Why Mexico May Be Uber’s Last Stand Against Didi – Internationally (Pt 2 of 2)

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It is a strange coincidence that Ofo vs. Mobike and Didi vs. Uber both seem to be centered on Mexico right now. And as I’m sitting in a cafe in Mexico City, I thought I would give my take.

In Part 1, I looked at Mobike vs. Ofo in Mexico and Latin America. Which I think is a pretty cool situation.

But the bigger story here is Uber vs. Didi. Because Mexico is starting to look like Uber’s last stand in international markets. That’s a long-shot prediction – but I think it is a real possibility.

My thinking:

  • Didi and its partners (Ola, Grab, Taxisfy, 99) have run the table internationally. Grab now dominates SE Asia. Ola is winning in India. Taxisfy is growing in Africa and Eastern Europe. And Didi dominates China.
  • Uber has cut a deal in Russia and mostly exited (similar to China). They have a presence in Europe. Although they are still banned in London.
  • I don’t have their numbers but Uber’s largest international markets now appear to be Mexico and Brazil. Media reports say their top three cities by ride volume are Mexico City, Sao Paolo and Rio. They have a reported 250,000 drivers and 7M riders in Mexico.
  • But Didi has just purchased 100% of 99 in Brazil, making them a very large player in that market. Note: this is a departure from their usual approach of taking a minority position in local ride-sharing champions.
  • And now Didi is going to launch directly in Mexico, reportedly this quarter. This is also another first for them in an international market. I know they are definitely hiring here right now (and mostly from Uber Mexico is seems).

It looks to me like Didi vs. Uber internationally is turning into a fight for Latin America. And it kind of appears to be turning into a fight for Mexico. So here are a couple of questions:

  • What happens if Uber loses in Mexico?
  • What happens if Uber loses in both Mexico and Brazil? Isn’t that game over in Latin America?

Question 1: Who will win in Uber vs. Didi Mexico?

Uber is the entrenched player in Mexico. No doubt about it. Uber has millions of drivers on their platform today.And superior volume can be particularly powerful in two-sided platforms like ride-sharing (also in marketplace platforms like eBay and Taobao). Plus you also have UberEats people everywhere (see below), operating between restaurants and consumers. And finally, Uber Mexico has seasoned local management in place. That is all pretty daunting for a new entrant.

But here’s what Didi has:

  • Far larger scale overall. They now dwarf Uber in rides. There are more daily rides in China than in the rest of the world combined. And this kind of scale gives them big scale and spending in IT, data, and apps. And a lot of these can just be ported directly into Mexico from China.
  • A lot more money. Didi just raised another $4B, which puts their war chest at something like $10-15B. Has any start-up ever had so much cash on hand? And they have shown they are willing to spend aggressively to capture markets. They outspent Uber in China in 2016 to win. They could do the same in Mexico. Meanwhile, Uber lost another $5B in 2017.
  • Smarter and more aggressive management. I’m sorry but it’s true. Didi’s Cheng Wei and Jean Liu are the A team of ride-sharing. They have emerged as the victors of the crucible of Chinese hyper-competition. They have successfully expanded to markets internationally, mostly at Uber’s expense. And they don’t seem to make mistakes. Try to point to any mistake Didi has made in the past 3 years. Any government problems? Now answer those same questions for Uber.

So the fight is about to start. And this raises my current favorite question.

Question 2: Is Didi going to start a money war in Mexico? Are they going to start subsidizing drivers and buying marketshare?

Didi has a ton of money. And Mexican drivers will absolutely switch (or multi-home) if they can make more driving for Didi. So it depends how aggressive Didi is going to be in Mexico. Note: Uber Mexico executives are already being offered 2x their salaries to move to Didi.

And what would Uber do in response to a money war in Mexico? Are they prepared to spend $500M per year to keep their marketshare in Mexico? How long would they (or their investors) be willing to do that?

My gut is that Didi really wants Latin America. I do think they are going to take their time opening their business and getting the operations right. But then I think they are eventually going to turn their big guns on Uber Mexico. Which means the fight for Mexico could be spectacular to watch.

And this raises my other favorite question.

Question 3: Is Softbank going to step in?

Softbank owns stakes in all of these ride-sharing companies (including Didi and Uber). If Didi’s Cheng Wei is the Bill Gates of ride-sharing (he didn’t invent it but he outmaneuvered everyone), then Softbank’s Masaoshi Son is its godfather. If the fight for Latin America becomes ferocious and expensive, he may try to stop what he has already referred to as “unhealthy competition”.

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That’s my take. Here’s Part 1. I’ll post some videos and such from the Mobike Mexico launch in the next weeks.

Cheers from Mexico, Jeff

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I write and speak about the fight for Chinese consumers and digital China.

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