Brazil: the battleground between China’s Didi and Uber

. Jan 04, 2018
99 Uber Brazil 99 is the main threat for Uber in Brazil

Brazilians first heard of Didi Chuxing on January 4, 2017. The leading ridesharing company had invested over USD 100 million in the Brazilian app 99 – Uber’s biggest Brazilian competitor. In exchange for the money, Didi was able to name one member of the company’s board and provide “strategic guidance” to 99. Almost exactly one year later, Didi has now concluded the complete takeover of 99 with a deal reportedly worth USD 600 million.

The deal could have severe international implications. Latin America is set to be the next battleground between Uber and Didi, the industry’s biggest companies. Uber has posted its fastest growth rates in the region. In Mexico, the Silicon Valley company has enjoyed such a stronghold that almost no competitor – including 99 – has dared to enter its market. Instead, Didi opted to tackle the region’s largest country. The move forms part of Didi’s aggressive internationalization strategy, after having run Uber out of their home turf.

The details of the deal have not yet been officially disclosed. Didi Chuxing, however, has reportedly bought out the funds Riverwood Capital, Monashees, Qualcomm Ventures, Tiger Global, and Japan’s Softbank.

With the deal, the Brazilian app was valued at USD 1 billion. Some analysts labeled it as Brazil’s first unicorn, a startup valued at over USD 1 billion. But if 99 might be a unicorn, it is by no means Brazilian, but rather a Chinese subsidiary in Brazil. In January 2017, Didi owned about 30 percent of the Brazilian company. Now, it has full control of it.

</p> <p>99’s CEO, Peter Fernandez, minimized the importance of other Latin American markets:&nbsp;“Brazil is a must-win market in the world. It has the world’s fifth-largest population. From my perspective, it’s a much more important priority for the company to win in Brazil than it is to peanut-butter our operations across the region.”</p> <p>Indeed, Brazil seems to be the crown jewel for ridesharing apps. Its population of 207 million suffers from limited public transportation, especially outside of São Paulo, the country’s financial capital.</p> <h3>99’s quick rise</h3> <p>Originally named 99Taxis, 99 was founded in 2012 and was originally created to work exclusively with licensed taxi drivers, unions, and authorities. It had actually started operating two years prior to Uber’s arrival in Brazil. By 2016, the Brazilian app had the most users in the Latin American country; Easy Taxi came in second, with Uber occupying third place. In August 2016, the company created 99Pop, its service for private drivers – exactly the same model as Uber or Cabify.</p> <p>Midway through 2017, the ridesharing company won a public bidding process to provide transportation for 15,000 municipal servants in São Paulo. The contract, worth 50 million BRL for 12 months of service, would reportedly slash the public transportation expenses for employees in the <a href="">mayor’s office</a>.</p> <p>According to data from 99, the company operates in 550 Brazilian cities, has over 25 million drivers (including private ones and taxi drivers), and 14 million users in Brazil. The pop version of the service is present in 30 cities, including the major state capitals.</p> <h3>Uber: woes in Brazil</h3> <p>For Uber, Didi’s takeover of 99 is just the latest in a series of setbacks the company has faced in Brazil. Back in 2014, when Uber started its operations in Latin America’s leading economy, it quickly rose to distinguish itself from regular cabs thanks to its luxury fleet, selected drivers, and services like water bottles, cell phone charges, and candies.</p> <p>If it was attractive to passengers, the Silicon Valley company also appealed to drivers, offering the perspective of a life without a boss, big gains, and flexible hours. And for a while, the company delivered on its promise. But soon Uber began an aggressive strategy to increase its number of drivers and lowered its quality standards. Between October 2016 and 2017, the number of Uber drivers skyrocketed from 50,000 to 500,000 – yet the number of passengers failed to grow at the same pace.</p> <p>Moreover, the transportation giant’s business model suffered many attacks. First, Uber drivers sued the company, asking to be considered formal employees – with all the associated rights and benefits. While most Brazilian courts have sided with Uber, <a href="">some decisions</a> favored the plaintiffs.</p> <p>Not helping Uber’s case is the fact that the company has struggled with several sexual misconduct allegations. In August, a Brazilian writer revealed that she was raped during an Uber ride. Her statement generated a social media campaign with women sharing their traumatic experiences while using the app.</p> <p>Uber did obtain a victory in the Congress, though. In 2017, Brazil’s lower house approved a bill imposing several controls over transportation apps, giving them nearly the same status (and bureaucratic obligations) as taxis. But the Senate approved a “softer” bill instead, leaving the main points out of the final draft.

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Gustavo Ribeiro

An award-winning journalist, Gustavo has extensive experience covering Brazilian politics and international affairs. He has been featured across Brazilian and French media outlets and founded The Brazilian Report in 2017. He holds a master’s degree in Political Science and Latin American studies from Panthéon-Sorbonne University in Paris.

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