Uber’s 4 Options for China

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I have argued that Uber’s best option for China at this point is to partner with local governments or State-owned taxi companies. This is detailed in How to Save Uber in China (part 1) and Uber China’s 5 Big Lessons for Netflix.

But looking back to late 2013 when Uber entered, I think they really only had four options in China.

Option 1: Do a Facebook and just stay home.

By early 2014, there was a low probability for success in Chinese ride-sharing apps. Domestic competitors Kuaidi and Didi were just too far ahead in drivers, riders and cities. And this is a game where getting to scale first matters.

But saying no to a billion consumers is difficult. Facebook, to its credit, has done so and stayed home. Learn to say no to China, especially to the Chinese Internet.

Option 2: Do a Carlsberg and go inland.

Uber entered late, but China is a big place. In 2013 and early 2014, they probably could have gone inland into China’s “big backyard” (i.e., the 50% of the country people seem to forget about). It’s a much smaller market by population and revenue but there was also much less competition.

In 2003, Carlsberg beer faced a similar situation. Local competitors (Qingdao, Yangjing, etc.) were dominating China’s main markets. So in 2004, Carlsberg made a surprising move. They basically abandoned Shanghai, Beijing and most of the East – and went far into the underdeveloped provinces of Kunming, Ningxia, Xinjiang and Tibet. Three years later, they were the market leader in all their targeted Western provinces.

Beer is obviously different than transportation apps but the idea of targeting smaller markets with much less competition is a good one if you show up late.

Option 3: Do a Yahoo and sell.

Basically sell or merge your China business and make a return on your investment while you still can. Yahoo did this and ended up with a valuable stake in Alibaba. Uber is reportedly in talks with Yidao Yongche but the status is unclear. And that is likely not a way to cash out.

At a certain point, you want to act like a venture capitalist and think exit strategy.

Option 4: Marry the State.

This is my recommendation. Kuaidi-Didi’s biggest weakness at this point is they are unwilling to partner with local governments and taxi SOEs. They want access to SOE assets (the taxis) but they don’t want the SOEs to become competitors. If Uber were to help local governments or taxi companies have their own apps, that could flip the entire dynamic.

Will watch and see what they do.

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