Late last year I noted that life after Uber would not necessarily be a picnic for Chinese ride-sharing giant Didi. While an 85% market share looks unassailable, it will need a lot more money to secure its position.
I was prepping a post on why that is the case, but Dr. Richard Windsor at Radio Free Mobile beat me to it. Read the whole post. His bottom line:
Rising prices and lower reliability is likely to drive many users back into the arms of the taxi industry thereby achieving exactly the result for which the rules were created.
Windsor believes that the only logical response for Didi is a change in strategy, but finds it hard to see how any strategic choices open to Didi justify its $34 billion valuation. Fair enough.
Didi is a rapidly-growing company with a need for a huge war chest in order to secure its market position. Payback to investors will be some time down the line, and others will decide when and if Uber [or Apple] will ever see a dividend. Even if it does, the question will remain as to whether that dividend was a fair compensation for the price and a fair return to investors on the risk.
If you are an investor in either Uber or Apple, and you count the company’s holdings in Didi as a part of the firm’s underlying value or future earnings, have a look at Windsor’s post. You may want to re-run your numbers.
The rule for disruptive companies in China, regardless of provenance, is this: your future depends on more than just being able to make a handsome profit off of disruption. You have to convince a host of powerful individuals and groups that China is better off with the industry disrupted than with the status quo.