Uber Forced to Focus on Smaller Cities in China

Uber Forced to Focus on Smaller Cities in China
Photo Credit: Reuters/達志影像

Translated and compiled by Bing-sheng Lee

Uber is exploring ways to survive in China as it faces the competition of local ride-hailing service, Didi Kuaidi. According to data collected by iResearch, Didi Kuaidi held 84.1% of China’s ride-hailing market as of February and is running in 400 Chinese cities.

To take on the fierce competition, Uber is turning to second-tier cities such as Hefei, Hangzhou, and Chengdu to expand its business.

On April 14, Uber stated that its service in Hefei, the provincial capital of east China’s Anhui Province, has increased by more than 30% daily since its initiation in March. This is the fastest growth rate the company has seen across the 400 cities it operates in. Uber now dominates over 50% of ride-hailing service in Heifei.

Last year, the company launched UberPool, which enables drivers to pick up more than one paying passenger at a time, to contest the ride-sharing market in the country with Didi.

Wen Yilong, who runs Uber’s Hefei operations, says that Uber has had much more success in the second-tier cities in China, even though most people consider the first-tier cities like Beijing and Shanghai the most business-friendly places in the country.

In a company press release, Wen says that smartphones and mobile apps are shortening the gap between China’s big cities and other areas. Mobile technology makes it nearly the same to promote Uber’s service in megacities and others because “apps used by people in large cities are also used by their peers in small cities.“

Uber opened its operation in China’s big cities in 2014 and started to penetrate smaller cities in the second half of 2015.

The company intends to make inroads into the northeastern and western regions of China and operate in 100 Chinese cities this year. Currently, Uber China is available in 50 cities.

Liu Zhen, head of strategy for Uber China, says that the company weighs several factors before entering a new market, including local population, level of development and consumption patterns.

Last month, Uber’s global CEO Travis Kalanick said that he believes the potential and competition of China’s ride-hailing market are unparalleled, which is why the company is pouring money earned in other places to fund its operation in China.

Lyft and Didi Kuaidi, collaborate to challenge Uber

On April 13, Didi and Lyft, a US ride-sharing service, initiated a cross-border cooperation project that allows Chinese visitors in the US to use Didi’s app to request rides driven by Lyft drivers.

The project is now available in nearly 200 cities in the US, where Lyft provides its service. The passengers can pay their fees with Alipay or WeChat, the apps they are accustomed to using in China.

According to Forbes, the teaming up of Lyft and Didi is seen as a move to counter Uber’s strong global influence in the ride-sharing business.

The two companies are now engaged in designing a reverse service, which is aimed to provide Americans with the access to Didi’s rides in China via Lyft’s app.

Lyft is also working on similar partnerships with Grab in Southeast Asia and Ola in India.

John Zimmer, Lyft’s co-founder and president, says, “For us in these geographies, China, India, and Southeast Asia, partnering is the smartest international expansion strategy.”

Uber facing legal problems in Taiwan

Despite the fact that Uber is the global leader in ride-sharing service, it has encountered multiple legal issues in many countries.

In Taiwan, Uber was sued by the Ministry of Transportation and Communication (MOTC) and was ruled illegal by the High Court in January. The company has already received fines of more than NT$ 50 million (approximately US$ 1.546 million).

The MOTC and the court think that the registered services of Uber include management consultancy, data processing, electronic information supply and third-party payment, but do not include auto-transportation. Therefore, Uber is not allowed to operate transportation services, which it has been doing in the country for three years.

Fan Chih-ku, administrative deputy minister of MOTC, says that the government estimates that around 3000 cars not registered as commercial use are recruited by Uber. Those cars are barred from taking passengers and charging fees by law.

Taiwan’s Executive Yuan says that the country does not welcome startups that refuse to take social responsibilities and deny paying taxes. If Uber does not pay taxes in Taiwan and ignores the safety of passengers, the government will never allow it to operate legally.

Yet, in an interview with Commonwealth Magazine, one Taiwanese Uber driver says that when he applied for the job, the company promised him that it would pay all the fines if he was caught by police.

Uber sends lawyers immediately to help drivers deal with all legal issues. The company also provides transportation and daily subsidies to the drivers whose licenses are revoked.

Edited by Olivia Yang

“China Focus: Uber eyes smaller Chinese cities to take on home-grown Didi” (Xinhua)
“Uber Bets on Small Chinese Cities” (China Topix)
Commonwealth Magazine
Storm Media
“Lyft, Didi Kuaidi Launch U.S. Ride-Sharing For Chinese Visitors” (Forbes)