The crucial differences keeping Didi ahead of Uber in China
Didi Kuaidi is Uber’s largest competitor in China, and the home-grown firm has thus far remained ahead of the American import. One reason for this is that Didi had already been operating as a taxi service for years before Uber appeared in China, and therefore has a better-known name. However Tony Qiu, Head of International Business Development at Didi Kuaidi believes there are other reasons his firm has been able to stay ahead of Uber; firstly, the fact that Didi still allow telephone orders for the elderly, or those who may not use a smartphone (this is important when you consider China’s ageing population); and probably more importantly, unlike Uber, Didi does not limit their worker pool by only allowing private cars to come onto the platform, they also welcome partnerships with licensed taxi companies.

China’s internet graveyard is full of US companies that failed to adapt to the country’s quirks. eBay lost to Alibaba by refusing to let merchants list products free of charge. Expedia lagged in China by refusing to open call centers, while CTrip flourished for that very reason. Google pulled out of China due to political stress, but many of its local team members thought it could have won market had it invested in TV and billboard ads like its competitor, Baidu.

It’s possible, but by no means guaranteed, that Uber will end up in a plot next to its American peers for similar reasons—its competitor, Didi Kuaidi, believes it has a better understanding of what domestic consumers want.

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“Taxi hailing is a very local business,” says Tony Qiu, head of international business development at Didi Kuaidi. That might seem like an empty statement, but Didi’s efforts to reach Chinese consumers shows in several ways.

One example is in the app itself. In all of its markets, Uber lets consumers book a car in just one way—by pressing a button. Didi’s app differs from Uber’s in a few small but significant ways. For one, it requires users to input their destination for all bookings—something Uber has steadfastly avoided. “Based on our research on user preferences, we found more people like to key in destinations for accurate pickup locations,” a company spokesperson says.

And unlike Uber, Didi vehicles aren’t hailable solely through an app. It has a separate phone hotline for senior citizens, who might not be adept at using a smartphone. One of its features—no longer available on the regular app, because it slowed wait times too much—is the ability to book rides using push-to-talk, a voice alternative to texting that has grown popular in China for various reasons.

Didi’s commitment to working with traditional taxis could also give it an edge over Uber, which partners almost exclusively with private drivers and seldom lets taxi drivers join.

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Didi’s approach of letting taxi and private car drivers co-exist in its system comes partly out of necessity—the company had been a taxi-booking service for almost two years before rolling out private driver services. It also helps appease authorities and reduces the chances of a government crackdown.

But more importantly, Didi sees new opportunities for revenue and influence by partnering with taxi companies. While it currently makes no money off of taxi trip transactions, Qiu says that Didi is trying new ways to make money from taxis. For example, it’s experimenting with virtual coins that work like frequent flyer miles for drivers, wherein drivers who rack up more currency can get access to more lucrative trips (like airport drop-offs).

“We see a lot of opportunity in our taxi business, and don’t view our private car business as an interference,” says Qiu. “We don’t want to take away the livelihoods of millions of taxi drivers, especially since they have taken us this far.”

Didi is also present in far more Chinese cities than Uber—over 400, compared to Uber’s 13. It’s possible that this might not matter, for as Uber itself has indicated, most of a ride-hailing company’s money comes from a relatively small number of cities. But Didi believes that its wider presence gives it a huge edge over Uber, even though business might be slow in those cities for now.

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“The issue in China is that there’s just too much demand,” says Qiu. “The taxi industry is huge in China, but not huge enough. There are an estimated 30 million hails for rides every day in China according to our data, but we are completing only 3 million every day.”

Qiu adds that many of China’s second- and third-tier metros are indeed unfavorable for Didi and ride-hailing. Many such cities have even smaller taxi penetration rates than larger ones, and private car ownership rates are low. But in Qiu’s view, this is all the more reason to get there early.

“China’s middle class is growing, so that means more people will be able to buy cars in the future, and also that more people will have money to spend on private rides,” he says.

Of course, if Didi didn’t see Uber as a formidable competitor, it wouldn’t continue to raise funding round after funding round. Moreover, if Uber is indeed getting 30% of its trips from China, a runner-up position might not be so bad in the world’s largest consumer market.

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Even if ride-hailing turns out to be a winner-take-most game, in China, there’s plenty to take, period.