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World

Sieren's China: Uber in the fast lane

Only months after entering the market, California-based ride-sharing app Uber is proving a big success in China. DW's Frank Sieren writes it has avoided other western companies' mistakes.

What do Chinese people who live in big cities need most after a decent smartphone? A taxi to give them a ride to work or take them home after a party. So, it's no wonder that the US transportation network company Uber is hoping to conquer the Chinese market. It's been working its way slowly but surely into China over the past few months.

At the beginning of this year, it registered about a million trips a day worldwide. Now that's the figure for China alone. This is true although Uber is currently only active in 11 big Chinese cities.

Founded in California five years ago, the company only expanded to China in early 2014. China is now its second-biggest market after the US. Within a year, the company wants to be present in 50 of the 80 Chinese cities that boast over five million inhabitants. To this end, the company has invested about a billion dollars in China this year.

It's actually astonishing that a US company has proved so successful in China. Why have internet giants eBay, Amazon and others not been able to get a foothold?

Cooperation with Baidu

Frank Sieren

DW columnist Frank Sieren

The answer is that Uber has not repeated the mistakes that many foreign companies have made in China. On the one hand, it has put Chinese managers in the top positions and given them free rein. On the other hand, last year it brought on board the popular Chinese search engine Baidu.

As China's equivalent to Google, Baidu is extremely useful to Uber because it has the country's best online map services at its disposal. These are crucial in cities that are continually being built, and especially for transport services such as Uber. However, the alliance is also useful to Baidu.

There are three internet giants in China: Baidu, Alibaba - China's biggest online commerce company, which also provides secure payment services - and Tencent, which is known thanks to its successful messaging and calling app WeChat.

Uber's expansion plans are perfect for Baidu, which in one blow will acquire millions more users for its online map and payment services. Baidu is the only of China's three internet giants that does not yet have a transport service.

Alibaba and Tencent each had an app that provided taxi and luxury transportation - Didi Dache and Kuaidi Dache respectively. They were so daunted by the aggressive Americans that this year on Valentine's Day they decided to merge their services.

The result - Didi Kuaidi - enjoys 90 percent of the market and is therefore still well ahead of Uber. However, at 45 billion dollars the California company is worth a good three times more than its Chinese counterpart, which is worth 12 billion.

Greasing the wheels

In response to the Americans' expansion plans, Didi Kuadi has now announced that it also wants to invest 1.5 billion dollars in China. So if Uber already has a foot in the door, long-term success is far from guaranteed - especially because all these private taxis are a thorn in the sides of city authorities, regardless of whether they are run by Uber or the Chinese competition. The authorities want to protect the drivers of licensed cabs, who are already complaining of losses.

The situation has become so desperate that Uber drivers have been physically attacked. However, the answer from California HQ demonstrated once again that Uber has understood the Chinese market. The Uber drivers were ordered to stay out of any arguments on penalty of being prevented from driving. Stability and public peace are not only of top priority for China's government, but also for Uber.

DW correspondent Frank Sieren has lived in Beijing for 20 years.

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