
Uber losing $1B a year to compete in China - prostoalex
http://www.reuters.com/article/uber-china-idUSKCN0VR1M9
======
javiercr
> "We have a fierce competitor that's unprofitable in every city they exist
> in, but they're buying up market share. I wish the world wasn't that way."
> (Uber's CEO)

I'm sorry but... isn't this exactly what Uber has been doing to their
competitors for a long time in most markets?

~~~
kamaal
This reminds me of the free market drive in India. First generation of
companies after market reforms, like Airtel, would openly scream "free market"
and destroy state held BSNL's monopoly.

But they now want more regulations on a free internet, they work against net
neutrality because "a large amount of their invested money" would be derailed.

Basically when it happens to others, its free market. When it happens to you
its unfair/harsh.

~~~
curt15
I think the saying is "pulling up the ladder behind you".

------
nrser
don't race to the bottom as a foreign firm against locals in China. you won't
win. they will go much lower and harder and longer than you will. they will
turn the heat off in the -12C winter and have people coding in their parkas to
save cash.

i hung out with some of the Uber e-staff and founders when they were in China.
i think the most memorable quote was "there's what works for every other
country in the world and then there's China".

i think they stood a chance if they had positioned themselves as an upscale
service. foreign brands convey status. they could have had something there
that the locals didn't. but that's not what they're doing everywhere else in
the world, and i understand them not being willing to split their strategy for
the market.

so i guess they went with firepower. and i would guess they knew it had a low
chance of success. entry into China is hard. that trail is lined with bodies,
every drop of blood sucked dry.

it's difficult understand until you see it for yourself. there are people
arranging fake uber rides online to split the subsidies. but they had some
idea. it's a big market and Uber has a lot of cash, but $1B is still a big bet
with such bad odds.

~~~
randycupertino
"Never get involved in a land war (or car service price war) in Asia."

~~~
tosseraccount
Douglas Macarthur said this ... (or part of it) and then wound up fighting the
Korean War ... which we won.

So ... never say never, I guess.

~~~
ojbyrne
Dunno if I'd say "we won." Technically North and South Korea are still at war.
And apparently MacArthur said that _after_ the Korean War.

[https://en.wikipedia.org/wiki/Korean_War](https://en.wikipedia.org/wiki/Korean_War)

~~~
tosseraccount
Can you find a definitive link?

I find this ...

"MacArthur articulated his most famous dictum—“never get involved in a land
war in Asia”—after the Japanese surrender, because he believed that Japan’s
simultaneous war in China made his Philippines victory possible. Japan had
annexed Manchuria in 1931, then invaded China in 1937" [
[http://www.politico.com/magazine/story/2014/05/rethinking-
do...](http://www.politico.com/magazine/story/2014/05/rethinking-douglas-
macarthur-106397_Page2.html)]

We acheived our goals of stopping the Communists from conquering a friendly
nation; so it's a victory.

~~~
ojbyrne
No, we intervened in a civil war between two groups, one that we decided was
more in our interests to support. And we opened 2 markets for arms to be sold
to, that would be healthy vibrant markets (for arms) for the next seventy
years.

------
BrandTurner
There seems to be a lot of people parroting that the CCP freezes out foreign
firms by onerous Chinese regulations favoring local firms.

That may be the case for a number of different situations. However, Didi
Kauidi, China's ride-sharing service, may just be a better offering than Uber.

Last year, it arranged 1.4 billions rides, more than Uber has done worldwide
in its entire history. Also, Didi doesn't just focus on private-car services.
It lets users pick a taxi, private car, shared car, shuttle van, or bus to
pick them up. It also is tailored to the local market. During Chinese New
Year, lots of flights and trains were sold out. Didi helped users find inter-
city rides at train fare prices.

It also has a few quirks that separate it from Uber. You can book a test drive
of new cars (Audi and Mercedes included). And, Didi is also offering a Tinder-
like matchmaking service for passengers. As a kid, I was getting it on in the
back seat of my parent's Dodge. What a time to be alive.

~~~
tonster
>And, Didi is also offering a Tinder-like matchmaking service for passengers.
As a kid, I was getting it on in the back seat of my parent's Dodge.

