Ride-hailing firm needs to look beyond the Chinese mainland market to maintain growth, analysts say
Didi Kuaidi, China's largest ride-hailing group, on Monday announced that it has invested an undisclosed amount in Ola, India's largest taxi-hailing service provider by market share, as the Chinese company moves toward a global transport alliance among rivals to U.S.-based Uber Technologies Inc.
The investment came as a part of Ola's latest fundraising round, the Chinese investor said in a press release sent to the Global Times on Monday, without revealing the value of the deal.
According to previous media reports, Ola aimed to raise more than $500 million, which would give the Bangalore-based taxi-hailing app a valuation of $5 billion. The Times of India reported on September 19 that Didi Kuaidi may invest about $30 million.
Didi Kuaidi, backed by Internet giants Tencent Holdings and Alibaba Group Holding, joined existing investors including Japan's tech powerhouse SoftBank Group Corp, New York-based venture capital firm Tiger Global Management and Singapore's sovereign wealth fund GIC Private, to support Ola's expansion in its home market, the press release said.
Ola, which the press release said has over 80 percent of the Indian ride-hailing industry, said on September 14 that it would spend $754 million to lease cars to expand its network in India.
"Didi Kuaidi looks to engage local industry champions like Ola to share technology and best practices in product development and operational expertise - all honed from deep market data-driven operations," said Didi Kuaidi, noting that India is a big market full of massive potential, similar to China.
India's online taxi market would grow at an annual average rate of 20 percent to $28 billion in 2020, the Wall Street Journal reported in March, citing Morgan Stanley's estimates.
"Didi Kuaidi has to fast-track its globalization to seek new profitable venues, as the company can hardly maintain its fast growth in China's online ride-hailing industry, where it dominates," Zhang Xu, an industry analyst with Beijing-based market research firm Analysys International, told the Global Times on Monday.
A report issued by the consultancy in August showed that Didi Kuaidi, offering services including taxi-hailing and car-sharing, controlled China's car-sharing market with an 82.3 percent share in the second quarter of the year, followed by Uber, which had 14.9 percent.
Another reason for Didi Kuaidi's overseas expansion is to compete with Uber, which has not only scaled up its app-based transport operations worldwide but also localized its business in China by setting up a separate company - Uber China - in the country, Zhang Yi, CEO of Guangzhou-based market consultancy iiMedia Research, told the Global Times on Monday.
On September 7, the San Francisco-based Uber said it had raised $1.2 billion from a consortium including Chinese search engine giant Baidu Inc for its Chinese unit.
Zhang from Analysys International said that in a bid to match Uber internationally, Didi Kuaidi has been pouring funds into the U.S. company's competitors around the world.
In August, Didi Kuaidi joined a $350 million investment into GrabTaxi, the Malaysia-based taxi-hailing app that rivals Uber in Southeast Asia. And on September 16, the Chinese company announced an entry into Uber's home market by inking a strategic cooperation with local ride-sharing start-up Lyft.
With these overseas investments, Didi Kuaidi has initially formed its globalization strategy, aiming to build up a healthy ecosystem for global transport with its partners, according to the press release.
"This is a long-term goal, requiring deeper cooperation in terms of data integration. Currently the partnership is more about capital investment," said Zhang from Analysys International.
