Didi - The $67B Company Taking on Uber - YouTube

in this video we'll talk about why didi could  become the next uber didi is one of the world's  

largest ride-hailing companies with 493 million  annual active users and is backed by a prominent  

set of investors including tencent alibaba apple  and uber themselves didi is set to go public at  

an estimated valuation between 62 and 67 billion  dollars making it one of the largest international  

company ipos on a u.s stock exchange like uber  didi's main business is mobility which includes  

ride-hailing taxi hailing and other mobility  services didi offers a variety of ride-hailing  

services like uber which include options such as  carpooling express and luxury when it comes to  

the global recognition of didi and uber uber is  more widely known due to its larger geographic  

reach and mobility uber states that they are the  number one mobility services provider in the us  

latin america europe and a number of other major  regions around the world however one of the  

largest regions that uber is not a direct leader  in is china where didi is the number one mobility  

services provider with an estimated 90 market  share in fact uber sold its china ride-hailing  

business to dd in exchange for an ownership stake  in 2016. china represents didi's largest market  

by far although the company has expanded to 14  other countries starting in 2018. one of its  

strongest international positions is latin america  in which didi is reported to be the second largest  

ride-hailing platform in the region overall dd's  international business serves more than 60 million  

active annual users and accounts for approximately  12 percent of its annual active users worldwide  

like uber dd is working to introduce additional  service offerings on its international  

ride-hailing platforms such as food delivery dd  and uber share a number of similarities with their  

mobility businesses which leads many investors to  directly compare their financials with each other  

but there are a number of major differences  between dd and uber that are essential to  

know at first glance it looks like didi's mobility  business is much larger than uber didi generated  

20.4 billion dollars in sales in 2020 compared to  uber's 6.1 billion dollars in sales but this is  

because the two companies have different business  models and therefore use different approaches for  

revenue recognition while uber primarily generates  its mobility revenue from the fees that it charges  

on rides delivered by third-party drivers  didi works with a large amount of taxi healing  

companies in addition to third-party drivers  as a result dd recognizes ride-hailing service  

revenues on a gross basis in a simplified example  let's assume that both uber and dd charge a twenty  

percent take rate on a ride transaction this means  that when a rider pays ten dollars for a ride  

both uber and dd collect two dollars of that ten  dollars as fees with the remaining eight dollars  

going to the driver however when it comes to  recognizing revenue when a writer pays ten dollars  

to dd dd recognizes that ten dollars as revenue  and marks the eight dollars paid to the driver  

as an expense meanwhile when a rider pays uber  10 uber only recognizes the two dollars in fees  

that they collect net of the driver's payout as  revenues this is why it looks like didi generates  

significantly more revenue compared to uber when  in reality it's not an apples-to-apples comparison  

to better compare the two companies instead of  using uber's revenue we can compare uber's gross  

bookings with dd's revenues for their mobility  businesses in 2020 uber reported 57.9 billion  

dollars in gross bookings compared to dd's 20.4  billion dollars in revenue highlighting uber's  

massive scale in mobility while both companies  generate a significant amount of revenue they have  

yet to report sustainable profitability both didi  and uber have lost billions of dollars since they  

were founded a large amount of which has gone  towards subsidizing rides both companies have  

noted that there is a possibility that they will  fail to achieve or maintain profitability in the  

future to improve its business economics dd has  stated that they are investing heavily into new  

technologies such as electric vehicles while uber  has pledged to convert its entire ride-hailing  

fleet to go all-electric by 2030 didi appears to  be more proactive in its move to electric vehicles  

electric vehicles help improve the economics  of shared mobility by lowering operating and  

maintenance costs duty makes it easier for  drivers to own and maintain electric vehicles  

by helping drivers to lease them through  their partners and providing the drivers  

with nationwide support services in 2020 didi  reported to have the world's largest network  

of electric vehicles on its platform with  over 1 million electric vehicles registered  

and to support this fleet didi built one of  the largest domestic electric vehicle charging  

networks with an estimated 30 market share based  on total public charging volume in addition to its  

charging network dd also developed the world's  first electric vehicle designed specifically  

for shared mobility the d1 didi launched the d1  in november 2020 with about a thousand vehicles  

operating commercially as of june 2021 dd plans  to launch new models of electric vehicles and  

increase the number of its custom designed  electric vehicles for its leasing network  

moving forward the other major difference between  uber and dd are there other business segments  

for uber its other main businesses include food  delivery through ubereats and its acquisition  

of postmates as well as uber freight meanwhile dd  doesn't have a significant food delivery business  

but the company has a wider variety of other  initiatives this includes bike sharing auto  

solutions freight community group buying financial  services and autonomous driving some of these  

initiatives help increase how often people use  dd's platform while other initiatives have the  

potential to increase didi's overall profitability  starting with bike sharing dd is one of the  

largest bike sharing service providers in the  world with over 5.2 million bikes deployed over  

