It's worth pointing out that Uber has already become massive in China; whenever I'm in Guangzhou there are a ridiculous amount of rides available and you're rarely waiting more than a few minutes.
I think that is only because black cabs already existed and were so popular in those areas. Uber legitimizes them, whereas before you would have had to worry about getting ripped off.
Suffice it to say, most of those drivers are probably on didi zhuanche and get more business from them than Uber. Its not that Uber is massive, but drivers have no concept of exclusivity so just monitor all the networks they can (even taxi drivers might have used multiple taxing hailing apps before the consolidation).
Didi kuaidi (and Uber) have done the impossible and made black taxis semi legal, since they were a fact of life already. They didn't have to build these markets from scratch, they already existed and were just poorly organized.
Note when I say black cab, I actually mean 黑车 whose direct English translation probably isn't very precise. Essentially, these are illegal taxis that would have wandered the streets looking for fares when they can get away with it. They don't mean a legal black livery car as in say...NYC.
You didn't see them so much in the first tier cities (though they are still around) where there were enough taxis, but they were everywhere in 2nd/3rd tier cities, and often were your only private transport option.
> Note when I say black cab, I actually mean 黑车 whose direct English translation probably isn't very precise. Essentially, these are illegal taxis that would have wandered the streets looking for fares when they can get away with it. They don't mean a legal black livery car as in say...NYC.
It's just called that for historic reasons[1], referring to any illegal cab, usually which solicits people for rides. They don't have to be of the Romani people.
You did actually see them in the first tier cities - though maybe not in certain areas. For instance entire intersections right outside of Haidianhuangzhuang on line 4 in Beijing would be routinely blocked by black cabbies just chilling there waiting for fares. Maybe less so inside 2nd ring.
I think it's a very interesting point about legitimizing this existing practice. Maybe they'll be less prone to blocking intersections now if they have the ability source fares through an app instead of harassing people coming out of Universities, subway stations, etc.
Oh, I definitely saw them in Beijing, especially when it was raining. I also took them a couple of times.
But these new services...didi dache, brings new standards to the game, the cars have to be at a certain level, and are often rentals. So, the old black cabs with the little Chinese cars are kind of cut out of the service.
This is what happened when Uber launched in Auckland as well. In NZ taxis are already pretty lightly regulated - no medallion system etc - so most of the uber drivers were taxi drivers who were using Uber, Zoomy (local hailing app) or normal taxi fares.
Cause you are just at GuangZhou. Take a look at other cities around the west and mid area of China. DidiKuaidi still dominate those cities and will keep this position for a long time
Uber drivers get paid an amount based on a subsidy multiplier of the ride value, and they are highly sensitive to these multipliers. According to a driver I talked with recently, Uber takes 20% of the fare, but is currently giving drivers a bonus of about 2.5x. So if a fare is 10 rmb, Uber takes 2 rmb, then pays out 8 * 2.5 = 20rmb. Driving costs these drivers roughly 1-2 rmb/km, and if the subsidy ever fell below 1.3x, the drivers would lose money (these are for People's Uber level of cars, which is the lowest level). Unless the subsidy can ever drop below 1.25x, Uber will be paying for every ride. And if it does, drivers will be parking their cars or switching to another service.
Uber also lost a lot of money through a couple of vulnerabilities that have since been, I believe, patched. Some people were able to figure a way to create fake rides through the app, allowing drivers to get paid without ever driving anyone. They previously also allowed riders to link up Alipay accounts to their Uber accounts, but Uber had no way to ensure the Alipay accounts had funds. So people would take Uber with an empty account, and Uber would have to pay drivers without receiving any money from the riders.
Another side note: there was recently a publicity campaign with some well-known celebrities that had very explicit nationalistic messages encouraging Chinese citizens to use their local service and not the services of an outsider.
The hack needed an extra rooted android phone and a special 'helper' app. It also took advantage of the subsidy they give new users and the driver for new users. (I have no idea if this has been patched)
Another subsidy I heard about gave about $1000 per week if you had over 80 rides. $4000 dollar subsidy a month goes a long way in China.
It really blows my mind that people think this is a sustainable business. Even after you out-spend the competition, who's stopping someone from downloading a new app from a new service? I've seen users in China blast all ride apps at once and just take the first one to arrive. Subsidies won't buy loyalty.
The brokers (Uber and friends) are clearly fighting over what they believe will become a future monopoly. Subsidies are going to leave the impression of higher demand to the drivers and ultimately you will have too many drivers in the market and only one broker (the other will be out of money). This is where the price paid to the driver will drop and the broker can yank up their fees.
When Didi kuaiche does a subsidy for a taxi ride (never use zhuanche, which is non-taxi), they send a message to your phone telling you that they added a bonus to help you get a taxi. It is usually 5 kuai, which is just less than a dollar.
My wife uses zhuanche, and they don't necessarily subsidize rides, but they give riders coupons to "try" the service (say 15 kuai or so). It is a bit more expensive than a taxi, so in a way this is a subsidy also.
I asked a Beijing-based Uber driver why there is so much more availability now than there was a month ago. He said that there are currently some special incentives, one of which is a 1000RMB 金牌 (gold medal) for any driver who exceeds a certain # rides in a week, with an average rating of 4.8 or more.
Ultimately Uber is doomed. Being first to market is great for building a brand, but the barrier to entry is so low for this manner of service that eventually they'll succumb to death by a thousand competitors.
When I lived in shanghai 5 years ago I was told that a cab driver would make about 4,000yuan a month. So needless to say I was quite impressed by the numbers in the article. I know full time office workers that makes considerably less than that with a masters degree!
How is that a problem? They don't have IP protection on the idea. It's quite fair and lawful for another company to copy it. They still need to overcome network effects and actually implement it. As the article shows, this was hard.
The parent comment didn't say they did have IP protection, nor that it was unlawful.
They asked how a company can or should respond in order to compete effectively.
It's a huge problem for most any company anywhere: how to compete when your competition is able to effectively clone you (not to mention if they have other advantages you inherently can't match in the market in question).
Also, it is just Forbes' words that Didi "emulate Uber’s model whole cloth". Fortune has a different perspective "But Didi has some built-in competitive advantages, by virtue of the fact that it was in the market earlier and that it designed its business for the Chinese market, instead of trying to import a template perfected elsewhere." http://fortune.com/2015/09/30/will-china-be-ubers-waterloo/
The Fortune article gave more details about Didi's model.
GP specifically said "Typical Chinese approach". Contrast with what you said "It's a huge problem for most any company anywhere", which is more reasonable.
Additionally, while "it's a huge problem for most any company anywhere", if there were no competition, it would be a huge problem for society.
Lyft realized this and decided to partner with Didi to get market share http://www.wired.com/2015/09/lyft-didi-kuaidi/. It's the old saying that your enemy's enemy is your friend, especially true when you knew you cannot win.
