People that have never lived in China might never understand the importance of WeChat in the Chinese market. It is truly ubiquitous, as messenger, service provider, payment system, and general app for the everyday life. If you build a business in China, building on the WeChat platform is already the next evolution step of mobile first: it is “WeChat first”.
WeChat had already morphed beyond its roots as a chat service to become a one-stop app for everything, from banking to shopping to dating to dining. With each new feature and service it adds, users have fewer and fewer reasons to leave it, or to download other apps. Mini programs may eliminate the need altogether.
Uber is usually not afraid to go on the offensive with regulators all over the world in order to facilitate its rapid growth and expansion. Be it by filing complaints against several governments in Europe at the beginning of 2015, or using it’s large venture cash pool to hand out aggressive cash incentives to drivers in India in order to go against opposing “old-economy” taxi monopolies.
In Uber’s most important growth market China, however, Uber’s management is much more cautious and obedient, knowing that their usual strategy of disrupting the market could possible come to a dead stop at anytime at will of the strong central government. Additionally, Uber is still only the minor player in China, competing with the extremely strong local competitor Didi Kuiadi that has around 80% of the market and gets significant invest from sources close to the Chinese government.
Uber therefore seems to go now for a strict compliance strategy in China. After China’s Ministry of Transport has published a draft of a new rule set for private e-hailing services, bringing in far-reaching regulatory demands on licenses, drivers and IT infrastructure, Uber is happy to comply with any new rule. Unlike Uber’s usual way of ‘acting first and (maybe) asking for permission later’, Uber has already announced that “the company is in close communication with Chinese regulators and would follow all new rules”.
Additionally, Uber will fully separate its China business from its other business by setting up an own Uber China company, and is trying to work more closely with local partners in order to get a better standing in the Chinese market. It is a “comply or die” situation, and Uber is likely to go for the survival option.
Uber said that to localize its Chinese business, Uber China has officially registered in Shanghai as a separate entity called Shanghai Wubo Information Technology, run by Chinese managers. It has obtained the requisite licenses and qualifications as an Internet company and placed its servers in China, the company added.
China Tightens Oversight of Private Car-Hailing Services
Great info graphic on bloomberg.com showing the rise and fall of the stock market in China, and the corresponding market and policy news over the last couple of months.
July has been an especially challenging month for the Automotive industry in China. The latest CAAM data shows a YoY decrease in production in July 2015 compared to July 2014 by -12.1%, mainly driven by the slow sedan segment with -27% YoY growth.
This weak monthly development brings down the overall growth in Passenger Vehicle segment to 4.0% YTD, 11.63 million produced cars compared to the 11.18 million of same time frame in the previous year. Combined with the weak LCV segment (-8.5% YTD growth), the total Light Vehicle production in China thus only grew by 2.4%, from 12.78 million units to 13.10 million units YTD July.
The Chinese Uber competitor Didi Kuaidi is ramping up the valuation game with a prominent invest from China’s sovereign-wealth fund CIC. Didi Kuaidi, which was formed by the USD$6 billion merger of the two competing taxi-hailing apps, Kuaidi Dache and Didi Dache, in February has now reached a valuation of USD$15 billion.
While this might be still small compared to Uber’s current boasting USD$50 billion valuation, the potential mid- and long-term implications for Uber in China are interesting. Didi Kuaidi claims to control around 80% of the market, on both taxi hailing as well as premium / limousine booking.
With government-close CIC as investor – and the respective ‘guanxi’ with the authorities, and the close roots to the existing taxi industry, Didi Kuaidi might be much better suited to further establish its presence and dominate the market for ride-hailing. The model of Didi Kuaidi’s operation – going hand in hand with existing providers and offering additional services on top – fundamentally differs from Uber’s ‘let’s disrupt the taxi industry” approach.
Jean Liu – president of Didi Kuaidi – made this point very clear in her talk with the Wallstreet Journal:
“We have a unique business model. We provide a comprehensive range of products. We are trying to serve every Chinese in every situation. (…) Our philosophy is we don’t really believe in disruptive termination. When it concerns millions of people’s jobs, and when it concerns tens of millions of people’s life, what we believe in is collaborative reform from within. We try to work with everyone.”
Jean Liu – President Didi Kuaidi
Police in Beijing have busted a factory that produced more than 41,000 fake iPhones worth as much as 120 million yuan ($19 million), including some that reached the United States, and have arrested nine suspects in the counterfeiting operation.
Police seized 1,400 handsets and large quantities of accessories during the May 14 raid. In the United States, the newest Apple Inc handsets can fetch $649, or more, depending on the model.
There still seems to be a market for willing (or scammed) customers to buy a fake iPhone. I had the chance to look at one of those devices here in Shanghai. The look and feel of the hardware is almost indistinguishable from a genuine iPhone. The quality of the components – such as screen or camera – is a huge difference though. On the software side they use an android OS with an iOS skin. Once again, the interface is almost a pixel perfect copy. They even make their own android version of iOS system apps like Photos or Music. The illusion breaks, though, the moment for example the android keyboard pops up, or an android system message appears.
For an inexperienced buyer without prior iPhone / iOS knowledge it looks pretty convincing, though, and I am not surprised to see people falling for the scam.
Apple® today announced financial results for its fiscal 2015 third quarter ended June 27, 2015. The Company posted quarterly revenue of $49.6 billion and quarterly net profit of $10.7 billion, or $1.85 per diluted share. These results compare to revenue of $37.4 billion and net profit of $7.7 billion, or $1.28 per diluted share, in the year-ago quarter. Gross margin was 39.7 percent compared to 39.4 percent in the year-ago quarter. International sales accounted for 64 percent of the quarter’s revenue.
Looking at the detail numbers the importance of China gets more and more obvious: An overall YoY growth of 33% for Apple, fueled by a 112% growth coming from China. At Apple, China has already surpassed Europe as second largest market after the US. And with a very high chance, it might not stop at being Number 2.
June 2015 was the first month in years to show a negative growth rate of -0.7% compared to the same month in 2014. This brings down the overall YTD growth to around 4.4%, with 10.33 mn vehicles produced until end of June 2015. The market again suffered due to the weaker demand on Sedan models and Minivans. On the positive side we still see a very strong SUV demand.
Subsidies seem to have their effect on sales of electric cars in China. Buyers of pure electric, plug-in hybrid electric, and fuel-cell electric vehicles enjoy significant incentives for their car purchase (for respective cars produced in China). Subsidies range from around 30,000 RMB for simple pure electric vehicles up to 180,000 RMB for fuel-cell electric vehicles.
This significant monetary incentives led to a production of over 50,000 vehicles in China until end of May 2015. The growth trend is rapid, yet still at low level in regards to overall production.
Subsidies are expected to continue as well next year in 2016, so the growth trend is unlikely to stop in the short-term.
Based on the production figures of the first 5 months we can observe a further slow down in car production in the Chinese market. Overall growth just around 5% compared to the same time frame of last year. A big part in this development is due to the very slow growth in the Sedan market, even shrinking by -3% in this segment.