Is China being taken for a ride?

Didi Chuxing taking over Uber reassures us that the world is not about to be dominated by a small number of Western brands

Mohammad Chowdhury
Published: 11, Aug 2016

Mohammad Chowdhury is PwC's Telecom, Media and Technology consulting leader across Australia, SE Asia and New Zealand. Until recently he built the practice in India where he became one of the most quoted industry experts in the country. Mohammad has served as an adviser to telecom sector reform in Saudi Arabia, Zimbabwe, Ethiopia, Slovakia, Poland and Slovenia and during 2015 as national telecommunications adviser to the Government of Myanmar. Previously in his career he has conducted significant strategic roles at Vodafone and IBM. He is quoted regularly by the Financial Times, Wall Street Journal, BBC, CNBC, TV-18 and NDTV. Mohammad has worked in 83 countries, lived in 7 and speaks 6 languages. He has a BA in Politics, Philosophy and Economics from Oxford University, an MPhil in Economics from Cambridge University, and strategy training from Harvard Business School. He was born in London, has family origins in Bangladesh, and is married with two sons.

(Photo: Shutterstock)

Didi Chuxing's takeover of Uber China last week is another vindication of the notion that global dominance of ecommerce by a few brands is a lazy and superficial theory.

Internet giants are finding around the world that the next stage of market penetration (ie the interesting bit beyond acquisition of subscribers to where you actually make money from them) is difficult without significant localisation of distribution, content, offerings and business models. All the big players see this: Facebook is trying to figure out how to market better in Asia, LinkedIn is growing its sales teams on ground in key emerging markets around the world, Amazon realises that it has a real fight on its hands to win against the likes of India's Flipkart, and Netflix has fallen foul of local tax regulation in various markets, in some of which its service has been stopped.

Didi taking over Uber may feel like a prophetic truth-coming that reassures us that the world is not about to be dominated by a small number of Western brands. Just as Francis Fukuyama was wrong in the 1990s to say that we are experiencing "the end of history" because democracy will become the dominant political system, whoever said the first to scale in internet wins is wrong too.

But in my mind there is a grave concern raised by the Didi takeover too, and this is about customer choice. With the China rides market to be dominated by one player, what happens to Chinese consumer choice? Will customers be able to benefit as they would from several players vying for their service, doing their best to keep their taxis new and clean, their drivers the most courteous and their fares the most competitive? All of that requires agility and costs money: Why bother if there isn't anyone threatening your trade?

Services such as taxi rides must have reasonable competition (or highly regulated service standards and fixed fares) to offer quality of service and value: Taxi service is not a monopolistic industry by nature. In Indonesia, Silver Bird and White Horse both provide great service partly because there is fierce competition for customers.

I haven't seen what the Chinese competition authorities are thinking, and Didi clearly has grand visions for bringing more to its customers, but we must hope that the week's events do not result in China's millions being "taken for a ride”.

  • Mashid

    Smart move by uber. They can now not only expand to other markets but shall be able to focus on their driver less auto manufacturing plant in Pittsburgh.

    on Aug 12, 2016
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