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
The future looks bright for an Uber manager, thinking of all the fully-autonomous vehicles that will roll through our streets in a couple of years. If you need a car you just fire up your Uber app, and a couple of minutes later you will get in a self-driving Uber car. No need anymore for Uber to sign up new drivers and make sure that always enough of them are on the street. Automatic algorithms can simply dispatch autonomous cars on the streets, depending on actual and expected demand. And all 160,000-something drivers of Uber can slowly be replaced with a safe and smart “robot car” … Everyone is happy! 🙂
As soon as all technological and regulatory challenges are met to have the fully-autonomous car ready for sale, Uber just hast to make sure to get enough cars for their business. So far, it looked like as they had already identified a potential partner – Tesla. Steve Juvertson, a Tesla board member, is pretty sure that Uber is going to fill Tesla’s order books:
“Travis [Kalanick – CEO of Uber] recently told me that in 2020, if Telsas are autonomous, he’d want to buy all of them. He said all 500,000 of estimated 2020 production, I’d want them all,” Jurvetson said. “But he couldn’t get a return call from Elon [Musk – CEO of Tesla].”
“I’m not saying you’re all going to have robocars. But, for those of us who have a chance to be in one, there’ll be one of those epiphanies. You’ll never go back.”
Uber will buy all the self-driving cars that Tesla can build in 2020
However, it seems that Uber is not only relying on Tesla or other OEMs to build the car for them. Recently Uber has invested in a couple of areas that indicate their potential interest to build their own self-driving cars. First, Uber set up shop close to the Carnegie Mellon University’s robotics center in Pittsburgh, USA, in January 2015. From there they went on a hiring spree to get more than 50 people of the top staff from the robotics center for their newly set up subsidiary.
“They took all the guys that were working on vehicle autonomy — basically whole groups, whole teams of developers, commercialization specialists, all the guys that find grants and who were bringing the intellectual property,” recalls a person who was there during the departures. “These guys, they took everybody.”
Uber gutted Carnegie Mellon’s top robotics lab to build self-driving cars
Later on, Uber and Carnegie Mellon University announced that they will form a strategic partnership, with “focus on the development of key long-term technologies that advance Uber’s mission of bringing safe, reliable transportation to everyone, everywhere”.
This was not the last new development, though. In August 2015, Uber announced that it will partner with University of Arizona for self-driving car research.
Uber has signed a partnership with the University of Arizona focused on research and development in the optics space for mapping and safety. We’ll work with some of the world’s leading experts in lens design at the University to improve the imagery we capture and use to build out mapping and safety features. As part of this partnership, Uber will also be donating to U of A’s College of Optical Sciences — supporting the next generation of optical scientists and engineers as they make new exciting breakthroughs.
Driving Innovation In Arizona
I am not convinced that we will see a self-produced Uber car on the road, though. There would be much more invest needed in order to get to be able to produce a working car than just forming strategic partnerships and investing in knowledge. The necessary asset invest would be huge as well, completely going against the current Uber model. However, it is a good way for Uber to keep all strategic options open. They could, for example, partner with an existing OEM sometime in the future and add additional engineering capabilities to make sure to get exactly the right car for their future “driver-less” business model.
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
Running a company like Uber doesn’t simply mean to have a couple of drivers on the road and connecting them prospective customers. They use smart algorithms to try to handle the real-time data, adjust fares on demand, and try to attract drivers to regions with high demand.
All that of course while trying to achieve a maximum coverage, and not being outsmarted by passengers and drivers trying to achieve the maximum of personal gain.
An interesting article on Motherboard describes those challenges and might be able to explain why what you see in your Uber app is not necessarily the full truth.
Uber’s access to real-time information about where passengers and drivers are has helped make it one of the most efficient and useful apps produced by Silicon Valley in recent years. But if you open the app assuming you’ll get the same insight, think again: drivers and passengers are only getting part of the picture.