Wait, what?

~~~
BrandTurner
Didi will soon allow drivers and passengers to select each other based on
their shared interests. It already has a deal with LinkedIn, to let people
join up their accounts on the two networks. The intention of such initiatives
is that white-collar workers, who often endure daily commutes of an hour or
two, will have more fruitful journeys during which business, friendship and
maybe even romance will develop.

\- Per the Economist

~~~
jsprogrammer
So...you matched with your parents as your driver and found a sexual interest
to carpool and play with? In a Dodge? (In China?)

------
drchiu
I'm afraid this is a fight Uber won't win. I just can't see the Chinese
internet giants letting an American company dominate this space. Call me
jaded, but the world isn't so black and white, and I'm sure in the end Uber
will concede to defeat after realizing their biggest competitor aren't playing
by the same rules.

~~~
rm_-rf_slash
It's not jaded, it's an accurate understanding of China's historically
mercantile attitude.

I cannot for the life of me think of a single foreign product or company
operating in China that China hasn't copied for their own version (or ripped
off, like the fake Apple stores). The only exceptions are culture companies,
where the brand matters more than the product (Pizza Hut; McDonalds;
Starbucks).

~~~
analyst74
Microsoft, Intel and Apple seems to do well, just on top of my head, many car
companies are also doing well, although German and Japanese cars sell better
than American ones.

After some googling, looks like Nike, Coca-cola, Gillette are all doing
reasonably well.

~~~
mikeash
Is Microsoft doing well? Their products are popular, but they have trouble
getting anyone to actually _pay_ for them.

~~~
sirkneeland
Their tens of billions in revenue suggest SOMEONE must be paying for them.

~~~
umeshunni
They have tens of billions in revenue in China?

~~~
est
> Of the $77.8 billion revenue Microsoft generated in its 2013 financial year,
> China, Brazil, and Russia each "exceeded" $1 billion

[http://www.businessinsider.com/r-naked-pcs-lay-bare-
microsof...](http://www.businessinsider.com/r-naked-pcs-lay-bare-microsofts-
emerging-markets-problem-2014-10)

------
barkingcat
Why does Uber need to be in China again? Why can't they be happy growing their
service and providing better services (like better driver auditing and
education) for the North American market?

If they spent $1 Billion improving their service it's better than trying to
outspend a natively innovating company in China backed by local people running
under different rules.

~~~
mahyarm
VC backed companies have a built in promise of attempting global scope when
they can.

And it's for the same reason why you want visa everywhere. Even if everyone
uses unionpay, the travellers want their visa cards to work.

~~~
tim333
It's quite a handy thing with Uber having just been in Saigon, Taipei, Manila
and similar it was a pleasant surprise to find Uber just worked, avoiding
having to research local taxi scams, trying to figure you've got change in
local currency when you've just landed and so on.

------
cryptoz
> "We have a fierce competitor that's unprofitable in every city they exist
> in, but they're buying up market share. I wish the world wasn't that way."
> \- Kalanick

Haha, really? Isn't that how Uber started out, and the quote could well be
verbatim from a taxi driver in 2011?

~~~
untog
Yeah, the hypocrisy contained in that statement is stunning. I wonder how the
CEO of Lyft felt when they read it.

~~~
blhack
How is that hypocrisy?

>We beat some people in some markets, but now we're being beaten in this
market, I wish we weren't.

~~~
Avshalom
"I wish the world wasn't that way" looks like its being applied to
"unprofitable in every city they exist in, but they're buying up market share"
not "We have a fierce competitor" as opposed to if he had said [I wish we
didn't] or [I wish they didn't]

making it about the "the world" pushes it into an ethical or moral opine.

------
anon8418
HN commentators are missing the point. Uber's strategy is lifted straight from
Groupons playbook: they're expanding aggressively internationally to drive
home the message that "HEY LOOK WE'RE A GLOBAL PLAY. WE'RE IN 42 CITIES IN
CHINA!"

This will drive up the IPO value. By the time they get steamrolled by the
local competitors or by the local regulators (likely both) they'll have sold
off their shares to the dumb retail investor.

The fact that the heads of Uber China and its main local competitor are
literally family members is very telling....

~~~
kagamine
> The fact that the heads of Uber China and its main local competitor are
> literally family members is very telling....

More on this please?

------
GigabyteCoin
Any firsthand accounts of Didi Kuaidi pricing from chinese HNers?

