After two years in China, US car-hailing company Uber has stepped up efforts to adapt to the Chinese market, including incentives for drivers to help it catch up with Didi Kuaidi - its well-funded domestic rival. Faced with such tough competition, Uber hopes to launch new services to survive the ongoing turf war.

An Uber station board in the Panyu district of Guangzhou, capital of South China's Guangdong Province Photo: CFP

The US-based car-hailing company Uber Technologies Inc has been busy expanding overseas in recent years. Now the company, which is reportedly worth $50 billion, has focused its efforts on China.

Uber CEO Travis Kalanick said Uber's market share in China has climbed to about 30 to 35 percent, Reuters reported Wednesday.

Liu Zhen, who oversees Uber's strategy in China, has said that China could overtake the US as Uber's largest market this year, industry research website askci.com reported on October 15. The company plans to drive into 100 new Chinese cities in the near future.

But Uber is also facing growing challenges in the Chinese market as well-funded competitors aim to keep it a minor player.

China expansion

Since Uber officially entered the Chinese market in February 2014, it has expanded into 21 cities, including Beijing, Shanghai and Chengdu, capital of Southwest China's Sichuan Province, according to a statement Uber China sent to the Global Times on October 8.

Unlike how it started in the US, Uber initially focused on the high-end market in China. When the company first launched in Shanghai, it began by only offering its Uber Black service, which hooked up passengers with rides in luxury vehicles, the financial news portal eastmoney.com reported in May. After a while, however, the company realized that the high-end service by itself could not meet the needs of the Chinese market.

In August 2014, the company launched a less expensive service in Beijing called People's Uber, which targeted China's urban commuters.

People's Uber recruited many car owners to provide a carpooling service.

"I have worked for People's Uber for more than a year," said He Jianlin, an Uber driver in Beijing. "I think Uber is quite good because it pays higher subsidies to its drivers than other car-hailing companies."

Uber heavily subsidized its drivers to tear market share away from its entrenched domestic rivals.

"There are also prizes. For example, Uber awards 1,000 yuan ($157) to the driver in Beijing who provides the most rides in a single week," He told the Global Times on Monday. "It has different subsidy policies in other cities."

For its customers' convenience, Uber accepts payment with credit cards and Alibaba Group Holding Ltd's online payment platform, Alipay.

"Uber's payment system helps ensure its drivers get paid in a timely manner because Uber automatically deducts money from the customer's Alipay account at the end of the ride," an Uber driver in Beijing, surnamed Li, told the Global Times on Monday.

Domestic challenges

Although Uber has worked hard to expand its business in China, it remains well behind market leader Didi Kuaidi, which is reportedly valued at $16 billion and backed by Chinese Internet giants Alibaba and Tencent Holdings.

"Uber provides fewer services than other Chinese car-hailing companies, which will limit its expansion in China," Hu Dan, senior consulting manager at iResearch Consulting Group, told the Global Times on Tuesday.

Uber had 649,640 active users as of the end of the second quarter of this year, trailing Didi Kuaidi, which had 3.59 million, according to a report published by Analysys International in August. UCAR Technology Inc ranked third with 466,520 active users.

"I often chose to use Uber when I lived in America because it cost less than other car-hailing firms, such as Lyft," a rider in Shanghai told the Global Times on Tuesday on condition of anonymity. "But I prefer Didi Kuaidi when I am in Shanghai as it is easier to get and cheaper than Uber."

The rider noted that Uber's customer service was also better in the US than in China.

A Didi Kuaidi driver in Beijing said he switched from Uber to Didi Kuaidi because the Chinese service has more customers and offers drivers more information about their fares.

"We are told the destination when a commuter books a reservation, but Uber's app doesn't provide this information," the driver told the Global Times on Tuesday on condition of anonymity.

Uber has also faced some trouble with its drivers. In September, accusations surfaced that some of its drivers in Chengdu had been falsifying orders to make more money under the company's incentive plan.

The Chengdu branch of Uber announced on September 23 that it explicitly prohibited drivers from falsifying orders and banned the drivers involved in the alleged activity.

The company has formed a technical team with engineers in Silicon Valley to address the issue, Uber China spokeswoman Huang Xue told the Global Times on Wednesday.

Development prospects

Uber has plans to catch up with its rivals in China. On October 8, it announced it will set up a new company in the China (Shanghai) Pilot Free Trade Zone with 2.1 billion yuan in registered capital. Uber said it plans to invest 6.3 billion yuan to drive its long-term expansion in China, according to the company's statement.

To survive, Uber needs to adapt to the Chinese market and continue launching services that leverage its advantages, Hu said.

"Uber's brand benefits from good word-of-mouth in China," said Zhang Xu, analyst at Beijing-based market firm Analysys International. "The legendary story of the company's founding has also captured a lot of attention."

Kalanick said he has been overseeing day-to-day operations in China, with the hope of spinning off Uber China into its own company, US-based Fortune magazine reported on September 3.

Because Didi Kuaidi has a huge advantage with the Chinese government, Uber expects the change will put the two companies on equal footing, Kalanick told Fortune.

On October 10, the Ministry of Transport published draft rules to tighten control over car-hailing services in China, effectively banning private cars from doing business through online car-hailing apps.

Uber China said it was preparing the documents to apply for a license to operate an online car-hailing platform, in order to meet the new regulations.

The company will continue to create new services to meet the needs of its customers in China as it sees great potential in that market, Huang said.

"Uber has made great efforts to strengthen its focus on the domestic market," Zhang told the Global Times on Monday. "However, it's not only Uber, but also its rivals, who are striving to win the Chinese market, so the key lies in whether Uber can take a step ahead."