Zirra: Didi Valued at $32 Billion

Zirra: Didi Valued at $32 Billion

The Chinese car-hailing juggernaut Didi Chuxing (“Honk Honk Commute”) is valued at $32B according to Zirra, a research company that uses AI tech to analyze private tech companies.

This is 3 billion less than the estimation of $35B made by Bloomberg last August when Uber sold its Chinese division to Didi. In September, Bloomberg reported that Foxconn, a contract manufacturer of electronics, invested $119.9M in Didi in a deal that values the startup at around $34 billion, according to a filing.

altDidi’s metrics estimated by Zirra

altDidi’s ratings estimated by Zirra

Only four months ago Apple invested $1B in Didi at a $28B valuation but Uber’s defeat two months later raised Didi’s valuation above $30B. The great momentum gives Didi a high 60-70% chance of an M&A or IPO at a price of $49B-$50B, according to Zirra. In fact, they’re ripe for an IPO within the next year. If Didi will miss this window, it might be too large to acquire or they might miss the best opportunity to go to an IPO.

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Didi took over the Chinese ridesharing market after acquiring Uber’s local businesses last summer. The move ended a three year war that caused each of the companies to lose at least $1 billion a year. While Uber was active in only 60 cities, Didi controlled 400 and was rolling.

Now, with their dominance in China, Didi is nearing Uber’s reach, which last August totaled 507 cities in 66 countries. Today Didi is offering 20 million rides per day with a turnover of $20B per year, the majority of which goes to the drivers, of course.

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Risks Factors

For Didi, the campaign against Uber might have ended, but not the entire war. Some risk factors are putting Didi’s rapid growth in danger, and these are not something the company can disregard.

1.Expansion out of China: Didi won the Chinese market by defeating Uber and turning it into a shareholder. But being a company now partly owned by Uber probably hampers future plans to compete elsewhere in the world. So far, Didi hadn’t named any new territory it would like to expand into, despite declarations to do so in the future. In the past, Didi announced partnerships with other major ride-hailing apps such as Lyft, so that Didi users traveling to the U.S can find rides from Lyft’ database.

2.Lack of competition: The new Didi-Uber ride-hailing monopoly rules 90% of the market, which brings Didi to significantly decrease its rides subsidiaries. This will ultimately lead to a surge in ride prices and we already reported on cases in which users’ employers stopped reimbursing receipts issued by ride-hailing firms, causing them to switch back to regular taxis.

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3.Regulation: Didi’s meteoric rise is partly thanks to China’s lack of regulation in the taxi market. But after confirming the merger between Uber China and Didi, which created a ride-hailing monopoly in the country, the Chinese regulators are now starting to push the market back down. The China Daily reports
that Beijing and Shanghai, as well as other cities in China, have started to restrict the types of vehicles that can be used as ride-hailing vehicles to the more high market segment that costs more than 200K per car. The official reason behind this is the government’s desire to tackle traffic congestion and air pollution. This will not only deprive many drivers of more middling cars from joining the service, but will also increase the price of each ride as the supply of available cars will dramatically go down and the costs spent by drivers in the service will go up.

Further limitation by municipalities and the Chinese Transportation Ministry include limiting the ride-hailing license to local residents only. According to Asia Times these limitations might “hit several hundred millions of customers and tens of millions of drivers. Only 10,000 of 410,000 drivers in Shanghai would be qualified to run the business.”

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Liu Qing, President of Didi Chuxing

4. Potential Competition

Shouqi Limousine, Chauffeur, and Ucar are some of Didi growing competitors who might pose future threats to Didi’s dominance in the Chinese market by managing fleets of cars and drivers, and offering similar services.

5. Lacking an Autonomous Cars Strategy

It is still unknown whether Didi holds a serious plan to develop or adopt autonomous cars. The CEO said it has some thoughts on the subject but the company didn’t make any visible step in this direction. While Uber turned Pittsburgh into an autonomous car laboratory and bought Otto, an autonomous track company, Didi is still quite on this subject.

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Didi will have to make its growth strategy clearer and be more detailed about its future than saying “we’ll definitely go abroad”. After all, the window of an IPO is very short, and yet there are more limitations to Didi’s growth than ever. Read our full analysis on Didi Chuxing here.

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