The ride sharing market is becoming an intertwined web. In lieu of their recent investment, DiDi now has shares in Careem. And since Uber owns 17.7% of DiDi (which is massive albeit the downplay by the media), effectively Uber now has shares in Careem. Uber and Careem are competing against each other in MENA and Pakistan. The connecting tissue is DiDi. Instead of competing with everyone everywhere, it’s putting the money in all of them except Uber (they acquired Uber China). That’s a very smart strategy. Marketplaces are hard to crack especially when there is a player already taking a major share of the market. Unless there is a drama, sort of one Uber is going through right now, the winner take-all nature of these businesses makes it extremely difficult to break through.
From DiDi’s perspective, the move is not hard to understand. After all, DiDi Chuxing is a merger of two separate ride sharing companies, to begin with. DiDi Dache started in 2012 and was instantly backed by Tencent (Internet giant in China). In the same year, Kuaidi Dache started and was backed by Alibaba (another Internet giant in China). After competing for two years, the two merged in Feb 2014 to fend off a US invader namely Uber. While that might seem like a very natural thing to do. In reality, it’s not because Tencent and Alibaba are fierce competitors. No wonders they are open to other partnerships around the world.
All this got me thinking about Uber. Despite the recent turmoil, the company is still the market leader. And pretty much the yard stick market is being judged on. While the media loves to downplay Uber now a day because it’s enticing and gets more clicks, the fact is DiDi or anybody else has a long way to go to actually crush Uber.
From Careem’s perspective, the move seems good except for the fact that it downplays the role of Careem in markets like MENA and Pakistan. Suddenly it’s no longer Careem Vs Uber. It’s more about DiDi Vs Uber in the war of world domination. On the plus side, Careem gets the money which is going to be handy if they want to defeat Uber, their only competitor in MENA and Pakistan. But perhaps more important is the partnership itself and DiDi’s role in the future of Careem being a tech enabled transportation system rather than a ride hailing app. From Careem’s own blog:
Unlike many developed parts of the world, our region did not get the opportunity to build sophisticated urban transport infrastructure. That held back our economic growth for the last few decades. At Careem, we are on a mission to leapfrog our cities into having technology-enabled mass-transit systems that will simplify the lives of people and accelerate our economic growth. Today, we’ve taken a huge step toward achieving that goal, and we’re happy to announce a strategic partnership with DiDi Chuxing, the world’s largest mobile transportation platform.
There are a couple of things very interesting in the paragraph. First, this is probably the first time I have seen Careem hinting towards a driver less car strategy. And it’s clear from their statement of leapfrogging into technology enabled mass transit system. While cab hailing apps make it easy to move from one place to the other, they are not actually a very good replacement of the mass transit system. More human driven cars on the road are not necessarily an efficient form of transportation. Driverless cars operating on their own however can be. And that seems like the only way to leapfrog the highly efficient mass transit systems available in developed countries like the US and Europe.
Second, I am not sure if this is intentional but the use of word platform instead of service from DiDi is interesting. A platform is something that you don’t necessarily build on your own. You let others build on top of your offering. Being the underlying fabric means you reap the most benefits. It’s on that end where I think any news of DiDi investing in another ride hailing app is more DiDi being smart than anything else.