Outcomes and key issues:
Uber entered China with lots of aspirations to take over the
world’s largest taxi and ride-sharing market. It carefully went through the
painstaking process and somehow managed to enter the Chinese Market. But, the
company is losing a lot of money than it is generating revenue. Uber lost more
than $1 bn in 2015. China is also the country where Uber and its boss Travis
Kalanick spend most their time. Though the company is spending huge amounts of
time and money, the outcomes have not been satisfactory.
Uber failed to gain any sustainable market share from its
biggest Chinese rival, Didi, in spite of pouring in huge cash to boost revenues
and develop technologies.
Uber and Didi formed a merger with Uber taking 20% stake.
This merger will give the duo the monopoly of the ride-hailing market.
Some of the key issues which Uber faced in China have been
China’s infrastructure, financial markets, and banking
system are underdeveloped relative to those in the West. This made it difficult
for Uber to operate efficiently and effectively in China.
China’s political structure, legal system, and
regulatory rules are complex and vexing. Not having a key local strategic
partner meant that Uber had to tackle these issues all by itself.
Chinese practice of intermingling personal and business
relationships is foreign to U.S. companies accustomed to more transactional
relationships with their customers and employees. This created a gap between
Uber and its Chinese employees.
Google Maps, which Uber uses to locate drivers and
riders, is blocked in China, forcing the company to redesign its software. Uber
had to get into a strategic partnership with Baidu in December 2104.
Uber China had to install servers in China to prevent
its operations from getting interrupted while passing over the Chinese
Customers in China had to verify their credit car
information before opening an Uber account. This was a major hassle for many
potential Chinese users. Uber China was able to rectify this problem by adding
the option of payment through Alipay
Usually Uber takes a 25% cut of the fare and passes the
rest to the driver. But in China, Uber pays drivers a multiple of the
passenger’s fare. By doing this Uber loses a lot of money. Interestingly, Didi
follows a similar payment process.
Thousands of taxi drivers have been going on strike to
protest against taxi hailing services such as Uber and other local taxi hailing
services. The government has been cracking down on these taxi hailing services
to protect the traditional taxi industry. (Quartz, 2015)
Local competition was so intense that Uber had to spend
big to attract customers and drivers to make the product more striking to the
Chinese customers. Uber was competing solely on price and subsidies. As a
result, it was gaining more passengers but eventually losing money.
10. The belief that Uber is
illegal in China has made the drivers extra cautious. This fear factor has
proved to be one of the biggest hurdles for Uber to rope in more drivers and
11. Fraud is one of the major
issues that Uber faces in China. Drivers create fake rides and claim bonuses.
About 3% of the rides were fraudulent in the summer of 2015. Uber had to spend
of time and money to control fraud. Steps have been taken to implement
additional identity verification and reduce the subsidies and bonuses to
12. By going for the mass
market to reach higher valuations Uber was bound to be subjected to Government
regulations. Local governments could issue drivers licenses to determine what
kind of cars can be driven and who would be eligible to be a driver
13. The biggest issue for Uber
in China is that China is a highly competitive market and Uber has to face
another strong disruptor like itself, Didi.