I took a few cabs around shanghai in 2008 and was floored at how cheap their
prices were.

If Didi Kuaidi is undercutting taxi prices, and Uber is trying to undercut
them... ridesharing must be almost free in major chinese cities at this point
I'm assuming?

~~~
seanmcdirmid
So didi offers a couple of services: a taxi service, it just helps you hail a
normal metered cab. I use that service every day, and it is no more expensive
than doing it the old fashioned way...but during peak, I can input a tip (up
to 20 kuai, or about $3), which helps me get a cab when I would otherwise not
be able to. Call that "surge pricing" I guess.

The black car service, my wife uses that more. I have trouble using it since I
can't epay (no chinese ID number to link to my unionpay card). But the cars
are nice, the prices are a bit higher than taxis but we often get coupons that
bring the price down. Still nowhere near to the cost of a taxi in the west.

~~~
pfarnsworth
How does this compare to Uber?

~~~
seanmcdirmid
I actually haven't used Uber in China. It isn't that big in Beijing, but I
hear in places like Guangzhou it has much more of a presence. As far as I can
tell, they have about the same cars working for them (they can take hails from
both); I'm guessing the only difference is in the subsidy.

------
brentm
Does anyone know the largest net loss a company has ever had for the year
prior to an IPO? Uber must be 2 years max from going public and their losses
seem to be accelerating[0].

[0] [https://www.theinformation.com/ubers-losses-grow-but-so-
do-i...](https://www.theinformation.com/ubers-losses-grow-but-so-do-its-
profit-projections?shared=4d2098)

------
mayneack
> "We're profitable in the USA, but we're losing over $1 billion a year in
> China," Uber CEO Travis Kalanick told Canadian technology platform Betakit.

I didn't realize they were profitable here. When did this happen?

~~~
kagamine
I can't find the article where i read the numbers (it was on the Guardian news
site) but Uber's reported loss for 2015 was in the billions, however, that
included income also in the billions. The loss as others here have noted comes
from growth and investment. If you segment their operations they appear to be
profitable in some regions.

------
iaw
Last funding raise was something like $2.1B. I suspected uber's burn rate was
high but this implies that they're going to be hitting some hard liquidity
issues within the next 18 months if they can't perpetually raise capital.

------
jdlyga
Uber is amazing in China. We used it all over Beijing

------
intopieces
The photograph in the article is of an office for Uber in Hong Kong. Is there
any reliable data available about how the company is doing there? Uber is
ideal for places with inefficient public transportation; Hong Kong has easily
one of the most efficient public transportation systems in the world. Subway,
tram, light-bus and easy walkability make Uber seem redundant.

~~~
tommoor
There are still A LOT of taxis in Hong Kong though...

~~~
intopieces
Doesn't that make the case for Uber even worse? Where Uber shines is being
cheap and more available than the closed system of Taxis. With Taxis
everywhere (and them being so cheap, I paid about HK$40 to get from the
airport to Happy Valley) it seems like Uber wouldn't have a place in the
market.

~~~
tommoor
I would think you were right, but HK is similar to New York in that respect
and Uber _appears_ to be doing well there...

------
patmcguire
Target runs a store in Rogers, AR just to spite Walmart.
[http://www.reuters.com/article/us-walmart-target-
idUSTRE73K6...](http://www.reuters.com/article/us-walmart-target-
idUSTRE73K6QA20110421)

------
tomkat0789
I'm surprised (not that surprised) to hear there's ride sharing apps in China
at all. I lived in Beijing for a few months several years ago and the taxis
are (for a foreigner) pretty reasonable and efficient. Besides better public
transport, taxis were everywhere, some were just motorized three wheeled
motorbikes with a little chair on the back. Besides those, one night while
getting a taxi to a bar, a random person stopped by and offered us a ride. My
Chinese friends negotiated a pretty reasonable price to get across the city.

The point is, I think ride sharing apps have much more competition in
China/Asia. It's not just terrible bus systems and inefficient taxi services
like in America.

~~~
mikeash
Taxis are indeed cheap and plentiful, but the ride sharing services are
somewhat cheaper and somewhat easier to hail. Plus, the customer base is so
gigantic that there's room for many players. It's not like some US cities
where Uber is displacing traditional taxi services that charge $400/mile to
ride in a broken-down Chevy driven by an escaped axe murderer, but you don't
necessarily need that much of an edge.

