"How crazy was the trillions-dollar trade war in China?"
Today, sharing with everyone another epic life-or-death battle deal between Alibaba and Tencent from over a decade ago, known as the most shocking money-burning war at the time, even more intense than the food delivery war I told you about before.
Everyone who goes to China, do you often use the Didi (滴滴) app to call a car, right? Chinese people often call it "打滴" for short. This story is exactly the brawl between the two largest ride-hailing platforms around 2013-2015: one is Didi (滴滴) backed by Tencent, and the other is Kuaidi (快的打车) backed by Alibaba. The two sides competed by throwing money until finally Mr. Ma Huateng had to call Mr. Jack Ma saying, "Bro, let's join hands, if we keep fighting like this, we'll go bankrupt before we get monopoly." =))))
Video excerpt of Ma Huateng's words as follows:
- My side is Didi, Ali's side is Kuaidi, we punched each other, my side lost 20 million, the other side said they lost 30, then ok we still pushed on. Until one day the highest loss reached 40 million RMB, but no one dared to stop, because stopping means all the money thrown so far goes down the drain, so even if dying we had to keep chasing. Finally, I had to call Jack Ma, to see how we brothers clean up this battlefield, then we merged the two companies into the current Didi.
The blog owner recalls back in 2013-2015, opening the ride-hailing app and facing a ton of vouchers for 10 RMB, 20 RMB, free door-open fee. Office workers in Beijing, Shanghai at that time did a small calculation: bus to work costs 2 RMB, hailing taxi to work only 1 RMB =))) such heavenly manna falling from the sky, if not slurping it up quickly, it'd be a sin against money. But many people don't know, this money falling from the sky was all chunks cut from the guts of Mr. Ma and Mr. Ma =)))
Behind this market-grabbing story, early 2013 when online payment started rising, Alipay and Wechatpay both joined the race for market share, at that time online ride-hailing became a juicy pie that everyone had to chase. Didi and Kuaidi from the start weren't ordinary startups, but chess pieces of Wechatpay and Alipay: either win market share or lose and get eliminated, basically no third option.
At first when they started fighting, both sides were like probing the market, losing around ten million per day each, clear goal to grab users, snatch drivers. January 2014, Didi made the first move, launching vouchers reducing 10 RMB for passengers, rewarding 10 RMB for drivers. Kuaidi saw that and immediately copied without falling behind. In a short time, the number of ride-hailing drivers in Beijing tripled, traditional taxi drivers all quit to switch to ride-hailing, some drivers showed earning 20k RMB in a month (about 70 million VND), better than going to work.
Customers gained through vouchers weren't sustainable customers either, someone did a survey, 80% users said if no more codes now I'll go back to traditional taxis, 70% drivers said whichever house rewards more I'll switch to drive for that house right away. But the two big guys still determined not to stop, throwing money more and more fiercely, each thinking if I lose then they lose even more =))))
At that time the two houses almost had 24/24 war rooms, meetings not to discuss how to make profit, but how to lose 10% more than opponent tomorrow =))) then both sides even planted spies to scout each other, Didi people pretended to be Kuaidi customers to book rides, Kuaidi people also watched Didi's vouchers every minute, as soon as opponent launched something new, 30' later we had to follow suit. By end of 2014, each accumulated losses of 5 billion RMB, this loss amount at that time was equivalent to profits of about 17 listed big companies, enough to see how fiercely they burned money. Hilariously, employees' KPI wasn't how much profit this year, but how much more loss than opponent this year, how much % market share grabbed.
At that time everyone knew this was clearly unreasonable, but no one dared to call stop, because stopping once means all the money burned so far becomes waste paper =)))) In this situation there are 4 main points, 1 for users, now they rely too much on vouchers, if no vouchers they won't go, try stopping vouchers 3 days and lose 60%. For the market, once ride-hailing industry lost, to regain market costs x3. For capital, shareholders invested billions already, what they need is to dominate the market, now abandoning means total loss. And for Ali and Tencent, losing this pie could lead to many other consequences, so even if losing more, even dying we must chase.
Until everyone thought this battle the two sides had to fight until one bankrupt, then Ma Huateng suddenly woke up, turned around to negotiate with Jack Ma, if we keep fighting now only you and I will be doomed, others enjoy the benefits why bother. Jack Ma also knew fighting like this in the end no one wins, plus the shareholders of both sides already secretly met each other, so finally instead of fighting to death, the two sides merged into one, we together dominate the market, earn back what was lost =))))
February 14, 2015, Valentine's Day also the day fate brought us together under one roof =))) rivals once life-or-death now suddenly became comrades, this news exploded the business world at that time. After the two houses merged into one, Didi quickly canceled vouchers, prices back to original level, more expensive than taxis, whatever penny they ate from brother now back to brother's pocket, the losses from this romance recovered by capital through other services.
After the two houses merged into one, then Uber jumped in from somewhere to be the third wheel or something, just 1 year Uber also got beaten by Didi half-dead, officially affirming the supreme position on the ride-hailing battlefield =)))
10 years passed, to 2025 Ali falls into food delivery war again =))) But seems this time opponents not evenly matched so after fighting a few months win-lose situation clear. This time I went to China again, seems the price basket back to old levels, typically in October I bought a fried chicken + fries + rice cake bowl only 10 RMB, yesterday I ordered the same place already up to 17 RMB =)))) don't know the next strategy of the big guys how, anyway we'll wait and see later. See you ladies in the next vlog neee
Cre: Vườn Khoai Lang
P/s: This case is so good, admin borrows it to explain why back then ride-hailing and food were so cheap but now expensive again
