UBER VS. DIDI: The Race for China’s Ride-Hailing Market

Uber and the Sharing Economy

Koen Frenken (2017) defined the sharing economy as the practice that consumers grant each other temporary access to their under-utilized physical assets. He said the word “sharing” used in this definition is different from what we commonly know. We often consider sharing as dividing and distribution, which can be translated as a zero-sum game. The sharing economy, however, is not a zero-sum game but a positive-sum game. Consumers do not consume goods all day long. It is not a zero-sum game in that consumers goods are handed over to others when they do not spend their goods, without additional investment.

 

The sharing economy is comprised of consumer-to-consumer interaction, temporary access by borrowing or renting, and better use of otherwise under-utilized physical assets (Frenken, 2017). Consumers offer others access to their goods, which can be said that consumers are taking the role of producers. Access is also more important than ownership in the sharing economy, which can be translated that the sharing economy is an example of the access economy. Besides, the sharing economy is an instance of the circular economy considering the fact that fewer goods are needed to meet the same demand compared to situations other than the sharing economy because more people flock to one item within the sharing economy. As the total number of goods in the sharing economy can be scaled down along with the dwindling number of the production and annihilation of consumer goods, it can also lead to sustainable consumption that societies can reduce energy use and greenhouse gas emissions.

 

Uber is a prime example of the sharing economy. Uber took advantage of the sharing economy's values and created the blue ocean. Uber connects passengers and drivers via mobile phones. People can use a service similar to a taxi without having to wait for a taxi or find a taxi company number and make phone calls. When individuals register a personal vehicle on Uber with the required documents, it can be used as a call taxi for ordinary passengers. Simply put, people can operate a taxi without a taxi license.

 

Uber users can use the service by simply downloading the Uber app to their mobile phones. Users must register their credit cards from the time they sign up because the charges are automatically paid through the registered card. Fares are set differently depending on weather, time and day of the week (See Exhibit 1). For example, on snow or rainy days, prices go up. When booking a vehicle through the app, the location of the reserved vehicle is provided to passengers in real-time, and it is recognized for convenience as it can immediately check the estimated price to the destination, current location, and driver information.

Uber in China

China is a huge market. In Chengdu and Hangzhou, the number of Uber daily rides is 479 times and 422 times that of New York City (Cao, 2015). However, the Chinese market has already been taken up by local first-comers, with Uber failing to dominate the market. A CNIT report estimated that by June 2015 Didi Kuaidi had 80.2% of China’s ZhuanChe ‘completed requests’ market, compared to Uber’s 11.5%. Uber has made several attempts, such as People's Uber, to tap the Chinese market, but has yet to get out of its underdog position.

 

Uber should target the Chinese market based on data from other countries. Unlike Chinese companies like Didi, Uber is serviced in more than 300 cities around the world. The data from this experience is very important. Leading global companies such as Apple, Google, and Amazon are not jumping into the self-driving car industry for nothing. This is because data obtained through self-driving information can identify consumers' movements and major areas of consumption, which can determine the future direction of businesses. Uber has already joined hands with Baidu. If Baidu combines information obtained from the Chinese market and Uber's information obtained from the global market, it is also not a dream to win in the fierce Chinese market.

How Uber Handles Regulations

Uber sued New York City in September 2019. New York City has banned car-sharing service companies from acquiring new licenses over the past year. However, the New York City government accepted the Taxi & Limousine Commission's request to extend the regulation for another year, and Uber filed the complaint in protest. Uber has also confirmed its opposition to the passenger-free driving regulations.

 

Uber should actively comply with local regulations. Unlike the days of Uber's debut, the market is now awash with companies copying Uber. Uber should not speak out loud. There is too much to lose. Uber has so far been able to run on the success track, aggressively destroying the market. It has also been actively opposed to various regulations. By doing so, it was able to bring changes and innovations to existing markets. But now Uber is no longer underdog, but it is a giant company that even went public on the New York Stock Exchange. Uber should no longer be aggressive. Uber should seek to change as much as possible within the boundaries of various regulations.

 

Reference

Cao, L. et al. 2015. Uber—Starts an Era of “Sharing Economy”.

Frenken, K. 2017. Political Economies and Environmental Futures for the Sharing Economy. Phil. Trans. R. Soc. A 375: 20160367. http://dx.doi.org/10.1098/rsta.2016.0367.

Wu, K. 2016. Uber vs Didi: The Race for China's Ride-hailing Market. INSEAD.