Date
17 October 2017

Uber unlikely to enjoy a smooth ride in China

Bill Maris, managing partner of Google Ventures, the search giant’s venture capital fund, has given a jaw-dropping estimate of the value of Uber — US$200 billion. That’s almost equivalent to the market value of the world’s largest car manufacturer Toyota.

To live up to such lofty valuation, the car service app must prove it can thrive in all major markets. At the moment, China is its biggest test.

Uber quietly launched a trial run in Shanghai last year before officially announcing its entry into the market. It then expanded to Guangzhou and Shenzhen before starting operation in Beijing on Monday.

Most foreign technology firms encountered serious challenges when they expanded into China. Facebook and Google are just two of the most vivid examples.

Can Uber buck the trend? It might take a long time to get a definite answer, but Uber is not likely to enjoy a smooth ride given the already crowded market.

Although Uber is the industry leader in Western countries, it is a newcomer in China, where a few big local firms dominate the market. They include Yongche.com, Alibaba’s Kuaidi Dache and Tencent’s Didi.

Sharing almost the same customer base, Yongche is Uber’s biggest rival in China.

Established in 2010, Yongche has established its presence in over 50 cities across the nation, and its target this year is to double the figure to 100.

According to China’s regulations, individual car owners are barred from making money from their cars. That means Uber has to abandon its current business model and team up with a local car rental fleet instead.

This is exactly what Yongche is doing, and it has established a strong base after nearly four years of efforts. Also, it is worth mentioning that China’s largest online travel agent Ctrip.com is a shareholder of Yongche.com, which indicates that Yongche.com is getting lots of customer referrals from Ctrip.

Taxi-hailing apps Kuaidi and Didi also want a slice of the high-end car renting market, which is a major focus of Uber.

Despite those challenges, Wang Xiaofeng, Uber’s general manager for China, thinks the brand will be an important edge.

“For those Chinese that have enjoyed Uber’s services in other countries, the experience may drive them to us. Through this way, we are able to cultivate a group of Uber customers in China,” Tencent Tech news portal quoted him saying.

Rival Yongche does not share Wang’s optimism. “It would be hard for foreigners to play well in the industry where even locals like us don’t find it easy either,” Yongche brand director Hu Xulei told Tencent Tech.

– Contact the writer at [email protected]

CG

EJ Insight writer

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