Monday, August 1, 2016

(The Big Disrupt) Uber: What Uber China's sale to Didi Chixung means

Uber, the undisputed king of the car hailing app market, has for years now waged a global campaign employing a highly successful scorched earth policy leaving a trail of rival car hailing apps, disgruntled taxi drivers and regulators in their wake severely upsetting the natural order of things in just about every country they've set up shop in. 

Uber phenomenal growth has earned the San Francisco startup a lot of enemies and in the face of its dominance globally, its rivals have teamed up and formed a loose coalition to counter or at least slow down Uber's aggressive global expansion and with Uber agreeing to sell it's China based operation to local rival Didi Chixung, it looks like the coalition is working. 

Cracking the Chinese market was always going to be tough for Uber to achieve as the Chinese government is notorious for backing local outfits over foreign competition and Didi Chixung already had strong position in the marketplace. Nonetheless, Uber spent billions to break Didi's local but unlike rivals just about everywhere else (maybe except for U.S. competitor Lyft and possibly India's Ola Cabs)Didi managed to match and even better Uber to defend its dominant position and eventually end the company's attempt to capture it's market leaving its infamous scorched earth policy in tatters. 

News of Uber's recent capitulation in China has given hope to just about every car hailing app service as Didi has provided a blueprint in how to resist Uber that other local players are almost definitely going to adapt. Uber's failure to capture or even gain a real foothold in Chinese market couldn't have come at a worst time as Google, its most important backer, competes directly with the company forcing the company to recently announce that it plans wean itself off Google and invest $500 million developing their own digital map. 

The importance of this decision cannot be understated as without Google Maps, Uber doesn't really have a business that works. The bigger play at hand is that Uber has for sometime planned to transition its fleet with driverless cars as while developing driverless cars has proved capital intensive, the tradeoff is that Uber can provide rides for its customer at a cheaper price and the company would like to do that with its own mapping technology. 

Should Uber pulls this off, Uber can deliver a cheaper service than its competitors using its own technology and data, two things driverless cars depend on and even capitalize opening their  technology to other services for a price. However, when Uber can start offering their customer rides in driverless cars is unclear given the high standard safety driverless cars have to reach to be road readyWhat's certainly unambiguous is consecutive reverses the company is suffering in courtrooms across the US most recently with the company being caught red handed investigating Spencer Meyer, a environmental researcher accusing the firm of price fixing. 

For a company that's used to having its cake and eating it, recent events must be shock to the system. In sum, despite its failure to capture the Chinese market, the company is still dominant or competitive everywhere else  and are the world's number one car haling service by a country mile. However with Uber's Chinese operation acquistioned and regulatory battles mounting from every corner of the globe, the young company is finding out the hard way it isn't invincible. 

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