Didi-Uber linkup could boost shar­ing

Ob­servers say merg­ing busi­ness in China could be a boost for the shar­ing econ­omy across the globe

China Daily (USA) - - FRONT PAGE - By PAUL WELITZKIN in New York paulwelitzkin@chi­nadai­lyusa.com

The de­ci­sion to com­bine the op­er­a­tions of Didi Chux­ing — China’s largest ride-shar­ing ser­vice — with the main­land op­er­a­tions of US gi­ant Uber Tech­nolo­gies Inc will pro­vide a global boost for the shar­ing econ­omy, ob­servers said.

Didi an­nounced on Mon­day that it would ab­sorb Uber’s busi­ness in China, end­ing a costly bat­tle be­tween the ri­vals. The com­bined com­pany may be worth $35 bil­lion, ac­cord­ing to some re­ports.

Uber China’s other share­hold­ers, in­clud­ing search gi­ant Baidu Inc, will re­ceive a 20 per­cent eco­nomic stake in the com­bined com­pany. Didi founder Cheng Wei and Uber CEO Travis Kalan­ick will join each other’s boards.

Arun Sun­darara­jan of New York Univer­sity’s Stern School of Busi­ness said the deal is good news for the shar­ing econ­omy in both the US and China.

“It sig­nals how valu­able the China shar­ing econ­omy mar­ket is to global lead­ers,” he said in an email. “It is good for the shar­ing econ­omy in the US be­cause it re­moves the big­gest ex­is­ten­tial threat that Uber — the big­gest shar­ing econ­omy plat­form in the US — has faced. Now that this risk is elim­i­nated, it paves the path for Uber to go pub­lic.”

The shar­ing econ­omy en­ables in­di­vid­u­als to rent or bor­row as­sets from own­ers through a dig­i­tal clear­ing­house. It em­pow­ers the uti­liza­tion of un­used ca­pac­ity while al­low­ing con­sumers to do busi­ness with their peers rather than with a com­pany.

Jeremiah Owyang is an an­a­lyst at Crowd Com­pa­nies, which ad­vises com­pa­nies on the shar­ing econ­omy. He said the deal will pro­vide a wider plat­form for global growth of the shar­ing econ­omy.

“We’ve seen in­cred­i­ble in­vest­ments over the last few years, which were pri­mar­ily funded to fuel in­ter­na­tional ex­pan­sion and mar­ket growth. Now, mar­kets where im­passes like China are ev­i­dent, par­ties can come to­gether, con­sol­i­date, and ad­vance the growth of the over­all move­ment. This is the nat­u­ral or­der of early mar­kets,” Owyang said in an email.

“You are go­ing to need a scorecard to keep track of all the trans­ac­tions likely to in­cur in the ride-shar­ing sec­tor in the next six months,” said Joseph Sch­wi­eter­man, di­rec­tor of the Chaddick In­sti­tute for Met­ro­pol­i­tan Devel­op­ment at DePaul Univer­sity in Chicago.

“The enor­mity of China’s mar­ket makes this deal of enor­mous im­por­tance. Uber, at least for the time be­ing, will have to re­main on the side­lines in a coun­try where ride shar­ing is poised for enor­mous growth.”

Didi owns a stake in Lyft, a US com­peti­tor to Uber. Lyft and Uber are both based in San Fran­cisco.

“Didi al­ready part­nered with Lyft last year so that Didi’s cus­tomers who are trav­el­ing to the US could ac­cess Lyft’s ser­vices,” said Su­san Sha­heen, a pro­fes­sor and co-di­rec­tor of the Trans­porta­tion Sus­tain­abil­ity Re­search Cen­ter at the Univer­sity of Cal­i­for­nia Berke­ley.

“Didi could con­tinue to use that strat­egy with Uber abroad to gain ex­po­sure to the in­ter­na­tional mar­ket be­fore more ag­gres­sive ex­pan­sion,” she said. “But we don’t be­lieve that Didi or Uber have made any of­fi­cial state­ment on plans to do that.”

Ger­rit Sch­nee­mann of con­sult­ing firm IHS said that the strate­gies go­ing for­ward will be in­ter­est­ing to watch. “The prob­lem is more im­me­di­ate for Lyft as Uber can now fo­cus on the com­pe­ti­tion in the US. Maybe this will ac­cel­er­ate an exit for Lyft via ac­qui­si­tion by GM, for ex­am­ple,” he said.

Wang Xiaofeng, an an­a­lyst at For­rester Re­search Inc, said the main rea­son be­hind the merger was to cut costs in the bat­tle be­tween the com­pa­nies for lead­er­ship of China’s fast-grow­ing ride-hail­ing mar­ket.

Zhang Xu of Analysys In­ter­na­tional said the merger will mean that smaller play­ers in China’s in­ter­net-en­abled chauf­feur ser­vice mar­ket will soon feel the pinch.

“The com­bined mar­ket share of Didi and Uber in China’s chauf­feur ser­vice is more than 80 per­cent. Their dom­i­nant po­si­tion will bring more com­pe­ti­tion to smaller play­ers and force them to im­prove the qual­ity of ser­vice to gain user loy­alty,” he said.

“Didi is the world’s largest shar­ing econ­omy plat­form and poised to dom­i­nate the South Asian mar­ket. Its re­la­tion­ship with Uber pro­vides global reach,” said Sun­darara­jan.

The enor­mity of China’s mar­ket makes this deal of enor­mous im­por­tance.”

Joseph Sch­wi­eter­man, di­rec­tor of the Chaddick In­sti­tute for Met­ro­pol­i­tan Devel­op­ment at DePaul Univer­sity in Chicago

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