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Tuesday, August 2, 2016, 14:29

Ride-hailing: Didi shows the way

By Reuters

Ride-hailing: Didi shows the way
This file picture taken on Jan 26, 2016 shows Jean Liu, president of Didi Chuxing, the number one ride-sharing and taxi-hailing s ervice in China, attending a press event in Beijing. (FRED DUFOUR / AFP)

SAN FRANCISCO - China ride-hailing service Didi Chuxing's dominance of Uber Technologies Inc in the China market may provide a play book for other regional rivals to fend off the biggest US ride-hailing company, especially in other Asian countries.

The two companies on Monday confirmed the sale of Uber China to its chief competitor, ending a two-year, money-losing effort to break into one of the world's toughest markets. Uber leaves with a major stake in Didi - about a fifth of the combined company - but will give up control of its China operations.

Didi had a head start and maintained the lead on Uber with a strategy that other rivals may emulate, analysts and investors said.

Didi counts two of the most powerful, best capitalized Chinese Internet companies as backers; has tight connections with local government; made an ally of local taxi drivers and expanded into services such as buses that Uber ignored; and exploited its knowledge of local culture and consumers.

Uber declined to comment.

Among those closely watching Didi's acquisition is Grab, the Southeast Asia ride-hailing startup that competes with Uber in countries including Singapore and Vietnam. Grab says its private-car business has about half of the Southeast Asian market and its taxi-hailing service has 95 percent.

"Our investor and global partner Didi has effectively won the battle for market share dominance in China," Chief Executive Anthony Tan wrote in an August 1 memo to Grab staff seen by Reuters. "We have seen that, when the local champion stays true to their beliefs and strengths, they can prevail," he wrote.

Grab and Didi formed an alliance with India ride-service startup Ola and US operator Lyft last year, and the Asian companies operate in what could be the next battlegrounds for Uber, said Jeremy Carlson, principal analyst in autonomous driving and mobility at IHS Markit.

"Grab knows very well what Didi is doing in China and is replicating that," such as offering transit options beyond personal car services, said Hans Tung, managing partner at GGV Capital, which has invested in both Grab and Didi.

Grab also has a powerful regional backer in Japan's SoftBank Corp..

In a news release, Didi called the deal to buy Uber China a "landmark transaction" that "signals a new stage in the development of China's rideshare industry."

Because China is a unique market - in population, regulatory complexity and concerns about foreign ownership of big companies - some lessons learned there may not transfer to other regions.

"It's the largest ride-sharing market in the world, but it is also probably the most complex for any company in the world," said Bill Gurley, a partner at Benchmark and an Uber board member. "Our ability to compete and execute globally is very sound."

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