On August 1, Uber announced the decision to merge its China operations with the dominant ride-hailing service of the country, Didi Chuxing. As part of this deal Uber will pick up a 20% stake in a combined entity with Didi Chuxing that is likely to be valued at $36 billion. Its founder Travis Kalanick will join Didi’s board, while Didi founder Cheng Wei is stated to join Uber’s board. Prior to this deal, Didi had formed a global anti-Uber alliance, which consisted of Uber’s competitors from different countries. As the ring leader of this alliance, it had invested $100 million in America’s Lyft and $20 million in India’s leading app aggregator service – Ola.
These investments were meant to prevent Uber’s total dominance of the markets. Ironically the merger with Didi provides Uber fuel to compete in the remaining markets while ending its attempt to establish an independent foothold in China. It not only makes Uber an indirect shareholder through Didi in its leading competitors Ola and Lyft; but also as part of a non-compete agreement for international market, prevents Didi from providing further funding to Uber’s competitors in various markets around the world. Kartik Hosanagar, a professor at The Wharton School, said that Uber will now be a more important part of Didi’s global strategy than India’s Ola. According to him – “That will mean a lot of strategic information being traded among the two and therefore will require Didi distancing itself from Ola and others.”
As the most valuable startup, Uber possesses a fearsome reputation of taking on competitors in every market it has entered. After spending nearly $1 billion in China, it hopes to recover its reputation by becoming a market leader in the second-most populated nation in the world. But India until now is turning out to be a different ballgame. In India, one of the markets that the anti-Uber alliance was supposed to protect, Uber currently covers 26 cities with 250,000 drivers on its platform. The market leader Ola, however, does more rides per day than any other player in the country, while providing services in 102 cities and possessing close to 450,000 drivers. Launched in 2011, two years before Uber entered India, Ola has been able to gather knowledge of the domestic market, enabling it to ramp up fast. Figuratively, Ola has a 15-20% lead on Uber in the world’s third-biggest market for ride hailing app and has steadily grown to become a unicorn, India’s third-most valuable startup after Flipkart and Snapdeal
In India, the competitors have almost similar offerings. They have cars of different sizes offering various slabs of fares. For example, the cheapest rides on Ola Mini and Uber Go (hatchbacks) cost Rs 5 to Rs 8 per km. Both retain a 20% commission and have also matched each other in innovations. On March 3, Uber started a new category of services under bike taxis and Ola announced the same within 24 hours. While Ola has its own wallet, Ola Money and also accepts cards and cash; besides digital wallets Paytm and Airtel, Uber uses cash and cards—debit & credit, to help commuters pay for rides.
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