------
50CNT
Honestly, I'm not surprised. 滴滴出行 is throwing a lot of money at buying people.
I downloaded the app in case I can't get a cab in Beijing, and they keep
bombarding me with "15RMB voucher", "50RMB voucher", "50RMB voucher", "25RMB
voucher" just to get me to start using the app.

Regular cabs are cheap and plentiful over here. I can go from here to Sanlitun
for about 150RMB, which is about 30km. Within 4th ring road, flagging one down
(outside of rush hour) is trivial. Public transportation is cheap as well
(1RMB for a bus ride, 3-10RMB for a subway ride all over the city). That means
that neither Uber nor Didi are competing on convenience, they're competing on
price till they've got the market cornered.

And every app over here does it. Wechat pay got themselves advertising spots
during the New Years Festival Broadcast last year and has been offering
discounts EVERYWHERE last November. McDonalds, Subway, Paris Baguette,
literally everywhere. This year Alipay got to sponsor the New Years Festival
Broadcast, so they're in catchup mode right now.

Uber may have used the strategy first, but they're late to the party in China.
As a foreign company in China, they should have positioned themselves as a
premium provider. Look at what Apple did. It's a thing of beauty how obsessed
Chinese people are over their iPhones.

So how would Uber have gone about that? Offer premium rides first. Nice
climate controlled cars with properly screened chauffeurs. Aim for the people
that aren't quite able to afford a full-time driver. Didi can be nicer than
cabs, but it's a little hit or miss sometimes. Remove that ambiguity.

Open up an Uber store in Sanlitun. Does an Uber store make sense? No, but then
a lot of things do not make any sense here in china, and they still work
somehow. Nice modern store, a fancy car somewhere on display, and what would
it sell? Gift rides and vouchers. Exploit the Chinese habit of giving gifts
and regifting(you can buy fruit in boxes for Chinese new year, why not Uber
rides in boxes?), and go wild with it. Wooden box with a red sleeve,
containing a scale model of a car with minimal uber branding, some assorted
status object and then a red envelope that folds open to reveal an Uber
voucher in the X000RMB range, or some fancier rides you can't book through the
app (eg. armoured cars/vintage cars/sports cars/helicopters/etc.). In a sense,
Didi is already doing some of these.

The point is, if you're trying to get into the Chinese market, don't get into
mudfights with Chinese competitors. They'll fight dirty, and if you fight
dirty, they'll fight dirtier. Apple didn't come out with a discount phone to
beat Xiaomi (which btw, fights REALLY dirty. They sell to distributors ABOVE
MRSP to cut their margins. the distributors have to put up with it).

No, go premium, and come early. There's an entire part of the Chinese tech
industry that calls itself C2C - Copy 2 China. The moment your startup hits
techcrunch, there'll be a Chinese copy of it. That is a law of nature. It will
happen to you.

Uber should have known this before throwing down the gauntlet over here. It's
not going to be a fun ride for 'em.

------
blizkreeg
I don't understand. Why not just focus on the rest of the world? It is, after
all a big effin world. China has always been a different market. What's with
this need to monopolize every corner of the world and lose a shiz ton of $ in
the process?

~~~
wrong_variable
Its not about the world - but who has the money.

Ghanan kids prolly wont have the money to even afford Uber.

~~~
blizkreeg
you'd be surprised at the pace of growth of the economy in many African
countries.

------
zouhair
The gall in that psychopath.

~~~
dang
Please don't throw around the word 'psychopath' as a personal slur on HN.
Personal attacks are not allowed here.

We detached this comment from
[https://news.ycombinator.com/item?id=11129670](https://news.ycombinator.com/item?id=11129670)
and marked it off-topic.

------
untilHellbanned
Their brand redesign was the beginning of the end. This will accelerate the
process. Their team has no clue what it is doing. You can downvote, but this
will be a fact sooner than you might think.

~~~
VeilEm
On HN every day brings some new event that completely changes everything
forever and deserves all our attention and capacity for outrage. Don't you
ever find this exhausting?

~~~
acchow
HN enjoys drama and Silicon Valley is our stage.

