Get Ready for the Uber - KuaidiDidi Price War

Last week, Uber announced they are raising a whopping $1B for their China business.

And this week, Kuaidi-Didi, Uber's gigantic Chinese competitor, announced they are raising $1.5B, likely in response.

All of this is awesome news for those of us who live in China. Because neither of these companies needs that kind of money for their China operations. It looks like they are both going to subsidize rides and to try to buy market share. A big investor-subsidized price war is about to kick off in China transportation apps.

All of this is really about the potential emergence of private p2p ride sharing in China. That is the big massive opportunity. But at this point, it is still very illegal - and those who do it have a big risk of getting raided or shut down. Absent government approval, the only big opportunity in China transportation apps will remain taxi hailing apps - and Kuaidi-Didi have taken that entire market.

But in the last month, there are increasing indications that the government is going to allow private p2p ride sharing - to some degree. So Uber and KuaidiDidi are both getting armed for that fight. For Kuaidi-Didi, it is their next big opportunity. For Uber, it is a chance to get up off the mat in China.

In reality, private p2p ride sharing is already happening in China somewhat. It is happening in a handful of cities and Uber appears to be subsidizing a lot of these rides. For example, in Beijing a taxi ride that costs 65rmb can be done on Uber for about 25rmb. The big China growth numbers Uber has been touting in the press this past week appear to be about these subsidized rides in +10 cities.

So subsidized p2p rides are already happening somewhat. And if the government greenlights p2p ride sharing, it will explode as a market.

So if you live in China, stop what you are doing right now and download Uber and Didi-Kuaidi. The coming price war is going to be awesome for consumers.

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Thanks for reading. I regularly write about the mega-trend that is Chinese consumers - and competitive dynamics (i.e., the brutal fight for them). If you would like to read my regular posts, please click 'Follow' or send a connection request.

Previous posts include:

• How to Save Uber in China (part 1)
• Uber China's 5 Big Lessons for Netflix
• My Favorite Map for Understanding China
• The Big Problem with China's 190M Seniors, in 1 Chart
• Three Ways Young Chinese Consumers Are Different
• Uber's New Competitor in China? The Government
• 4 China Businesses to Avoid

About: I am a Professor of Investment at Peking University Guanghua School of Management. I am also an investor and former executive / slave to Prince Alwaleed.

I send out a monthly "Recommended China Reading" email. It lists the best recent articles and books I have found. You can sign up for it at www.jeffreytowson.com. You also get free chapter of my One Hour China Book there too :)

Photo by Giulio Nesi (creative commons license, link here)