China’s taxi app war is about to enter its second era. Just days after a leaked memo showed Uber is raising $1 billion solely for its business in China, Bloomberg reports that Didi Kuaidi — China’s largest taxi app company, courtesy of a recent billion dollar merger — is out to raise $1.5 billion.
This would/will be the first funding for the merged Didi Kuaidi entity, but Didi Dache and Kuaidi Dache — the two companies that come together — were already well-backed. Didi had raised over $800 million — including its most recent $700 million — from investors like Tencent. Kuaidi raised over $700 million — most recently $600 million in January — from the likes of Alibaba and SoftBank.
What’s interesting about the prospective new round is that, besides how minted Didi Kuaidi already is, it holds an apparent 95 percent (plus) of the market according to reports. Didi and Kuaidi both retained their own brand, and together they serve around 300 cities in China.
So, while it’s easy to see that Uber is raising $1 billion for China as part of an aggressive plan to expand into a further 50 cities (it currently serves 12 in China), Didi Kuaidi’s fundraising is relatively unexpected.
Before coming together, Kuaidi and Didi both raised significant war chests in the past to finance massive incentives for drivers and price cuts for passengers against each other. Both companies were estimated to have sunk hundreds of millions into this war of attrition which ultimately brought them together. This time around, the merged company could use its new capital — once it arrives — to execute a similar tactic against Uber, but it is almost certainly also looking to next advent in China’s taxi app market: the rise of peer-to-peer (P2P) rides.
Uber famously pioneered the concept of P2P worldwide with its Uber X service. Uber X doesn’t exist in China, where the company instead runs People’s Uber, a non-profit service that similarly allows anyone to be a driver. Uber simply doesn’t take a cut of the profits… at this point, at least.
Didi Kuaidi was notably slower to introduce P2P, it did so earlier this month, having stuck to winning the legacy taxi on-demand space. Already it has signed up one million P2P drivers though, and it has ambitious plans.
It needs to be bold though. In the aforementioned leak, Uber CEO Travis Kalanick suggested that Uber has at least 50 percent marketshare for the P2P market in China’s top cities. If that’s anything near accurate, then it might explain what major activity Didi Kaidi has planned. There’s a real danger that, if Uber leads this market, Didi Kuaidi could miss out on early mover momentum and be stuck chasing its U.S. rival.
There are plenty of hurdles around P2P taxis in China, however. The rise of Uber has caused protests from professional taxi drivers (who don’t take too kindly to new competition), while Uber, Didi Kuaidi and other rivals have been raided by police in various cities, as local authorities each take their time in judging the legality of P2P.
Either way, with two top companies pulling together billion-dollar purses, China’s taxi app market is anything but settled following the big Didi-Kuaidi merger.Featured Image: TonyV3112/Shutterstock