Uber Is Facing Big Challenges In China
Uber faces some tough competition in China and various kinds of partnerships between their rivals are preventing it to expand further. China’s dominant ride-hailing app Didi Kuaidi has some powerful friends. One of them is Tancent, owner of the country’s most popular messaging app, WeChat. The service has more than 600 million active users, most of them Chinese residents, using the app to communicate with friends. A popular feature on it is to receive updates and coupons from many if their favorite domestic and foreign brands.
However, Uber cannot be found on WeChat anymore. Suddenly its accounts began to disappear from the service on March 16th. In the following months Tencent began to ban or freeze all of Uber’s accounts on WeChat. Uber is spending huge amounts of money in China, telling its investors it is planning to spend $1 billion this present year. Even though this accounts for roughly half of the top 10 busiest cities by number of trips booked through the app, Didi Kuaidi is way ahead. The company apparently accounts for 78% of the country’s private car business.
According to reports in the local media, Tancent was first blaming Uber’s issues on WeChat policy violations and later on technical glitches. Both Tancent and Didi Kuaidi declined to comment. Analyst Gene Cao explained that those companies are very sensitive on this and that “Tancent, particularly their WeChat business unit, is very conservative about publicly commenting on any WeChat strategy.”
The loss of WeChat is a massive hit to Uber in China, as the service has become an important promotional tool for companies trying to reach wealthy Chinese. WeChat’s Chinese version had 8 million public accounts in late 2014, and before March, WeChat had become a very important part of how Uber communicated with passengers and drivers.
Help from the Chinese government shouldn’t be expected as Beijing tends to side with local companies over foreign ones, and as a result the Silicon Valley’s app has suffered. But Uber is actually optimistic that Tancent will eventually back down: “I think as we continue to succeed, and it’s clear we’re in this for the long haul—we’ve got Chinese investors behind us; we’ve got partnerships with cities; we’re spending money in the local economy; local investors have an interest in our success—then we’ll get into more of a détente mode,” said Emil Michael, senior vice president for business at Uber.