DiDi Releases Expansion Plan to Take on Uber in Latin America

Healthcare, Financials, Automotive Author: Linyan Feng May 03, 2019 01:42 PM (GMT+8)

Unlike Uber's antagonistic approach to expand into a target market and seize the largest market share, DiDi takes relatively conciliatory and multiple ways.

Cars on road. Photo by Nabeel Syed on Unsplash

On April 25, ride-hailing giant DiDi Chuxing’s president LIU Qing (Jean Liu, 柳青)announced that 1,200 Didi employees serve in DiDi’ Latin America expansion department in an investment forum held by Chile in Beijing.

DiDi (download the 44-page report about DiDi for free) provides Express, taxi, and food-delivery in the region, covering 200 million users. The company plans to expand more business such as diversified public transport, electric vehicle, smart transportation in the future. Chilean President Sebastian Pinera also met with executives from DiDi.

The company has been planning to take on U.S. rival Uber in some of Latin America’s fastest-growing markets, including Chile, for a long time. In Jan 2017, CHENG Wei (Will Cheng, 程维), the company's CEO, claimed that the company's next international market targets would be Japan, South Korea, Brazil, and Europe. April 22, 2017, the company said that it is beginning to recruit drivers ahead of its launch in Colombia's capital Bogota in the coming months. Didi launched its international department in Feb 2017.

“DiDi currently competes with us in certain countries in Latin America and in Australia, and in 2018 made significant investment to gain or maintain category position in certain markets in Latin America,” Uber said in its prospectus.

Prudent and cunning way

DiDi seems to clearly know that it is facing entrenched competitors with key knowledge of local markets and the company is not an international brand when it comes to global expansion yet. The company takes an easy and tender way to do that business.

DiDi usually invests its competitors. DiDi invested USD 100 million in Lyft and USD 350 million in Grab, in 2015. DiDi also was involved in Ola’s USD 500 million investment in 2015. DiDi acquired 99 in a USD 1 billion deal in early 2018. In July 2017, DiDi injected USD 2 billion into Grab, along with SoftBank.

Will Cheng once admitted that relying on DiDi's international expansion, DiDi won the war with Uber. DiDi's anti-Uber alliance has trapped Uber in several bruising fights for local domination, which costed Uber's resource and ended up Uber's losing China market.

DiDi is not the bossy type. Grab’s co-founder Anthony Tan once claimed that “DiDi is not the type to say ‘we want to boss’,” DiDi, instead, respects Grab’s ability to operate across disparate cultures and fragmented markets in Southeast Asia. That’s a market with 600 million people. Latin America is a growing market for ride-sharing as well, and Brazil, with a population exceeding 200 million, is a prime target.

SoftBank is among the biggest shareholders in DiDi, Ola and Uber. Uber has given up its business in China, Southeast Asia, Russia to local competitors. The cash burning game cannot go on forever and players have to cut subsidies to drivers, which let them lose market share, or merge.

SoftBank has publicly encouraged Uber to focus on the United States and Europe in Jan 2018. In 2019, Uber announced another M&A deal with Careem, its competitor in the Middle East, which is expected to close early next year.  

Consolidation is never Uber’s strategy, not for the past years and not today. Uber, however, after several costly battles in Southeast Asia, Russia, and China, ceded its control over its operations there to the local players.

Uber itself admitted that Uber's strategy to barge into a new market without considering local situations carefully has put the company into a position where it faces too many battles across too many fronts with too many competitors, losing valuable market where it did not operate and the battle where it did.

Unlike Uber's antagonistic approach to expand into a target market and seize the largest market share, DiDi takes relatively conciliatory and multiple ways. DiDi undertakes three-pronged ways including acquisitions, investments, and partnerships with local players.

People Matter in DiDi's international plan

Didi cannot go back to the carefree days when users growth came easily, even at high subsidies, and the company and the public were largely ignoring the company’s vulnerabilities to regulations, safety issues, and subsidy abuses. Didi has to find traction with its business challenges.  

DiDi suspended its DiDi Hitch business since August when the second death occurred. The company had suspended its service for six weeks to make some changes after a passenger was killed by a driver in May 2018.

DiDi needs to fundamentally change how it runs this company to make real progress on thorny problems of security and safety. More importantly, it needs to find the next new business engine.

“Globalization is a top strategic priority for DiDi”, Will said in a statement. DiDi might need to do more than invest in overseas ride-hailing operators. The company must find a way to impress its investors and potential investors, probably by venturing into international markets directly. 

ZHU Jingshi (Stephen Zhu, 朱景士) is an all-time head of the department, a former Goldman Sachs executive. Stephen has worked with Jean for four years before he joined DiDi in 2014 to oversee the international expansion, marketing, and public relations. Stephen also played an important role in recruiting talents, who can be promoted to lead operations of core businesses such as Express Mobility, Premier Business Unit, and Big Data after they gained experience under the corporate strategy department. Stephen was promoted as the company’s SVP of financial operations and strategy in December 2018 and will keep supervising its global expansion and financial department.