Grab’s acquisition of Uber is the latter’s third retreat facing a strong local player, after China (to Didi) & Russia (to Yandex).

Now with Softbank being large, if not largest, shareholders of Grab, Didi, Ola & Uber, and Didi being shareholders of Lyft, Taxify and Careem, what is next for the ride-hailing industry, and the strong use case it carries?

Well, first, there is speculation that India might be next. The following quote came from a Dealstreetasia article on the matter:

SoftBank owns stakes in most major global ride-hailing firms, and executives have indicated they favour consolidation. SoftBank’s Vision Fund Chief Executive Rajeev Misra has already urged Uber to focus less on Asia and more on profitable markets such as Latin America, a person familiar with the matter had said.

At the same time, Wang Xing, Founder & CEO of Meituan, tweeted (in Chinese): “I heard that Emperor Masayoshi Son the Great is pushing for a global merger of Uber & Didi. It is becoming more and more interesting.”:

Wang Xing’s tweet on Uber Didi merger (the bottom one)

Probably not going to happen (very soon)

While we should not be surprised at any potential deepening of relationships between Uber & Didi, a merger is probably off the table – for now.

The duo are not really competing directly (aside from in the markets of Brazil & Mexico – and maybe more in the coming months), and pushing them together would raise too many eyebrows, especially looking at the trade environment between Trump and Beijing now.

Regulators in China and US are usually more suspicious of such cross-border deals. The Didi-Uber China merger did not cause the competition watchdog in China to react probably because it was a Chinese company acquiring a US company’s operations on Chinese soil. It is hard to imagine an arrangement that does not make one of the two government feel really uncomfortable.

But eventually, some sort of co-existence will happen, with Softbank at the helm – at least Softbank would want to see that.

What is at stake for Wang Xing then

Wang Xing, the Founder of Meituan who made the tweet above, is the center-piece of something really interesting is happening in China’s ride-hailing space.

As we wrote earlier, Meituan is leading an assault on Didi. The attack seems to be gathering momentum, with Meituan announcing this week that it has already taken 30% of the market share in Shanghai.

The founders are allegedly friends who had lunch together on the day of Meituan’s announcement

Maybe the numbers are exaggerated, but judging from the social media posts from the city that we have seen, the overwhelming sentiment of drivers and riders seem to be welcoming Meituan joining the fray. This is actually not surprising – we wrote about such potential 1.5 years ago.

Let’s leave aside the generous subsidies Meituan is dishing out to drivers, if in anyway Meituan can prove that it is capable to grab (for the lack of a better word) significant market share from Didi, the impact on how investors value the whole sector is going to be significant.

Softbank gave Didi US$5 billion to play with, and now it seems the money is not only going to be used for overseas investment, as speculated.

But then, of course, Softbank is not any other investor. Another US$5 billion (in exchange for potentially more control of Didi) would not be taxing for them.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.

 

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