The Chinese are getting into the action. Aivars Lode avantce
Investment by Chinese Internet Firm Could Help Uber’s Business in China
By Gillian Wong and Douglas Macmillan
Uber Technologies Inc. has a new ally in China, a market where the dominant car-hailing service finds itself in the unfamiliar role of underdog.
Chinese Internet-search giant Baidu Inc. has agreed to make a strategic investment in the San Francisco company, people familiar with the matter said on Friday. Baidu said it plans to disclose an investment in a U.S. startup on Wednesday, but didn’t provide further details. The size of the investment couldn’t be immediately learned.
The alliance with one of China’s top Internet firms could help the American ride-sharing company play catch up to a pair of well-heeled local startups that have emerged as leaders in a field of Chinese cab-booking apps.
Didi Dache, backed by Tencent Holding Ltd. and Kuadi Dache, a company funded by Alibaba Group Holding Ltd. , have raised hundreds of millions of dollars and expanded rapidly throughout the country by offering discounts to riders and incentives to new drivers.
Uber, which now operates in 250 cities around the world, has far outpaced its closest U.S. rival, Lyft, which has raised one-eighth as much funding and has few users and drivers in most cities where it operates. Lyft, which took an investment from Alibaba earlier this year, plans to expand outside of the U.S. next year.
Car-booking apps are just one element of China’s quickly evolving Internet-services economy, which is drawing competitors seeking to win over the country’s 500 million smartphone-wielding consumers and the revenue they control.
Uber entered China last year and now is available in eight of the country’s largest cities. In addition to competitive pressures, the company has had to navigate a complex regulatory environment and technical problems specific to the Chinese market, including unrivaled traffic congestion and the sheer geographic size of major cities such as Beijing.
Baidu also could help Uber ward off possible resistance from the Chinese government, which has historically imposed strict regulations on U.S. businesses, said Jamian Ronca Spadavecchia, president of Washington, D.C.-based global risk advisory Oxbow Advisory.
“Teaming up with a Chinese domestic company could lessen the risk of central government interference,” Mr. Spadavecchia said.
Baidu has offered to funnel some of the millions of users of its online services to Uber’s app, one of the people familiar with the deal said. Baidu operates the country’s most popular search engine and mapping application.
Uber has joined with rental companies to offer its premium-priced black-car service in China. A separate service launched this year, called People’s Uber, lets non-professional drivers offer “nonprofit” rides to passengers who pay only to cover costs like gas and maintenance.
The number of trips booked through Uber’s service in the first six months in Shanghai exceeded the number of trips made in San Francisco, New York and Paris each during their first six months, Allen Penn, Uber’s head of Asia, said an interview earlier this year.
Still, Uber is a late arrival to a Chinese market that has exploded over the past two years.
“To do this two years later than everyone else I think is tough,” said Hans Tung, managing partner at GGV Capital, a venture capital investor in Didi.
Didi Dache, founded in 2012, says it offers services in more than 300 Chinese cities and has more than 100 million registered users and 1 million registered taxi drivers. Didi’s daily taxi-booking orders, which have risen to as much as 5.2 million in a single day, are now 10 times that of Uber, the taxi-hailing service said in an interview with the New York Times this week. The company said on Tuesday it raised more than $700 million in its latest funding round led by Singapore state investment firm Temasek Holdings Pte. Ltd.
When Uber reported last week that it raised $1.2 billion, it said in a filing that it could seek up to another $600 million from other investors to support its global expansion. The company has added foreign investors including Qatar’s sovereign-wealth fund in an effort to build powerful allies in places where it may encounter government resistance.
Uber’s rapid expansion has created new challenges from regulators in cities around the world. Allegations that a driver on the service raped a woman in India last weekend triggered a nationwide ban on smartphone-enabled taxi services in India that resulted in the Uber temporarily halting operations in the country, its largest market outside the U.S.
On Friday, however, a French court declined to ban Uber from operating its service that uses drivers without professional licenses, winning the company time in a key market amid its regulatory battles world-wide.
It was a spot of welcome news for the California company, after facing bans across the globe. In Europe alone, officials in Spain, the Netherlands, and Brussels have all moved to at least temporary block some Uber services.
District attorneys in San Francisco and Los Angeles sued Uber for allegedly misleading consumers and said they are seeking an injunction until it complies with California law.
Also this week, Thailand barred all app-based taxi service operators who use personal vehicles; a Spanish judge ordered a temporary halt to the company’s operations in that country; and the city of Portland, Ore., issued a cease-and-desist order and filed a lawsuit against Uber.
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