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Didi Chuxing

China’s ride-hailing king channels Genghis Khan in preparation for a new price war

Meituan-Dianping announced plans to open ride-hailing services in seven cities, including Beijing, Shanghai, Chengdu, Hangzhou and Xiamen, heralding a price competition not seen since the exit of Didi’s biggest rival Uber

PUBLISHED : Monday, 01 January, 2018, 8:00am
UPDATED : Monday, 01 January, 2018, 6:05pm

The man who battled Travis Kalanick to a standstill and forced Uber Technologies to pull out of China is unperturbed by talk of a challenger to his ride-hailing throne.

“If you want war, you will get war,” Cheng Wei, the co-founder and chief executive of Didi Chuxing, the world’s biggest ride-hailing company, said in a recent interview with Caijing Magazine.

Cheng, 34, was quoting 12th-century Mongolian warrior-ruler Genghis Khan, whose empire spanned Asia to the Adriatic Sea, in response to a question about competition from Meituan-Dianping, which has advertised its plans to expand into the ride-hailing industry in several Chinese cities with offers of steep discounts to consumers and rebates to drivers.

Didi, which counts hi-tech giants Apple, Alibaba Group Holding and Tencent Holdings among its biggest shareholders, is itself born from a truce between two rival ride-hailing companies that had engaged in a ruinous price war, which at one point went as far as giving consumers free rides to win market share.

After that merger, the combined entity took on Uber, which pulled out of China in 2016 in return for a minority stake in Didi.

“Didi has withstood the fiercest competition in history, from Kuaidi to Uber. We have PK’ed countless rivals,” said Cheng, using a local slang for duelling. “Meituan may not be the weakest, but it may not be the strongest either.”

Cheng’s comments were confirmed by a representative of Didi.

Separately, Mobike, one of China’s leading bike-sharing companies, said on Friday it would soon roll out its ride-sharing service in Guizhou, a Chinese province located in southwest China. Mobike users in Gui’an New Area and Guiyang will be able to locate and unlock Mobike’s fleet of electric cars with the same app that they use to rent bicycles.

Mobike’s expansion into ride-sharing is the company’s first attempt at offering services outside of bike-sharing.

Didi, which is headquartered in Beijing, last month secured more than US$4 billion in a new equity funding round led by Japanese conglomerate SoftBank Group Corp.

That lifted the Chinese ride-sharing company’s valuation to about US$56 billion and boosted its cash reserves to US$12 billion, according to a person familiar with the matter.

Didi, which serves more than 400 million users in China, said that investment will support its business expansion initiatives, including in artificial intelligence and the development of new energy vehicle service networks.

Meituan-Dianping had raised US$4 billion in its latest funding round in October, giving it a US$30 billion valuation that places it behind Uber, Didi Chuxing, Xiaomi and Airbnb, and ahead of SpaceX, the space travel start-up founded by Elon Musk, according to venture capital research firm CB Insights.

Meituan-Dianping raises US$4b in funding round, vaulting into world’s top 5 unicorn ranks

Didi and Meituan-Dianping once shared common investors: Tencent and South China Morning Post owner Alibaba. Last year, New York-listed Alibaba reached a deal to sell its stake in Meituan-Dianping for a reported US$900 million.

Meituan-Dianping signalled its ambitions to expand into ride-hailing on Thursday, when it unveiled a new booking icon on its mobile app, with a pledge to start services in Beijing as soon as it collects 200,000 sign-up clicks from future customers and drivers.

Representatives for Meituan-Dianping did not immediately respond to an email request for comment on its plans in the ride-hailing market. But the company’s customer service staff said the booking service is likely to launch in January next year. Other cities in its sights include Shanghai, Chengdu, Hangzhou and Xiamen.

Didi has withstood the fiercest competition in history, from Kuaidi to Uber.
Cheng Wei, chief executive of Didi Chuxing

To entice new customers, Meituan-Dianping is offering three coupons equivalent in value to the flag-down fare of taxis, while exempting drivers who sign up early from commission charges in the first three months.

A price war between Didi and Meituan-Dianping could benefit both drivers and consumers in China.

“It doesn’t matter which platform I have to work with, as long as it puts more money in my pockets,” said Li, 40, a driver for Didi in Beijing who only gave his family name. “Right now, Didi takes 20 per cent of the ride fare as commission. It’s just too high.”