A key debate since Didi’s acquisition of Uber China has been: whether Didi has a strong enough moat to defend itself and justify its valuation?
Didi has been fending off many supposedly deep-pocketed competitors (or would-be competitors) over the last three years: Meituan, HelloBike, T3 and Gaode. While none of them has presented an existential threat to Didi, fighting multiple wars is certainly weary to many Didi executives, who had expected a swift path to IPO when it was killing Uber in China.
Now it seems that Tencent, Didi’s major backer, might enter the fray itself. Strong rumours indicate that over the last couple of months, Tencent has filed for a number of ride-hailing and car-sharing related trademarks under its own corporate entity.
Do not form your own orbit
If these rumours are true, it indicates a major swift of Tencent’s strategy. It backed both Meituan and Didi over the years, to counterbalance Alibaba in the fight for offline use cases as well as payment.
It seems that both companies have grown to a stage where it is quite impossible for Tencent to exercise the control it used to be able to wield.
While the market generally believes that Tencent will most likely enter the sector through some kind of aggregator model, just like Alibaba did with Gaode, we think that the more important incentive for Tencent is to create a counterbalance such that Didi and Meituan do not drift too far away from its orbit.
Gone are the days where founders of three companies enjoyed a warm dinner together, boasting the solidarity of ‘anti-Alibaba alliance’. The ride-hailing and local life market in China have entered a new phase – of uncertainty.