Didi achieves $25bn valuation for Uber showdown

The Wall Street Journal, citing unnamed sources, reports that Didi Kuaidi (also known as Didi Chuxing), China’s home-grown Uber competitor, is close to completing its latest funding round to raise more than $1.35bn at a valuation of over $25bn. Didi's valuation has soared from $6bn in February 2015, when it was formed by two competing taxi-hailing companies by joining forces. Didi will use the funding to recruit drivers and ensure fares are kept competitive, something it hopes will combat Uber's aggressive growth in China. As we have previously reported, Uber spent over $1bn in China last year and expects China to become its biggest market, however Didi definitely has the home advantage, already operating in over 400 Chinese cities and serving over 30m riders at the end of 2015; it expects to grow its active driver pool from 4m to 10m by the end of 2016. 

Earlier this year, Uber CEO Travis Kalanick offered up a simple explanation for why the ride-hailing company is burning through $1 billion a year in China: “We have a fierce competitor that’s unprofitable in every city they exist in, but they’re buying up market share.”

That competitor is Didi Kuaidi, a Chinese taxi and ride-hailing company backed by the likes of Alibaba and Tencent Holdings. Didi is believed to dominate the market in China—it operates in 400-plus cities and claims to break even in 100 of them. Compare that to Uber, which was in roughly 40 Chinese cities as of late March (though Kalanick has said it will hit 100 by the end of 2016).

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And Didi is about to get more formidable. The company is reportedly close to locking down more than $1.5 billion in new funding, lifting its valuation above $25 billion. Per the Wall Street Journal, Alibaba and Tencent are back for the latest round, which is expected to close by the end of April. Uber’s China unit completed a series B round of “well over $1 billion” (Kalanick’s words) in January that brought its valuation to about $8 billion.

Uber and Didi are both spending heavily in China to carve out space in the market, and both say the strategy is working. In a recent interview with CNBC, Kalanick claimed Uber had grown its market share from 1 or 2% in January 2015 to 30% in a little more than a year—“phenomenal, possibly unprecedented growth.” Didi, for its part, said a few months ago that it has over 80% of China’s private car-hailing market. (Kalanick did not specify the market he was talking about.)

For Uber, the question continues to be whether it can ever catch up to Didi, or will have to settle for being runner-up. In the US, where Uber is the runaway ride-hailing winner, No. 2 status would probably be unacceptable to Kalanick and his team. But China is entirely different—in terms of politics and regulations, but also the cultural niches that companies like Uber can fill. Plus, the market is huge. Even if Uber isn’t keeping up with Didi in China, it ultimately might not need to.