Ride-Hailing is Roaring Back

Ride-hailing companies are making moves to enter public markets as demand recovers from Covid-19 lows. Chinese giant Didi Chuxing recently filed paperwork for an initial public offering in the U.S., while Via Transportation is reportedly planning to do the same and Singapore’s Grab is in talks to merge with a SPAC. The listed majors today, Uber, Lyft, and Chinese e-commerce platform Meituan Dianping could soon face reinvigorated competition.

Didi’s plan merits a particularly close look given the company’s scale and ambitions. As of the first quarter, the company had nearly 500 million annual active users and completed over 40 million mobility trips each day, double that of Uber.

Didi and its subsidiaries have attracted more than $25 billion in funding to date from investors including SoftBank, and in 2020 the company brought in $3.7 billion in revenue (excluding driver earnings and incentives). This fast growth partly explains the company’s reported $95 billion valuations on the secondary market.

Just like Uber and Lyft, however, Didi is not yet profitable. Through its domestic mobility services business which accounts for over 90% of revenue was profitable in 2020, Didi had an overall net loss of $1.6 billion due to its international mobility business and other initiatives like autonomous vehicle development.

Didi plans to achieve overall profitability by expanding its average daily trip count to 100 million by 2022, but challenges lie ahead according to BNEF’s recent analysis. At home, the company has a dominant market share, and further growth could attract regulatory scrutiny. In the 14 markets in which it operates abroad, Didi faces fierce competition.

Didi’s strategy differs from Uber and Grab because the company is mainly focused on mobility services. While those rivals moved aggressively toward food delivery amid Covid-19, Didi only has a small food business in a handful of international markets.

The company also stands out for its continued focus on autonomous vehicles, with the fourth-largest AV testing fleet in China, according to BNEF’s latest estimates. As Uber and Lyft both unload their costly internal AV divisions to focus on other business areas, Didi’s commitment to, and spending on, AV research and development will be closely watched.

There’s strong long-term growth potential for shared and autonomous mobility services, according to BNEF’s recently published Light-Duty Vehicle Outlook, with demand expected to rise fivefold over the next two decades.

Shared mobility services are projected to deliver 8% of total car kilometers traveled in 2040, with autonomous mobility services via robotaxis delivering another 9%, according to the outlook. Most of this growth in autonomous mobility demand appears primed to happen in developed markets like the U.S. and China.

Before You Go

Tesla is trying another tactic to woo customers in China unveiling a 5,000 kilometer (3,100 mile) supercharger network that loosely follows the same path as the legendary Silk Road. The automaker will install 27 new recharging hubs on a route from the eastern coastal hub of Zhoushan to the western city of Horgos.

It comes after sales of locally made models rebounded in May, following incidents that have dented the company’s image, including a protest by an unhappy customer at the Shanghai auto show in April.