CCTV-NEWS：赵克锋：China's two biggest Taxi Apps announce merger

采访视频链接：http://english.cntv.cn/2015/02/14/VIDE1423890482087721.shtml

For more insight, we're joined on phone by Professor Benjamin Chiao, Assistant Dean of Institute for Advanced Research at Shanghai University of Finance and Economics.
Q1. We have seen a fierce battle for market between the two taxi-hailing apps. What factors do you think lead to the end of the competition and a tie-up？
This is an excellent example of the so-called "co-competition”. On the red pocket front, Tencent and Alibaba are fierce competitors because they want to fight for the underlying payment market. But on the car-hailing apps, they have a common competitor, Uber. Valued at US$40billion, Uber is an extremely strong international competitor now testing waters in China. It has already attracted the search giant Baidu to invest in it. Although Baidu didn’t confirm the figure, there are several investment amount estimates reported in the media that are on par with the US$700million raised in December by Tencent’s Didi Dache. However, Uber raised even more recently, about US$1.2 billion. More, Uber’s CEO Kalanick said his company would integrate its service into the popular app Baidu Maps. This should really alarm Tencent and Alibaba.

Q2 What are the effects on the whole industry？

First, this would further reinforce Uber’s strategy to leverage on existing platform.

Baidu would help a lot. Baidu’s mobile search service has more than 500 million monthly active users, while its Baidu Map service has 240 million. Indeed, car-hailing apps have leveraged on existing successful platforms. The Didi Dache had a huge boost from Tencent. Tencent’s WeChat users booked a total of 21 million cabs in the first month of the tie-up between WeChat and Did Dache. Didi Dache alone has more than 100 million registered users covering over 300 cities in China. Didi Dache together with Kuadi make up of almost the whole market in China. Uber covers only about 10 cities. But Uber is bringing innovations and experience accumulated worldwide to fight the battle. For example, Uber would provide customised services, even delivering a lion-dance team to your place during the Chinese New Year. Uber is being heavily sanctioned in many countries, China is without regulation on this as of now, so it is a huge market Uber must fight for.

Second, users must worry about whether the merger will decrease the company's immediate incentives to continue to subsidise users and raise prices. This is far from conclusive at this stage because O2O market is yet to take more and more offline services online so building market share and attracting eyeballs could still be a dominant strategy now. So I don’t worry too much that the merger would bring higher prices in the near term.