Chinese ride-hailing giant Didi is “hot on the tail” of US rival Uber in Mexico, according to a new report, as competition in the sector heats up amid aggressive expansions into new markets.
In November and December Didi was the most popular travel app in Mexico’s Apple App Store, with Uber coming in second. Since then, the Chinese company has ranked second according to an analysis by research company ValueChampion. “Didi has been hot on [Uber’s] tail in Mexico just as Lyft has been in the US,” Duckju Kang, ValueChampion CEO said in the report. Didi launched its services in Mexico in April 2018.
Uber drew attention to the competition with Didi in its IPO prospectus, which it filed on April 11, saying that the Chinese company had “made significant investments to gain or maintain category position in certain markets in Latin America.”
Didi has faced scrutiny in China after two passengers were killed by their drivers on separate occasions last year. The incidents took place on the company’s carpooling service Hitch, which has subsequently been suspended indefinitely. Regulators have since tightened their grip on the ride-hailing sector by imposing stricter rules. Didi has responded by implementing more stringent driver background checks, while various cities require drivers and cars to be registered in the city in which they operate. The result is a decrease in the pool of available drivers.
Didi reportedly lost RMB 11 billion (around $1.5 billion) in 2018, almost five times higher than its 2017 losses of $400 million. The company recently revealed that nearly one-third of its commission revenue was spent on driver subsidies in the fourth quarter of 2018.
To make up for losses at home the company has been expanding aggressively around the world. Didi’s Japanese joint venture with Softbank will expand to 13 cities in the country following its launch in Osaka last year. The company has sought to take on Uber globally, but most notably in Latin America. Along with operations in Mexico, both companies are competing in Brazil. Didi is also seeking drivers in Colombia and has advertised for jobs in Chile and Peru.
“A combination of high valuation, a lot of capital and difficult competition in local markets creates an imperative for these companies to expand into other markets in order to justify their valuations with better growth prospects,” Kang said in the report.
Aside from being Didi’s competitor, Uber is also a shareholder. The US company sold its operations in China to Didi in 2016 in exchange for an approximately 18% stake in the company. According to its IPO prospectus, Uber estimates its holdings in Didi amounted to around 15% as of September 2018.
The conflict between Didi and Uber has not only manifested itself in a battle for market share, but also in investments. In March, Uber acquired Careem, a ride-hailing service that operates across the Middle East. Didi had invested in the service prior to Uber’s acquisition. The move highlights Uber’s intent in making it as difficult as possible for competitors to expand into new markets, according to ValueChampion, thereby cutting off possible new revenue streams.