Chances are that if you don’t live in China or aren’t a mobility expert, you haven’t heard of DiDi. It’s equally likely that this ignorance won’t last long. As China’s leading mobility service provider gets ready to ramp up its global presence, here’s a ready reckoner on a company that was ranked No. 4 on CNBC’s ‘Top 50 Disruptors’ list in 2018; was featured among the ‘Top 50 Smartest Companies’ by the MIT Technology Review in 2016; and was honored as a ‘Global Growth Company’ by the World Economic Forum in 2015.
DiDi Is Big, Very Big
The statistics are staggering. According to a recent Frost & Sullivan study, DiDi has a presence in around 400 cities and towns in China. It has a user base of around 450 million customers and operates over 30 million rides every day. In China, it has a market share of 80% in taxi e-hailing and over 85% in private car e-hailing. It is also active in mobility solutions for corporates, chauffeur services, food delivery, car sharing, bike sharing, ride sharing as well as bus services.
So what does all this translate to in monetary terms? DiDi has a valuation of approximately USD56 billion and has, not surprisingly, attracted a raft of investments from big ticket names like SoftBank, Apple, Alibaba, Temasek and China Merchants Bank.
Wheels On (Almost) Every Continent
Currently, DiDi’s business—in terms of revenues—is skewed towards China. In 2018, for instance, its Chinese operations yielded nearly 96.5% of its profit revenues. However, the Chinese giant has been steadily expanding its global footprint, primarily through a series of strategic collaborations and investments.
In 2015, it invested $100 million in Lyft, the US’s leading private car hailing company. Over 2017-2018, it partnered with and invested over $10 million in Taxify, thereby establishing a presence in Europe and Africa. In 2017, it partnered with and invested in Careem, a prominent private car hailing player in the Middle East which also has a presence in South Asia. Strengthening its presence in South Asia, DiDi pumped $30 million into Ola, which has an over 80% share of India’s e-hailing market. In Southeast Asia, it invested in Grab, the region’s dominant private car hailing company. In Japan, traditionally a difficult market for e-hailing companies, DiDi collaborated with SoftBank and with local taxi operators to offer taxi services. DiDi is on the roads in Australia and Mexico. And, finally, its recent acquisition of 99, Brazil’s leading private car hailing company, added a samba beat to DiDi’s dance of domination.
The next step for DiDi will be to strengthen its presence in each of these regional markets, and look to these markets, beyond its home ground, as equally important sources of revenue.
Tapping Into Opportunities Arising From Low Vehicle Ownership And Electric Vehicles
Although China is the largest market in terms of vehicles sales, it lags behind several key markets in terms of vehicle ownership. If we compare vehicle penetration rates, i.e., vehicles per 1000 population, then China’s vehicle penetration at around 100 vehicles per thousand population is much lower than that of the US (>800), Australia (>700), Japan (>600), Germany (>550), and the UK (>550). While this is due to the large size of China’s population, it is, at the same time, indicative of the significant gap as well as opportunities that exist in fulfilling mobility needs.
Against a backdrop of low car ownership, DiDi has collaborated with industry participants to provide a cheap, on-demand alternative to vehicle ownership. The collaboration—‘D-Alliance’—is aimed at jointly developing a customized fleet of low-cost electric vehicles (EVs). The D-Alliance has 31 founding partners that span the gamut from original equipment manufacturers and parts and components manufacturers, to EV services and digital mapping providers.
By promoting the new energy automotive industry with partners along the value chain, DiDi aims to transform existing business models in the mobility industry. It is estimated that the alliance will help slash EV production costs by almost 50%. If this transpires, the D-Alliance could become a case study for auto industries in other countries/regions to emulate.
Among the other major areas of cooperation for D-Alliance members are auto sales and leasing, services, finance, fleet operations and car sharing, and the co-development of vehicles and industry standards. The D-Alliance is likely to focus initially on China and then expand into other markets, especially markets where DiDi is already investing.
This is where it gets all muddled – why is a ride-hailing company investing in building vehicles as well as entering into all the elements of a car company’s value chain of selling, leasing and managing vehicle fleets? It would seem that DiDi’s ambitions are to collaborate as well as compete with established car companies.
Pinning Its Future On Autonomous And AI Technologies
DiDi is one of the launch partners, along with Amazon, Mazda, Pizza Hut, and Uber, for Toyota’s e-Palette (L4 autonomous EV) alliance. These L4 autonomous EVs with open control interface allows partners to install their automated driving systems to be used for mobility services as well as for goods/food delivery.
It’s not just autonomous technologies though, artificial intelligence (AI) is also seen a pivotal to the company’s future. DiDi’s AI Lab, which it set up in 2018, is dedicated to language processing R&D, machine learning, computer vision, voice recognition, and operations research and statistics. DiDi is interested in AI algorithms in order to better calculate mobility service volumes. It aims to improve its forecast accuracy from 85% to 95% during 2018–2020.
Driven To Succeed
DiDi is (pardon the pun) driven to succeed. So this is where I see the company headed in the near future.
Taxi e-hailing and premier private car hailing will remain the key revenue generators for DiDi. It will collaborate with automotive manufacturers to grow its car sharing business.
The company will enhance its global market position by entering new markets, strengthening its position in existing markets, and introducing innovative services that leverage technologies like autonomous driving, connected vehicles, EVs, AI and, possibly, blockchain. Collaborations and acquisitions will continue to be at the core of DiDi’s strategy. I also believe it will provide mobility subscriptions to its customers in future so you can access its suite of products and services just like you do with Amazon Prime.
In the long term, I firmly believe that this Chinese mobility giant will imprint its DNA in almost every major smart mobility-related technology and services related domain across the globe.