Uber is losing $1bn a year in the fight for China market
Wed 17 Feb 2016
Uber CEO Travis Kalanick announced this week that Uber is losing $1 billion per year in China, blaming the loss on fierce competition.
In a speech at the Vancouver Launch Academy this week, Kalanick said that the company is deeply engaged in a fight for customers in the Chinese market, and that an unnamed competitor is “buying up market share.” He went on to clarify that while Uber is profitable in the United States, they are losing in China. But he defended the need to remain in China at a loss, saying that while he “prefers building rather than fundraising,” refusal to participate in Chinese fundraising will result in Uber being squeezed out by other companies whose business strategy is to purchase market share.
This unnamed competitor is widely assumed to be Didi Kuaidi, a rival for-hire car company that reportedly runs 80% of Chinese private taxi services, beating Uber 3-to-1 in market share. Didi Kuaidi is backed by Chinese mega-corporations Alibaba and Tencent, and raised $3 billion in its most recent fundraising round last September. Didi Kuaidi has a valuation of approximately $16 billion, versus $40 billion for Uber worldwide.
Taxi drivers in China began staging protests against ride sharing apps last year, Uber and Didi Kuaidi included. Kalanick said at that time that taxi drivers were being paid to stage those protests, although he did not clarify who might be funding the protests.
Kalanick revealed last year that Uber would invest $1 billion to strengthen its position in the Chinese app-ride market, though few at the time would have suspected that sum to be written off.
Uber has also faced problems with the Chinese government, who accused Uber of operating without a license, and allowing private car owners to offer taxi services. Some believe that Uber’s problems in the Chinese market stem not from competitors’ business practices of undercutting and operating at a loss, but rather that Uber made a late entry to a saturated Chinese market. Uber has been making headway in China since its 2014 launch, beginning a partnership with Baidu for access to mapping and mobile technology, but obviously its struggles in the market are far from over.