220 cities while generating around 500 million  dollars in revenue in 2020 didi's bike sharing  

service helps to attract more people to its main  platform with about 40 percent of customers who  

use bike sharing services at least once a month  using didi's ride healing services at least once a  

month as well in 2018 duty launched auto solutions  which encourages drivers to join dd's platform  

dd partners with leasing and financial services  companies to help drivers obtain vehicles  

didi also helps to lower the operating costs for  drivers and increase their earnings potential by  

providing drivers with access to fuel discounts  and a network of maintenance and repair shops  

in 2020 about three million drivers on duty's  platform used at least one auto solution service  

other initiatives included inter-city freight and  community group buying which are both businesses  

that have significant growth potential for  community group buying an e-commerce model that  

is rising in popularity in china didi is one of  the major players in this area it competes against  

other leading tech companies including meituan  pingdor alibaba and jd.com dd ceo has stated  

that the company's investment in community group  buying would not be limited and that the company  

would go all out to be the number one player in  the market through its platform didi also provides  

a variety of financial services including credit  loans wealth management and payment solutions to  

better serve customers drivers and business  partners within its ecosystem didi has formed  

a number of banking and insurance partnerships  to provide these consumer financial services  

this includes supporting credit card applications  offering installment purchase plans for cars and  

selling financing insurance and lease related  products both uber and duty have emphasized  

the importance of autonomous driving for the  future of ride-hailing however in 2020 uber  

sold off its autonomous driving division signaling  a potential lack of progress and focus in the area  

meanwhile didi has continued its investment and  development of its autonomous driving technology  

didi has stated that autonomous driving is  the future of mobility it has the potential to  

significantly improve safety while also improving  vehicle utilization by allowing cars to operate  

throughout the day therefore increasing supply  and reducing the cost of transportation dd is  

developing level 4 autonomous driving technology  and the operating system for an autonomous fleet  

with its team of over 500 members the company  operates a fleet of over 100 autonomous vehicles  

and also partners with other global automakers  to test its autonomous driving hardware  

and software in their vehicles if dd's autonomous  driving initiatives pan out then this could help  

the company significantly reduce costs for its  mobility operations moving on to the management  

team and investor base didi is well positioned  with both dd is still led by its founder will  

chen who founded dd in 2012 and is the ceo of  the company meanwhile dd's president is jean  

lu who previously worked in banking at goldman  sachs but later joined dd as the ceo in 2014.  

didi's investor base is also filled with a number  of prominent investors softbank owns a 20.2  

percent stake through its vision fund investment  uber owns a 12 stake and 10 cent owns a 6.4 stake  

meanwhile will chen owns a 6.5 percent stake while  jean liu owns a 1.6 stake in addition to the main  

shareholders didi has a number of other notable  investors including apple toyota and alibaba  

although didi has a strong position in china's  ride healing industry the company faces a number  

of challenges moving forward because of dd's  high market share in ride hailing the company has  

experienced additional regulatory oversight this  comes as regulators have increased their presence  

in china's internet sector in 2020 and 2021 with  a notable example including the regulation of  

alibaba's financial lending business in june 2021  regulators announced that they were launching a  

probe to analyze potential unfairness regarding  dd's competitive practices and pricing methods  

asking with alibaba regulators will be swift to  take action if necessary in addition to regulation  

another major challenge that dd faces is how to  classify the drivers on its platforms whether that  

be gig workers or employees other ride-hailing  companies including uber have also faced the same  

challenge if dd has to reclassify its drivers  from gig workers to employees then this could  

have a number of major effects on its business  for example gig workers or contractors don't  

receive the same level of benefits as employees  so reclassification could significantly increase  

costs for the company as didi continues its global  expansion this could increase complications due to  

the different legal structures and expectations  in each geographic region so could didi become  

the next uber while didi is the leader in  china's mobility market dd will face major  

challenges competing in international markets  with uber and other competitors in addition didi  

doesn't have a significant food delivery business  relative to uber however didi has major potential  

in other initiatives including community group  buying autonomous driving and digital finance  

which could help diversify its revenue streams  beyond mobility to support its high stock  

valuation didi will need to demonstrate strong  growth in its other initiatives as well as a road  

to profitability if didi can do this then it has  the potential to become more than the next uber