Bottom line: Didi Kuaidi could rise over the next 1-2 years to challenge Uber, as it embarks on a global expansion starting in Southeast Asia, fueled by billions of dollars in new investment.
China’s homegrown version of global hired car services giant Uber continues to race ahead, with word that Didi Kuaidi is on the cusp of a new fund-raising that’s similar in size to the many recent amounts raised by its larger US cousin. At the same time, we’re seeing the earliest signals that Didi Kuaidi may be getting read to challenge Uber outside of China, with separate reports saying the former is in talks for a major investment in a major Southeast Asian taxi app operator.
The market for hired car service apps seems to change almost daily, with hardly a week passing without the announcement of a major new milestone or conflict between these aggressive companies and traditional taxi drivers. Uber is a good example, hitting speed bumps with government raids of 2 of its Chinese offices earlier this year, only to disclose it had no intention of leaving the market and was preparing to invest $1 billion in China this year alone. (previous post)
The result of the hired car service wars is that China has emerged as a lucrative but hotly contested market, with Uber as a heavyweight alongside Didi Kuaidi, which was formed by the merger of the nation’s 2 leading taxi app operators earlier this year. Against that backdrop, this latest fund raising by Didi Kuaidi looks quite impressive, with media reporting the company has raised up to $2 billion in the round. (English article; Chinese article)
The initial reports late last week cited Xiaoju Kuaizhi, the official owner of Didi Kuaidi, saying its latest fund raising was so popular that it met its initial target of $1.5 billion in just 5 days. That reports added the company might try to take advantage of the strong sentiment to raise even more funds, and a separate report a day later indicated the amount had reached $2 billion.
In a letter to some of its new investors, Didi Kuaidi, which began life as a taxi app operator but has more recently expanded into private car services, said it now gets requests 3 million ride requests a day. It added its annual gross merchandise volume is expected to reach $12 billion by the end of this year.
Race for New Markets
This newest funding would come after Didi and Kuaidi collectively raised around $1 billion at the start of the year in 2 separate deals prior to their their merger. (previous post) The amounts look similar to recent ones from Uber, which raised $1.2 billion late last year and was reportedly looking to raise another $1.5-$2 billion in May.
Much of Didi Kuaidi’s money will be used on its domestic expansion, especially on its newer private car services that are more lucrative than taxi tie-ups and compete directly with Uber. But now it’s looking like Didi Kuaidi may try to also challenge Uber in some global markets, perhaps beginning with nearby Southeast Asia.
According to separate reports that cite unnamed sources, Xiaoju Kuaizhi is in talks to invest in GrabTaxi, which operates taxi apps in 17 Southeast Asian cities in 6 countries. (English article; Chinese article) The investment, if it’s happening, may be getting support from Japan’s Softbank and Asia-focused hedge fund Tiger Global, which are investors in both Didi Kuaidi and GrabTaxi.
The fact that Softbank and Tiger are backers of both companies means that an investment by Didi Kuaidi in GrabTaxi would look quite logical as a first step outside China, and could probably total as much as $500 million. Such a move looks relatively smart, as it would take Didi Kuaidi into a nearby region that shares many qualities with China. Didi Kuaidi would also have strong partners in Softbank and Tiger, helping to smooth its transition from a China-only company to a global player that could quickly challenge Uber.