This article is an excerpt from the Shortform book guide to "The Upstarts" by Brad Stone. Shortform has the world's best summaries and analyses of books you should be reading.
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When did Uber enter China? And why did the ride-hailing giant end up selling its Chinese operations to its Beijing-based rival?
Uber entered China in early 2014, launching its black-car service in Shanghai, Beijing, Guangzhou, and Shenzhen. However, the company ended up selling its Chinese operations because the losses Uber was incurring to win a meaningful market share were unsustainable.
Here is the timeline of events that have led to ceding off Uber China to its biggest competitor Didi Chuxing.
Uber China Timeline: 2012-2016
June 2012: Cheng Wei leaves Alibaba and finds Didi Dache after learning of the Hailo-Uber battle.
- Among 30+ ridesharing competitors in China, Didi differentiates strategy by giving their free app to younger drivers who already had phones, rather than giving smartphones to drivers.
April 2013: Kuaidi Dache raises funding from Alibaba. In response, Didi quickly raises from Tencent.
- In China, dominant share is often established by the startup with the strongest connection to the big 3 – Tencent, Baidu, and Alibaba.
Summer 2013: Kalanick travels to China to try a pilot in Beijing. He meets Cheng Wei and calls him “special…a massive cut above anyone else in the industry.”
Nov 2013: Cheng Wei tries to raise capital in Didi, only to be rejected by multiple investors. He attributes it to Didi’s high burn rate (in 2014, Didi burnt through $100,000 every day).
Feb 2014: Tencent has a big hit with the Red Envelope app, which allows gifting of money as per Chinese custom. Suddenly Alibaba and Tencent get into a mobile payments war, with Didi and Kuaidi as strategic pieces.
Early 2014: Uber launches its black-car service in Shanghai, Beijing, Guangzhou, and Shenzhen.
Oct 2014: Uber introduces UberX in 4 Chinese cities. In December, it raises from Baidu.
Jan 2015: China’s Ministry of Transport rules that private car owners are not allowed to use ride-hailing apps for profit. However, Uber, Didi, and other apps are still allowed to operate, possibly because it helped alleviate transportation issues.
Feb 2015: After burning a lot of money, Didi and Kuaidi decide to merge to form Didi Kuaidi, with Didi controlling 60% of the merged company.
Spring 2015: Kalanick meets with Cheng Wei and asks for a 40% stake in the company, in return for ceding China to Didi. If refused, Kalanick would hand Didi an “embarrassing defeat.” Didi rejects the proposal.
May 2015: Didi says it’ll give away 1 billion RMB in rides. Uber matches it.
Sept 2015: Didi invests $100MM in Lyft. It also establishes an anti-Uber coalition with Lyft, Ola in India, and Grab Taxi in Southeast Asia.
2016: Didi Chuxing (renamed) raises $7B in 2016 and reaches 5,000 employees. It claims an 85% market share in China and is active in 400 cities, while Uber is only in 100. At their peaks, Didi and Uber are both losing $1B per year in China.
Jul 2016: Uber finally cedes China to Didi, getting 17% in Didi and a $1B investment.
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Here's what you'll find in our full The Upstarts summary :
- How Airbnb and Uber started as side projects before becoming the giants they are now
- How virality helped both Uber and Airbnb grow
- Why circumventing local laws was essential to growth
