Uber Flees China In The Wake Of Rules Set By Anti-Trust Regulator

Uber and Didi Chuxing apps

Uber’s operations on the streets of mainland China are over less than a week after it welcomed with open arms new ride-hailing regulations set by the Ministry of Transportation, resulting in the sudden increase of fares that caught the riding public by surprise on Tuesday.

Meanwhile, riders, who for years have patronized the online ride-hailing services offered by Uber and its competitor Didi Chuxing, have opted to look for alternatives via Weibo, Twitter’s counterpart in China.

According to USA Today, fears of a sudden fare hike quickly spread online among Chinese netizens when news broke out that Uber and Didi Chuxing entered a tie-up deal in the wake of the ride-hailing rules, which, according to the Ministry of Transportation, reportedly one of the anti-trust regulators in China, will take effect on November 1.

What many frequent Uber and Didi Chuxing passengers feared came less than 24 hours after the two companies announced their merger, creating what to some observers is a near-monopoly.

One young lady passenger quoted by USA Today complained that what usually cost her 12 yuan (approximately $2.11) to get to work suddenly doubled. Such a complaint was also heard multiple times in several cities of China.

According to Linette Lopez, a senior correspondent for Business Insider, in leaving China, Uber “surrendered a massive market and sold its $8 billion business to Liu’s Didi [which is said to hold a whopping 85 percent of the country’s market] less than a week after Chinese regulators legalized ride sharing in any capacity.”

Uber registered a loss of $2 billion in just a matter of two years, a great chunk of which “was used to pay huge subsidies to drivers,” said CEO Travis Kalanick in February, according to BBC News.

“Not by choice,” Kalanick added, “but because its then-competitor Didi did just so: The company had set aside $4 billion since 2015 for what Cheng Wei, Didi’s CEO, called ‘market fostering.'”

Travis Kalanick at The Metropolitan Museum of Art Costume Institute Benefit Gala, May 2, 2016, in New York.
Uber’s move to leave China’s massive market has solicited different reactions from some observers.

Zennon Kapron’s comment was straightforward, saying that the American ride-hailing firm’s “approach to markets around the world has been fairly arrogant,” as quoted by the Economic Times, ranging from contemptuous disregard of local taxi regulations in China to that of threatening media critics.

“But arrogance is a difficult attitude to have to be successful in China,” said Kapron who owns a Shanghai-based consulting firm Kapronasia.

A number American companies suffered the same loss in China that Uber has just gone through, of which Google is a classic case, who had to endure terrible censorship from Chinese authorities until it was forced to withdraw and sell its stakes to its counterpart, Baidu.

As Scott Candrowski of Fortune noted, “Uber’s surrender to Didi shows the steep odds U.S. tech faces in China.”

Uber (AP Photo/Ng Han Guan)
Following Uber’s exit from China was Didi’s expansion of investments outside of its home country. According to Bloomberg, Didi, together with Softbank, intends to invest more than $600 million in Grab, Uber’s major rival in Southeast Asia, particularly in Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam, on top of its $350 million initial investment in Grab, whose investment was valued by CB Insights at $1.5 billion nearly two years ago.

For his part, Anthony Tan, Grab’s CEO, had a different expectation for Uber, believing that the American firm would eventually switch its attention to the relatively untapped Southeast Asian market in place of what it lost in China.

Unfortunately for Uber, there are indications that it is also bound to lose Taiwan, following the cancellation of its permit to operate due to the gross misrepresentation that Taiwan’s Ministry of Economic Affairs Investment Commission will soon impose, the Financial Times reported.