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.