China is not only the world’s largest auto market, but is also a major market for the rising transportation services – such as chauffeured cars that offer rides akin to taxis, but with the advantage of flexibility and added usability.
Essentially, the best known car sharing service provider today is Uber Technologies – which was established just a few years ago in San Francisco (2009) and has then expanded on a global scale. In China, the rides have become so cheap as competition grows that most often clients can have rides for free – Uber has been emulated by a myriad of other rival services and large incentives are now needed to win new customers. The technology industry is treating Uber and its lookalikes as the next big thing, with venture capital and hedge funds pouring in billions of dollars as they bet on their rapid expansion. In China, there are hundreds of millions of paying commuters to be won and companies are treating market share as the primary goal, even in the face of dwindling profitability. “Unlike previous price wars, where they were mainly attracting new users, they now need to fight to grab each other’s users. They’ll need to have enough capital so that they can last,” comments Zhang Xu, a Beijing-based analyst at Analysys International, an advisor of Internet companies.
Uber is planning to spend more than one billion dollars in China this year, according to a letter sent to investors by chief executive officer Travis Kalanick – the company’s traffic in the country has doubled last month to close to one million rides per day. With Alibaba Group Holding Ltd. and Tencent Holdings Ltd. as the parents, major competitor Didi Kuaidi said it would offer free rides to commuters worth 1 billion yuan ($161 million) to fend off Uber and local rival Yidao Yongche.