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Chinese ride-hailing giant Didi Chuxing started operations in Russia on August 25. The company launched its Didi Express service in Kazan, capital of the Republic of Tatarstan in the east-central part of European Russia. Photo: Handout
Tech

Didi Chuxing valuation could rise amid international expansion, analysts say

  • Global expansion is expected to help Didi ‘tell a better story’ when it comes time for the company to go public
  • Didi has set a target of serving 800 million monthly active users globally by 2022
Didi Chuxing
Che Pan
Che Panin Beijing
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Chinese ride-hailing giant Didi Chuxing could potentially achieve a higher valuation when it goes public, according to analysts, following the company’s latest international expansion into Russia.
The Beijing-based company, which ranks as China’s second-biggest unicorn behind TikTok owner ByteDance, launched its Didi Express service on August 25 in Kazan, capital of the Republic of Tatarstan in the east-central part of European Russia. This marks the latest foreign-market foothold for Didi after Australia, Japan, Brazil, Mexico, Costa Rica, Chile, Colombia and Panama.

“Global expansion helps Didi tell a better story for its IPO and achieve higher valuation if it aims to list in Hong Kong or the US,” said Feng Linyan, a senior automotive analyst at investment research firm EqualOcean. “This is something Didi has to do, despite the steeper cost of operating in these new markets.”

Feng indicated that Didi’s strategy involved eking out profit from its core business in mainland China, as it continues to expand in overseas markets. Didi currently has a valuation of US$56 billion, according to a CB Insights report.
While Didi has denied media reports in July that it was seeking an initial public offering in Hong Kong, speculation has continued because of increased investor interest in corporate share sales after a pandemic-induced lull. China has been ratcheting up support for its local hi-tech companies by revamping listing and stock trading rules at a time when the US is threatening to cut off technology exports amid dialled-up tensions between the world’s two largest economies.
A screenshot of Didi Chuxing’s app in Russia, where its initial service coverage is in Kazan, capital of the Republic of Tatarstan. Photo: Handout

At present, private investments are keeping Didi well-funded to pursue its international expansion plans. As of March, Didi has raised about US$23.2 billion from various major investors including Japanese conglomerate SoftBank Group Corp, Tencent Holdings and Alibaba Group Holding, according to data from venture capital and private equity research firm PitchBook. Alibaba is the parent company of the South China Morning Post.

“There’s also the role that some of Didi’s investors, like SoftBank, may be playing behind the scenes,” said Abishur Prakash, geopolitical futurist at Toronto-based consulting firm Centre for Innovating the Future, about the company’s overseas strategy.

Didi, which recorded more than 1 billion trips in its international markets last year, expects its international operations to underpin future growth, as it targets serving 800 million monthly active users globally by 2022.

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“We are optimistic about Didi Chuxing’s prospects as it expands into Russia,” said Asad Hussain, mobility analyst at PitchBook. He indicated that Didi has a curated approach to entering new markets, where the company’s services are tailored for local preferences. Uber Technologies, by comparison has a “cookie-cutter” approach to operating in different countries.

In Russia, President Rustam Minnikhanov of the Republic of Tatarstan vowed to give full support to Didi in a meeting with the company’s representatives in June, according to Russian media reports.

“Kazan has a pro-innovation policy and friendly business environment” a Didi spokesman said on Wednesday.

Russia’s urban transport market – including taxi, car-sharing and carpooling services – is forecast to reach US$26.5 billion by 2025, up from US$9.9 billion in 2018. Didi’s main competition in the country is Uber Technologies-backed Yandex. Taxi.

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In Didi’s home market, competition is expected to grow, as the ride-sharing sector becomes more mature. Didi currently dominates mainland China’s 300 billion yuan (US$44 billion) ride-sharing market, where it has a 90 per cent share.

“Hundreds of ride-hailing platforms of different sizes are operating in China, the competition has been intense and increasing,” industry think tank Forward Research Institute said in a report published last month. It said operators’ survival depend on the market share they control.

Didi has been competing against services aggregators – including Alibaba Group Holding-backed Gaode Maps, Meituan Dianping and Baidu Maps – which allow users to hail a ride from various ride-hailing platforms simultaneously.

This article appeared in the South China Morning Post print edition as: Expansion ‘could boost Didi valuation’
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