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 The terms of a deal that sees Baidu buy a stake in the fast-growing
taxi app operator were not disclosed.
Uber, though, is a comparative latecomer in China, where taxi app
users are set to triple to 45 million by 2015 compared with 2013,
according to Chinese research firm iResearch. Domestic firm Kuaidi
Dache and Didi Dache, backed by tech giants Alibaba Group Holding
Ltd and Tencent Holdings Ltd respectively, have 90 percent of the
market sewn up.
"China is the Holy Grail because it is both elusive and attractive
at the same time," said Kumar Saha, an automotive and transport
analyst at Frost & Sullivan.
Uber does have a presence in mainland China already, but it's tiny,
with operations in just eight cities. By contrast, Kuaidi is already
in over 350 cities, while rival Didi recently raised $700 million to
fund expansion.
"You have to do things differently in order to succeed here in
China," Uber Chief Executive Travis Kalanick said in Beijing, making
his first public appearance since a rape case involving a driver in
India that resulted in an Uber ban in New Delhi. Kalanick declined
to discuss the India situation or its impact on company policy in
other markets like China.
Baidu is the latest big-name investor in Uber, joining the likes of
Goldman Sachs and Google Inc, to place a bet on the fast-growing
transportation company, now valued at a hefty $40 billion. But
Uber's aggressive growth has already been accompanied by negative
publicity over some of its business practices and bans in some
countries.
Shanghai-based drivers for the firm's affordable-end 'People's Uber'
business, which dubs itself a non-profit ridesharing service, told
Reuters the firm paid them around double the drive fare to lure in
more drivers and help boost market share.
Uber officials in China did not respond to questions on these
subsidy payments.
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Kalanick said the firm was not facing any "pressing regulatory
issues" in China, but analysts warned domestic regulation would be a
steep hurdle.
"Any fault in complying with law will be damaging. With or without
these incidents, the government will exert their control," said
Klaus Paur, global head of automotive at Ipsos.
Baidu's investment may help smooth the process, analysts said. But
Kuaidi and Didi already have long-standing ties with regulators and
Uber's "outsider" status will be hard to change.
"They are using this disruptor positioning. We use the collaborator
positioning with government," Joe Lee, co-founder of Kuaidi, told
Reuters.
Uber's first challenge, though, is simply to hook in consumers in an
already-crowded taxi app market.
"I use apps almost every time I need a taxi," said Lucy Zheng, a
25-year-old graphic designer from the eastern city of Hangzhou.
"Uber? I've heard about it, but never used it."
(Additional reporting by SHANGHAI newsroom; Editing by Kenneth
Maxwell)
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