China’s biggest ride-hailing platform, Didi Chuxing, is making its first move in Brazil in a drive to win market share in emerging economies.
The move comes as Didi faces regulatory pressures in its home market and is engaged in global rivalry with Uber.
The strategic partnership with 99, Brazil’s homegrown taxi-booking platform, will give Didi a seat on 99’s board of directors, the two companies announced on Thursday (1/5).
“The focus for the partnership with 99 is on developing the enormous, untapped potentials of Brazilian and Latin American markets,” said a spokesperson for the Chinese company. “Didi has a very firm commitment to a globalization strategy.”
“The war on one front is now being fought everywhere, globally,” said William Bao Bean, partner at SOSV, the Chinese software start-up accelerator. “Before it was fine to be the top app in China or in the US. That’s no longer enough for Uber or Didi.”
Didi has also invested in Lyft, Uber’s main US rival, as well as GrabTaxi, which is popular in Malaysia and the rest of Southeast Asia. The three car-sharing apps are part of a global anti-Uber alliance in which users of one app can hail the others’ cars when travelling abroad.
“[Didi] have to expand abroad because they’re being hit by the regulators at home,” said Shaun Rein, managing director of China Market Research Group.
For the past two weeks Didi’s drivers have faced fines from the local governments of Beijing and Shanghai because of new regulations that bar out-of-town migrants from driving cars for ride-hailing platforms — a restriction that knocks out the majority of Didi’s fleet in China’s biggest cities.
“Now that Didi have locked down the domestic market after acquiring Uber in China, they can turn their attention abroad,” said Wu Changqi, professor of management at Peking University.
Brazil, like other emerging economies, is more open to Chinese tech than the established markets of Europe and the US, argued Mr. Bao.
“Five of the top ten mobile apps in South America and Southeast Asia are Chinese,” he said. “The fact that these are also ‘mobile-first’ markets means there’s a similarity in needs for design and user experience.”
The rapid take-up of mobile internet in emerging economies such as Brazil has led to the “mobile-first” phenomenon, in which many users experience the internet for the first time on their mobile device rather than through a computer. Consumers often use mobile payment systems before ever setting foot in a bricks-and-mortar bank.
“Didi has a great market in countries where most people don’t own their own cars yet, infrastructure for parking might be poor, and there’s a lot of low-income people merging into the middle-income bracket,” added Mr. Rein.
There are more than 140,000 drivers registered with 99 and 10 million user downloads in São Paulo, Rio de Janeiro and other large Brazilian cities.
Didi will provide support for 99’s technology development and business planning, and will share expertise on its “big data” algorithms for managing drivers and traffic flow, which has been the focus of Didi’s research and development.