer Zhang Bo said, "Uber is very active in internationalization. If Didi does not follow up quickly, the opportunity may be fleeting."
Didi has four major strategies in overseas regions: natural growth, acquisitions, investment in local companies, and continued financing. In 2018, Didi began intensively deploying Latin America.
In January 2018, Didi announced the acquisition of 99 Taxi, the largest local e-hailing company in Brazil. Cheng Wei said that internationalization was Didi's core development strategy. A month later, Didi's valuation surpassed Uber for the first time, leading by about US $ 10 billion. In April of the same year, Didi entered Mexico market, which is Didi's first overseas market.
Passengers who have experienced the service of 99 Taxi said that 99 Taxi has some localization features in the Brazilian market, such as the possibility to add or change destinations during the journey. For passengers who do not have a local bank card, they can use an international credit card to pay the fare or cash.
Didi's success has attracted the attention of other countries. In April, Prime Minister Lee Hsien Loong of Singapore and his party visited Didi on the spot, and Lee Hsien Loong posted on social media, "Didi is expanding from a taxi-hailing software to a multiple business platform."
When Uber layoffs in Europe, the United States and Latin America, Didi was vigorously working in these places.
In July 2018, Didi Chuxing announced the establishment of a joint venture with Softbank to enter the Japanese taxi market. Japan is the third-largest taxi market in the world. Didi has been operating in Osaka since the fall of 2018 and has been providing services in major cities such as Kyoto, Fukuoka, and Tokyo. At that time, the CEO of Didi Japan was Zhu Jingshi, and also the vice president of Didi Mobility. At the end of 2019, Didi expanded to 20 cities and regions in Japan. In April 2020, Didi also launched a delivery service in Osaka, directly competing with Uber Eats.
Last June, Didi entered Chile and Colombia. Didi currently operates in 4 countries in Latin America, providing express, taxi, carpooling and other services. Qiu Guangyu, chief operating officer of Didi International Business Unit, told the media in September that Didi has more than 1,500 employees in Latin America, and most of them are locals.
In July 2019, Didi announced cooperation with financial institutions and convenience chain stores in Brazil and Mexico to introduce debit cards and wallet services to passengers and drivers. This move proposed a solution to the habit of users in Latin America relying on cash transactions. Now, passengers can recharge their Didi accounts at convenience stores, and they can also use Didi to pay utility bills and phone bills.
Of course, the side effect of large-scale internationalization is a sharp increase in losses. According to media reports, the overall loss of Didi in 2018 was as high as 10.9 billion yuan. This represents an increase of 336% year-on-year compared to the loss of 2.5 billion yuan in 2017.
Uber was in the trouble
Relative to Didi's announcement that its core business is profitable, Uber has been particularly disadvantaged this year.
On May 7th, Uber released its first quarter earnings report for 2020, with a loss of $ 2.9 billion in the quarter, the largest single-quarter loss in three quarters. In the earnings conference call, CEO Dara Kosrosasi said that the total order volume of Uber's car-hailing business in the first quarter fell by 3% year-on-year due to the epidemic, and the impact is not too large. But in the following April, Uber global orders will fall by 80%.
The takeout business may be a turnaround. After the outbreak, Uber's catering booking business was in strong demand, up 54% year-on-year in the first quarter. However, the growth of the takeout business cannot compensate for the decline in the core taxi business.
Uber decided to survive by cutting down its businesses. At the end of last month, Uber announced layoffs and laid off 3,700 employees, accounting for about 17% of the total number of employees. In addition, Uber also announced the closure of Uber Eats' takeout business in eight countries.
A spokesperson explained that Uber decided to terminate Uber Eats operations in the Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Ukraine and Uruguay, and transferred the UAE's Eats app to local travel Careem. He said that Uber will concentrate its resources on Eats' global head market.
The impact of the epidemic has made Uber's profit schedule unclear. Uber's chief financial officer said in this earnings call that the profitability time may be postponed to a quarter in 2021.
Goldman Sachs once estimated that in 2030, the global passenger car market will grow eightfold to reach $ 285 billion. The battle between Uber and Didi is not over, but for Didi, after this epidemic, it has clearly occupied the market firstly.
This is an article from WeChat official accounts The Passage (ID:passagegroup), written by Chen Yanni, translated by Chris Yuan.