In January, Chinese ride-hailing giant Didi Chuxing
quietly marked its second anniversary in Latin America, where the company operates in six countries across the region, serving roughly 20 million registered users and employing 1 million drivers. Within weeks of this milestone, its home market, China, was in lockdown due to the outbreak of the novel coronavirus, and the company went into crisis mode to respond.
With the lockdowns lifted in China this month, Didi said business in its home country has “bounced back” and that it is making “product adjustments”, including the launch of new services to meet the rising demand for home deliveries from Chinese consumers who are still tentative about shopping in busy markets and shopping malls (South Morning China Post
Some of these new services are now being rolled out in Latin America, where the company claims to have a 30% market share. Last month, Didi launched ride-hailing services in Panama, marking the sixth Latin American country where it operates.
“Each market has unique needs and priorities [and] we work to address these needs in collaboration with local authorities and health experts … while borrowing from good practice in China. For instance, free disinfectant distribution and vehicle disinfection stations [are available] across multiple markets. In Mexico, Colombia, Brazil and Chile, we offer free or discounted rides to medical professionals and other frontline workers,” a Didi spokesman told the South Morning China Post
Didi’s expansion into Latin America came two years after it emerged victorious in an expensive price war with Uber Technologies in China.
Martin Mao, Didi’s head of its business in Mexico and Central America, noted that his first impression upon arriving in Mexico were the country’s similarities to China, notwithstanding the different language and cuisine.
“The whole Latin America market and China share a lot in common… Both are undergoing development with the same level of per capita GDP and both are home to metropolitan cities where a population of over 20 million gives rise to sophisticated traffic environments,” he said in an interview.
According to Mao, a common conversation starter among newly arrived Didi colleagues was “Which city has the worst traffic congestion – Beijing or Bogota?”
“Similar traffic conditions allow Didi to leverage what it has learned from big cities in China and apply those lessons on the other side [of the Pacific],” Mao added.
Since Didi pushed Uber out of China nearly four years ago, the company has been on an acquisition spree around the world: investing in Grab
in Asia, Lyft
in the US, 99
in Brazil, Taxify
in Europe and Careem
The milestone for the company’s active operations in Latin American came in January 2018 when Didi fully acquired 99. Three months later, they entered Mexico with its own wholly owned subsidiary.
“We hope the revolutionary ride-sharing services in China can serve as a strong reference across the world… It is an opportunity for China to change lanes and overtake other countries,” company founder and chief executive Cheng Wei said at an event in Beijing after the Mexican roll-out.
Developing markets are expected to form the backbone of Didi’s global expansion. In an internal meeting last Thursday, Cheng forecasted that Didi would be processing 100 million orders per day globally within three years, with a monthly active user base of 800 million, according to a company statement issued on Friday.
“We are building a new giant on top of an existing one at home… Having said that, apart from intelligence and know-how acquired from the home market, we also need to deepen our understanding of each market for localization,” said Mao.
Not everything from China works in Latin America, however. Shortly after launching in Latin America, Mao’s team found out that most people used cash for transactions, unlike in China where digital payments were ubiquitous.
“The common transaction option with cash was not very safe [for ride hailing]. But many drivers didn’t even have a bank card which they could use to say pay utility bills,” said Mao.
Didi responded by entering into partnerships with financial institutions in both countries and issued driver’s with bank cards. For example, Didi card users in Mexico can top up their balance at Oxxo, the country’s largest convenience store chain.
“There are still many things to learn so we can develop a better product through iterations. The additional offer also enables drivers to meet daily needs with instant withdrawals from their Didi card.”
Food delivery services, another trend that is ubiquitous in China, has also been introduced by Didi. DidiFood was first launched in Mexico in early 2019, but has since expanded with the roll-out of 99Food in Brazil in December and a service in Osaka, Japan, that debuted on April 7 this year.
Didi has faced stiff competition in Latin America from early movers like Uber, which generated nearly 14% of its total revenue last year from the region.
In its 2019 annual report, Uber said Didi has made “significant investments” to gain or maintain its position in certain Latin American markets, without elaborating.
However, the era of cutthroat competition between ride-hailing giants Didi and Uber are long-gone, according to Mao.
“The industry needs healthy and long-term development. Before it was life-or-death boxing , but now it is doing the right things we each believe in… With a market as big as Latin America with a ride-hailing penetration of mere 2 per cent, growth even by one percentage point would still be impressive,” he said.