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Billion Dollar Unicorns: Didi Chuxing Monopolizing Chinese Ride-Sharing Market?

Posted on Monday, Oct 3rd 2016

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This year has seen Chinese ride-sharing firm Didi Chuxing expand its list of investors to include the likes of Apple, Foxconn, and even Uber, cranking up its valuation to $33.7 billion. It is now the third largest Billion Dollar Unicorn after Uber and Xiomi.

Didi Chuxing’s Journey

Formerly known as Didi Kuaidi, Didi Chuxing is formed from the merger of taxi-hailing firms Didi Dache and Kuaidi Dache in 2015. Didi-Dache was founded in 2012 by Taobao alumnus Wei Cheng.

True to its name, which translates to “honk honk, commute”, Didi Chuxing today offers not just car and taxi services, but also bus service and even a chauffeur booking service. It claims to have 300 million users of its taxi, chauffeur, bus and other services. It operates in over 400 cities across the country versus UberChina’s 45 cities.

Didi Chuxing claims it has more than 87% of the private car-hailing market share in China and a 99% share of the taxi-hailing market. It also says that it completes more than 11 million rides per day on its platform and cleared 1.4 billion rides in 2015. While the user statistics may be impressive, the industry is still going through its regulatory issues.

In August, Didi Chuxing announced its plans to acquire Uber China. As part of the arrangement, Didi will invest $1 billion in Uber’s global company Uber Technologies and Uber China’s other shareholders, including search giant Baidu Inc., will receive a 20% stake in the combined company. However, the deal has hit some hurdles with China’s Commerce Ministry opening an antitrust investigation into the acquisition. In July, China released regulations to formally legalize the ride-hailing business, which had been operating in a regulatory gray zone.

Didi Duxing’s Financials

Didi Chuxing is a privately held company that keeps its revenue information confidential. However, according to leaked documents reported on the FT and Business Insider in 2015, Didi Dache and Kuaidi Dache recorded operating losses of $305 million and $266 million and gross bookings were $141 million and $44 million, respectively, in the first five months of 2015. The report also suggests that the company incurs a gross loss of $2.75 on each trip.

It is venture funded and has raised $9.49 billion from investors including Alibaba, Ant Financial, Apple, Capital International Private Equity Fund, China Investment Corporation, China Life Insurance, CITIC Capital Holdings, Coatue Management, DST Global, Foxconn Technology Group, GGV Capital, GSR Ventures, Ping An, and SoftBank. It raised $1 billion from Apple in May 2016 and in September 2016 Foxconn invested $119.9 million at a valuation of $33.7 billion. Uber is valued at $62.5 billion.

The recent interest from Apple is fueling speculations about an IPO in 2017, but the company has denied any such plans. No ride-sharing company has gone public yet, and it is one sector that routinely sees skyrocketing valuations despite huge losses.

The Chinese ride-sharing market is a gigantic prize. If Didi Chuxing emerges as the monopoly, its valuation has a long way to go yet.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

Photo Credit: iphonedigital/Flickr.com

This segment is a part in the series : Billion Dollar Unicorns


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