In August 2016, Uber sold its China assets to its primary competitor in the country, Didi Chuxing, and ended a costly subsidy battle that was on its way to slowly bleeding the company dry. That was the last time Uber and Didi faced off head-to-head in a ground war.
Uber will go head-to-head with Didi again — this time in Mexico
Didi, which acquired Uber’s China assets in 2016, is launching its service in Uber stronghold Mexico.
But Didi isn’t done with Uber. The Chinese ride-hail player has just launched its service in Mexico, which happens to be an Uber stronghold.
While Didi has been fighting proxy battles against Uber around the world through its investments in multiple international competitors like Ola in India; Careem in the Middle East; Taxify in Europe and Africa; and via its acquisition of Brazil’s 99, this will be the first time Didi will be actively battling the U.S.-based ride-hail player outside of China.
It’s a significant move for Didi, which has quietly sought world domination, and one that several sources internally say has given Uber a cause for concern. Didi is going after Uber in a market where it will hurt.
Uber’s struggles with profitability in places like the U.S. and Southeast Asia are well documented, but the company has managed to become profitable in Mexico as Latin America has quickly rocketed to becoming the company’s fastest-growing region.
Until now, Didi’s international strategy has largely been to invest in and work with local players in markets outside of China. But it appears Didi has decided that competing in Latin America will require boots on the ground.
Didi, which has been recruiting drivers in Mexico since early April, had already taken the first steps to infringe on Uber’s stronghold in Latin America through its acquisition of 99 in Brazil.
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While local competitors across the region continued to battle Uber outside of Mexico, few were willing to take the risk of trying to undercut the well-resourced U.S. company in Mexico — including 99.
It’s unclear if Didi will leverage any of 99’s talent, operations or other resources to make its entrance into Mexico a smoother process. Update: 99’s product, customer services and legal teams will oversee both Brazil and Mexico, according to a spokesperson.
Complicating matters is Didi’s investment in Taxify, which already operates in Mexico.
But now Taxify, which has only raised $2.2 million to date, will be facing off against both Didi and Uber. Taxify CEO Markus Villig previously told Recode the company has a strong relationship with Didi and that he also believes there is plenty of opportunity for each company in the region.
For Uber — which has been whittling down its international footprint in an effort to cut losses — its decision to pull out of Southeast Asia and sell its assets to competitor Grab leaves room for the company to focus on important markets like Latin America as well as the Middle East and India. In that way, Uber and Didi’s international strategies look more similar than ever: Operate on the ground in some major markets while investing in local players in others.
The freedom to focus more of its resources on Latin America paired with its experience operating as a near monopoly in Mexico specifically gives Uber some solid ground to stand on in the face of Didi’s entrance into the country. In a few short years, Mexico has become Uber’s third-largest country market — behind Brazil and the U.S. — with seven million riders and 250,000 drivers.
But fighting Didi off is no easy task. With a total of around $20 billion in funding as of December 2017 and the backing of Chinese sovereign wealth funds like China Investment Corporation, Didi is one of the few companies that can engage in and possibly win a subsidy battle against Uber.
There’s also a possibility of Didi acquiring local players in Mexico to aid in buying up market share to get the ball rolling. In addition to Taxify, which Didi already has a relationship with, other players like Rakuten-backed Cabify and Rocket Internet-backed Easy Taxi are also competing in the country and may have a harder time sustaining their business in the face of a potential subsidy battle between Uber and Didi.
Uber is preparing to go public in the next two years so losing ground in a market as important as Mexico is a risk the company can’t afford to take. Bolstering its efforts in the face of a historically formidable opponent will become more important than ever.
This article originally appeared on Recode.net.
