U.S.-based rival Uber establishes Chinese unit to gain competitive edge
Chinese car-hailing firm Didi Kuaidi announced Thursday that it had obtained the first Internet car-hailing license in the country, which was awarded by the Shanghai municipal government.
The development is expected to improve new business models and online platforms powered by Internet companies, CEO Cheng Wei was quoted as saying in a press release sent by Didi Kuaidi to the Global Times Thursday.
In a forum about car-hailing services held in Shanghai Thursday, Sun Jianping, director of the Shanghai Municipal Transportation Commission, said that the government has to become innovative to tackle contemporary challenges.
"Combining the Internet with local transportation will better meet the needs of the public, which is also in line with the country's 'Internet Plus' strategy," Sun said.
"Car-hailing apps are not illegal. The government, however, has to develop measures to ensure those platforms do not cause problems," Hu Dan, analyst from Beijing-based market consultancy iResearch, told the Global Times Thursday.
Hu noted that the Shanghai government's move is likely to accelerate the issue of new regulations by the Ministry of Transport (MOT), which are expected to become binding measures that encourage innovation.
Meanwhile, Didi Kuaidi's major rival, U.S. car-hailing service provider Uber Technologies Inc, announced plans Thursday to establish a new company in the China (Shanghai) Pilot Free Trade Zone with 2.1 billion yuan ($330.5 million) as registered capital.
The new company, which is the organization's only independent one outside the US, offers support services such as technical development and marketing, according to a press release Uber China sent to the Global Times Thursday.
The company noted that its total investment in China will amount to 6.3 billion yuan ($991.6 million), which it said would facilitate long-term expansion in China.
As the operating environment in China is very different from that in the U.S., setting up a separate office in Shanghai is a must, said Zhang Xu, analyst from Beijing-based market research firm Analysys International.
"The new company is expected to put more effort into communication and marketing, which will help Uber further localize in the country," Zhang told the Global Times on Thursday.
In the second quarter of 2015, Didi Kuaidi was ranked as the largest Internet car-hailing firm in China with about 82.3 percent of the market, Analysys International said in an Internet car-hailing report in August. Uber became the second-largest with 14 percent.
"We don't think that Uber will surpass Didi Kuaidi in the short term," Zhang said.
Zhang noted that the U.S. car-hailing service provider still faces challenges, for example, developing government relations.
Uber's document did not disclose who will be the CEO for the new company. However, a Chinese leader is likely to pave the way for its further expansion in the country, Zhang noted.
Also, Uber China is preparing applications for Internet car-hailing permits issued by the MOT, Liu Zhen, who oversees Uber's strategy in China, was quoted as saying in the document.
"Getting the first license can't be taken to mean that Didi Kuaidi has beaten Uber here," Hu told the Global Times, noting that the two companies adopt different strategies to approach policy planners.
For example, instead of waiting for signals from the MOT, Didi Kuaidi usually seizes opportunities in pioneer cities like Shanghai.
Analysts noted that the car-hailing service industry is turning into a battle for market share, as Chinese and U.S. players develop new businesses such as car-sharing and car-pooling.
Hu noted that Didi Kuaidi is trying to build a vertical corporate structure to cover the whole urban transportation industry.
"Though Uber rolled out car-sharing services in September, the company has lagged the Chinese Internet firm and it has to compete for a larger slice of the pie," she said.
Another Chinese car-hailing service, UCAR Inc, announced that it has finished a round of fundraising of $550 million, which valued the company at $3.6 billion, news portal qq.com reported on Thursday.
