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Didi Chuxing’s Cheng Wei and His Sharing Economy Empire

This year, the market value of Didi Chuxing is estimated to be more than 100 billion RMB (more than 15 billion USD), making it the most valuable non-listed company in the world. Without doubt, Didi Chuxing is one of the most successful startup companies that China has produced in recent years. As the CEO of Didi Chuxing (formerly Didi Kuaidi, and often simply shortened to Didi), Cheng Wei is seen as a visionary of his time, a successful entrepreneur despite slowing growth at home. 

 

 

But in fact, the early stages of Didi’s setup were anything but plain sailing. In a recent speech by Cheng Wei on “The Night of Sina Economics- Night Talk on Zheng He Island”, he told the story of Didi’s establishment:

 

“Three years ago, when I was at the age of just30, I started my business in Beijing with only 800 thousand RMB in capital. Without any support from the government, Didi drew no fewer than 14 bans from various local governments around the country.”  

 

But in a sign that the environment in China is still beneficial for those willing to take risks, Cheng still managed to grow the Didi Empire into one of the country’s greatest success stories.

 

Of course, the premise is that you should really have that “X factor”.

 

 

For Didi, that is its efficient platform, which meets the needs of its consumers and adopts the philosophy of the sharing economy, which also represents the two phases of the company’s development.

 

Before the merger of bitter rivals Didi and Kuaidi, their aim of each one was to connect all the taxis in China to the Internet, to move the ride-hailing process from the street to the web by grafting the taxi trade onto the Internet.

 

However, we found that it was difficult for consumers to find a taxi during rush hours, even though 80% of all taxi drivers had become their users. In order to solve that problem, we expanded our businesses to widen the number of drivers on our platforms. But it still didn't solve the problem completely as we found that no matter how many drivers were online, it was still difficult to call a cab at peak times.

 

The problem lies in the fact that the need for rides is tidal, with demand surging only in certain periods. If there are enough drivers on the platform to cater for rush hour, then at other times, 80% of the drivers will be sitting idly, which would be a terrible waste of labor.”

 

Thus, Didi moved into the second phase of its growth, namely exploring the sharing economy. It connected B2C with C2C, hooking up part-time car owners and their unused cars with passengers during rush hour. Once again, Didi increased its service offerings. This time, it focused on encouraging car owners to share their cars with others. More services such as “fast rides” and “lift rides”, as well as other choices such as sharing cars with others were created. All these contributed to the rising car usage rate. According to the data from Cheng Wei, nowadays, the fulfillment rate for taxi orders can reach 90% or above in every city around China.

 

In Cheng Wei’s speech, he said he viewed it as no accident that Didi has become a pioneer of the sharing economy.

 

Only the greatest need combined with the fewest resources can produce the most pioneering model. Let’s take the example of AirBnB. It has grown quickly in Europe and North America, yet in China few people choose to share their house through AirBnB. The reason is that while the number of visitors attempting to fit into crowded urban areas in the US, for example, largely surpasses the capacity of local hotels, existing accommodations in Chinese cities can adequately cope with the number of visitors in China. As a result, Chinese are still not used to the idea of sharing their house with others. On the contrary, transportation is one of the most fertile grounds for the sharing economy.”

 

Over the past decade, with the improvement of living standards in China, people’s pursuit of a more convenient transport option has seen the ownership rate of cars soar. However, that ownership rate was increasing so rapidly that the construction of roads could not keep up. In this environment, then, buying a private car is not the ideal way to enhance one’s user experience. A better solution than putting more new cars on the road is increasing the usage rate of existing cars. If a car can be shared by four people during rush hours, then the number of cars on the road could be decreased by ¾, providing great relief for both traffic and the environment. That is what Didi is working on: to solve the transportation problem in China using the model of the sharing economy. We have to admit that Didi does make a difference.

 

 

Cheng Wei predicted that in the future, the model of the sharing economy will soar in the field of transportation as the third evolution of the car industry is approaching.

 

“US tech giants like Apple, Tesla and Google are all trying their best to creating driverless cars, using AI technology. Of course, in most peoples eyes, driverless cars are still a long way from reality. But nobody believed a computer could beat a human at Go before Google’s Alpha Go beat Li Shishi. The development of AI took a sudden step forward. Driverless cars will be the same. People might feel scared to see a car with no driver on the road today, but buying a car in the future will be as strange as buying a horse is today.

 

If driverless cars become a reality, there won't be much difference between using your own car or sharing somebody else’s – either way there won't be a driver. Furthermore, the cost of sharing cars with others will decrease sharply so it is natural more people will choose to share rather than buy their own.

 

The golden time of the sharing economy is upon us. Perhaps it is high time for Chinese entrepreneurs to take note before it is too late.

 

Cheng Wei who was chosen as one of the “TOP 10 2015 Annual Economic Figures in China” is a student in the second intake of CKGSB’s DBA program. To read more about the program, please click here.

 

To see the video of Cheng Wei’s speech on “The Night of Sina Economics—Night Talking on Zheng He Island” [in Chinese], please click here.