Skip to main content

Where Did Uber Go Wrong in Its Attempts to Establish Market Control in China?

"Uber in Beijing" by bfishadow is licensed under CC BY 2.0

"Uber in Beijing" by bfishadow is licensed under CC BY 2.0

Uber has marked its footprints all over the world. The ride-sharing service is home to a plethora of users- 15 million in 78 countries and is still going strong. It had managed to create a monopoly in its segment in the U.S, meanwhile disrupting the taxi - public transport sector. Lately, many competitors have joined this booming sector which has made the playing field even. Even though Uber is well recognized in every part of the world due to its successful business exploits in each country, its efforts to capture the Chinese market weren't smooth-sailing.

In 2013, Uber Co-founder Travis Kalanick decided to take uber on to Chinese shores. They opened "UberChina" in shanghai with the help of Chinese investors such as Baidu in 2014. Even though Uber is still operating in China , it came with a lot of difficulties.

The App was not localized as per the Chinese user base.

  • Many are familiar with how the Uber App operates, it connects the drivers and the passengers of a particular region, where the passenger has been dropped to his desired location by the driver for a fee depending on the location & distance covered. This journey is commenced when the passenger books the ride. In China, Locals generally use the Wechat & Alipay apps to book and pay for rides but the app only supported US Credit cards due to which users were not able to book rides.
  • Along with that, the app was only accessible to users who used Google maps, whereas in china users were only familiar with Baidu maps. Lack of localization made it difficult for uber to connect with its users and offer a seamless transition for them into their customer base.

Tackling Competition From Didi.

  • Establishing a business in a foreign territory usually comes with its fair share of challenges. Uber had to deal with tough competition from its Chinese counterpart in China, Didi Chuxing. The business model of Didi was similar to Ubers, but here it connected the passengers to Taxi drivers. The user base at that time of Uber was less as compared to Didi, With Didi having the upper hand with 900 million users to Ubers 229 million.
  • The Taxi fares offered by Didi were comparatively less to Ubers at that time, which meant that passengers favored booking rides through Didi as to Uber. Due to this Uber invested huge amounts of money into their expansion strategy where 40 million was invested in free rides for passengers. This strategy helped them close the Gap with Didi to a certain extent. But it led to a series of clashes between the two giants in a bid to establish supremacy in the Chinese market.

Chinas new rules and regulations made it hard for Uber to settle.

  • China revised its rules and regulations a few years later, where for a business to expand its operations in new territories it had to take permission from the authorities & after the completion of certain checks. This made the transition more difficult for Uber due to the incorporation of these new laws.
  • After two years of constant effort in gaining control of the Chinese market, UberChina had to relinquish its assets and was sold to Didi Chuxing. Uber had invested a total of 2 billion dollars since making the move to china and had amassed 7 billion dollars, on the outside, it might seem like a profitable venture, but Uber's lofty business plans for china were certainly left unfulfilled.
  • One could argue government laws are designed to protect their local business and that makes the establishment of foreign businesses a little difficult because of these factors, but it is the same in all the other countries as well where country laws favor homegrown businesses and foreign businesses usually have to tackle these challenges.

Scroll to Continue

Uber's struggles in China highlight the fact that even Established businesses sometimes can find it extremely hard to dictate their core value propositions to foreign countries. In other words, Businesses have to do a lot of research before venturing into foreign markets and to add to that also localize their products and services in a way that will help them connect with the locals of the desired country, which leads them into buying your company's products and ideas.

Source- Polymatter.

Related Articles