A year ago, China’s market for taxi-hailing apps was split almost evenly between one service called Didi and another called Kuaidi. Investors began pouring in money and choosing sides: In December, Didi raised $700 million from Chinese e-commerce company Tencent and Russian private equity fund DST; a month later, Kuaidi announced $600 million in funding from Alibaba, Japanese telecom SoftBank, and other investors. Then, in February, the two merged.
The combined company, Didi Kuaidi, accounts for 99 percent of the country’s online taxi business and 78 percent of its private car business—a total of 8 million rides a day, according to researcher Analysys International. In July the company raised an additional $2 billion from investors including Alibaba, Tencent, and Temasek Holdings, the investment arm of the Singaporean government, and boosted its value to $15 billion. This latest funding round has one clear purpose: keeping Uber in Didi’s rearview mirror.
Uber has 11 percent of the country’s private car business and is raising $1 billion to claim more. In a June message to investors, Chief Executive Officer Travis Kalanick said expanding in China is Uber’s top global priority and that he plans to put Uber in more than 60 Chinese cities, up from 11, within a year.
So it’s not surprising that the company comes up constantly when talking with Didi executives. “We are the only company that’s trying to provide a comprehensive set of products that will service everyone. You don’t see Uber doing that,” says Didi Kuaidi’s president, Jean Liu. “This is a battle that everyone is watching,” says James Giancotti, CEO of Hong Kong-based Oddup, a company that rates startups. “It’s China private vs. U.S. private.”
Three-year-old Didi, which wouldn’t disclose revenue, operates in more than 300 cities. It doesn’t rely on its own network of drivers, instead tapping into China’s millions of licensed cabbies and private chauffeurs. Riders use an app to hail idle cabs and can offer bonus fees or tips to woo drivers during peak hours. Didi is also working on features that will let users compare prices and travel times across different kinds of transport, including buses.
The company has added a carpooling service called Didi Hitch that lets nonprofessional drivers sift through rider profiles and pick a person to share costs with. Hitch drew 3 million users in its first two months and is expected to reach 10 million by the end of the year, according to Liu. She’s also lobbying government officials, most notably in Shanghai, to approve Didi’s use of Uber-style surge pricing and a private fleet of black cars.
Didi says its local expertise gives it the advantage over San Francisco-based Uber, which is valued at $50 billion. “We feel it’s very promising,” Liu says of Didi’s talks with Chinese officials. “We have a very good chance for collaborative reform, instead of disruptive annihilation.” The company, she says, is working with the government to try to reduce traffic and pollution, to help cities including Shanghai adapt their transit management for mobile, and to act as an advocate for taxi drivers. Didi’s 4,000-person ground-operations staff helps drivers negotiate discounts for dining and car washes.
It’s for good reason that the ride-hailing service has taken steps to keep all the local stakeholders happy. China’s municipal governments occasionally issue warnings or carry out crackdowns on car services, although mostly against unlicensed private cars. Earlier this month, the ministries of transport, industry, and public security summoned companies including Didi and Uber to “rectify certain problems,” according to a newspaper run by the transport ministry.
Uber said in an e-mailed statement that it maintains close communication with local officials and is “on par with any other Chinese companies in the industry, meeting all potential required qualifications.”
Just behind the company’s co-CEOs on the Didi org chart, 37-year-old Liu has been a driving figure in its biggest projects of the past year. She grew up the daughter of Lenovo’s founder, majored in computer science at Harvard, then spent 12 years managing Asia investments at Goldman Sachs before joining Didi as its chief operating officer last year. She was named president less than two weeks before the merger with Kuaidi was announced, and one of her first duties was to smooth the transition. “We have to stay highly coordinated,” she says. “You can’t have a bunch of people who are afraid to speak up, but you can’t have people all acting on their own opinions.”
Liu has recruited junior staffers from Bain Capital, Morgan Stanley, and McKinsey and introduced a rotation system akin to the one at Goldman, requiring new hires to work in a number of different departments before they settle into more permanent positions. She led Didi’s last round of fundraising, and is using data analysis to figure out where next to send drivers.
So far, Didi has no plans to move beyond China, says Liu. “India would be the next logical step,” says Michael Lint, a partner at Golden Gate Ventures. “But they would need to invest a significant amount of money to break that market.”
For now, Liu is focused on making the most of her local advantage. Sometimes, though, China’s brutal traffic jams require some unconventional thinking. While heading to a recent meeting with Beijing officials, the traffic brought her car to a halt, and Liu had to sprint half a mile to the subway then grab a nearby rickshaw to make the meeting on time. “It felt like I came out of a boxing match,” she says. Depending on Uber’s next moves, the real fight may just be beginning.
The bottom line: Didi has 78 percent of China’s licensed- vehicle rental business but is raising billions to fend off Uber.
—With Tian Ying
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