The Japanese taxi industry is going to be the new foreign market for Chinese ride hailing company Didi Chuxing as the company announced that it is planning to get into an agreement with the Japanese investment institution Softbank for setting up of a joint venture for that purpose.
The Chinese ride hailing company had been attempting to expand its presence outside of its home market and decision to venture into the Japanese market reflects that intention. However, the Chinese company is expected to encounter a number of challenges in the new market where deregulation of the taxi industry in Japan is being severely protested against by the existing taxi companies there.
The rules and regulations that govern the ride hailing industry in Japan are very strict about not allowing any driver without a valid driving license to offer his or her services due to safety concerns and companies in the market only have the operational extent of using a mobile app and platforms to match user with the fleets of taxis that operate there.
There are two companies that have already expressed their intention of initiating trial runs in the Japanese market this year with respect to ride hailing services. Didi had managed to raise a capital of over $4 billion for financing its internationalization efforts and that latest round of funding valued the company at over $50 billion. SoftBank already owns a stake in Didi.
In 2016, Didi managed to gain complete dominance of the Chinese market after it purchased its arch rival Uber after a long and protracted war between the two where the later is reported to have unsuccessfully burned billions of dollars to get a foothold in the market. And in the last one year, Didi has managed to successfully push into other foreign markets as well.
But the business in its home market is already coping with some challenges which include driver complaints about reduction in subsidies which, they claim, is equal to them being given less pay while they work for more hours. Further, new market entrants and a slow pace of economic growth are also headwinds that the company is battling against.
Brazil’s ride hailing company 99 was acquired by Didi in January.
There are plans of the Chinese company to enter the Mexican market and the company is also already in the process of expanding into the regional markets outside of the mailand China such as in Hong Kong and Taiwan.
Didi, Indian rival Ola and Southeast Asia’s Grab are the ride hailing companies where SoftBank itself owns stakes. SoftBank became the largest shareholder in Uber only last month.
Japanese cities including Osaka, Kyoto, Fukuoka and Tokyo would be the ones where Didi’s “deep learning-based demand prediction and smart dispatch systems” would be initially leveraged for trial services for Japan’s taxi fleet.
(Adapted from WSJ.com)