Uber to enter 100 more Chinese cities

Uber chief executive Travis Kalanick speaking at a Baidu event yesterday. The US service's unit in China now operates in almost 20 cities.
Uber chief executive Travis Kalanick speaking at a Baidu event yesterday. The US service's unit in China now operates in almost 20 cities.PHOTO: REUTERS

Ride-hailing service unveils plans a day after revealing $1.7b boost

BEIJING • United States ride-hailing service Uber will enter 100 more Chinese cities over the next year, doubling a previous goal set just three months ago, chief executive Travis Kalanick said yesterday.

Uber's China unit currently operates in almost 20 cities, Mr Kalanick said at an event in Beijing held by Uber investor Baidu Inc.

The speech comes a day after Mr Kalanick said the China unit had raised US$1.2 billion (S$1.7 billion) during ongoing fund-raising, while people familiar with the matter told Reuters that larger local rival Didi Kuaidi had brought in US$3 billion.

The two companies are spending heavily to subsidise rides and gain market share, betting on China's Internet-linked transport market becoming the world's biggest and most lucrative.

"When we started this year, we were about 1 per cent market share. Today, nine months later, we're looking at about 30 to 35 per cent market share," Mr Kalanick said.

He did not specify whether that market was for all ride-hailing services including taxis, where Didi dominates, or just for private cars.

Uber also welcomes new regulations expected later this year governing ride-hailing services in China, Mr Kalanick said.

At the event, Baidu, China's Internet search leader, demonstrated a voice-operated artificial intelligence smartphone assistant for finding nearby offline services, which could also control a robot reminiscent of the titular machine in Disney movie Wall-E.

Baidu invested in Uber China and integrated the company's hailing service into its mapping function to provide better user experiences, Baidu chairman Robin Li said.

After the Baidu slot, Mr Kalanick spoke of the importance of Uber's relationship with the Internet firm. "We can get introductions to the city governments, the government officials that want to shepherd our kind of innovation and our kind of progress into their cities," he said.

Both companies have been raising funds from investors to pay for their expansion plans. Didi Kuaidi is close to raising about US$3 billion from investors, more than it had originally planned. The latest round of financing values the company at US$16.5 billion, according to one of the sources, who asked not to be named as the details are private.

"You need a sufficient operational base to have enough users - if you only had 10 or 20 cars, you will never be able to book one," Didi president Jean Liu said at a forum in Hangzhou on Monday, explaining why the company was "burning cash" to chase operational scale.

The company, formed from a merger of two competing Chinese taxi-hailing apps in February, has competed with Uber in giving out incentives to attract drivers and free rides to win over commuters. The subsidies, which can reach multiple times the actual fares, have also created a cottage industry aimed at scamming the firms of the payouts.

Ms Liu saidDidi had to spend on driver incentives in order to build enough economies of scale to tip the business into a "virtuous circle", according to a transcript of the speech obtained by Bloomberg.

By achieving scale, "waiting times are shortened by a little, fares become cheaper, and because more drivers on the platform don't require subsidies, you create a virtuous circle of increased orders, customer retention", she said. She did not say whether the company will eventually end driver subsidies.

Drivers for Didi Kuaidi contacted by Bloomberg say the company has reduced the subsidies to drivers.

"The subsidies I get from Didi are about half of the peak in the past," said Mr Tom Teng, who has been driving part-time for Didi for about six months. "It is pretty easy to get orders nowadays; there are so many of them."


A version of this article appeared in the print edition of The Straits Times on September 09, 2015, with the headline 'Uber to enter 100 more Chinese cities'. Print Edition | Subscribe