Uber, the U.S. ride-sharing company, has big plans for China, and it says the number of Uber trips there is almost as large as it is in the U.S. While Uber has raised more than US$1 billion for its standalone Chinese unit, its mainland market share is dwarfed by that of a local competitor, DiDi. But on a recent trip to China, I was less interested in the numbers than in discovering why some Chinese prefer to drive for the foreign underdog rather than the dominant, homegrown ride-hailing firm.
Same App, Same Credit Card
I was impressed to discover that I could use the U.S. app to request an Uber ride in Shanghai, and bill it to my American credit card already on file. For my first trip, Mr. Xie pulled up in a new Toyota, bemused to see that his passenger was a foreigner. He’d only been driving for Uber for a few days, but was enthusiastic. “My main business is P2P (peer-to-peer) lending, and all of the work is at night, taking prospective clients to dinner and drinking. So I have lots of free time during the day,” he told me.
Mr. Xie was keen to chat about his private lending business. So keen, in fact, that he missed the exit to get us into the tunnel under the Huangpu River, adding 20 minutes to my journey as we were swallowed up in traffic.
He said he hoped that driving for Uber would be a great way to meet new borrowers, and that attracted him more than the pay. “I started driving for DiDi, but the customers were not really the kind I’d want to lend to. Uber riders are richer, so I’m sticking with Uber,” he added. Mr. Xie noted that lots of foreigners also use Uber, but he didn’t think they would end up borrowing from him.
Rich and Bored
While the original Uber app worked well in Shanghai, all of the communications were in Chinese, which might be an obstacle for all but the most adventurous foreigner. But a few days after returning to the U.S., I received a message from Uber: “We’re thrilled to bring you a language-specific service, ENGLISH, to make it a bit easier for expats and global travelers to get around the city [of Shanghai].” According to the message, you just open the app and enter the referral code “zaishanghai” (meaning “in Shanghai”) and then “unlock the English option.”
My second driver in Shanghai rolled up in a brand new Mercedes sports coupe. Mr. Zhang looked like he was about 23 years old, and I couldn’t help but start the conversation by asking why a young guy with a very expensive car was driving for Uber. “Well, my dad has a successful business, so I haven’t had to get a job . . . and I’m bored. One of my friends told me I could meet interesting people driving for Uber,” he said.
I asked how that was working out. “Well, today is my first day,” he replied. “But it is pretty cool to drive a foreigner.” I’d be surprised if he lasted more than a couple of days.
My Own Boss
Mr. Wang was more experienced, having driven his Buick for Uber for a few months. Prior to that, he drove for a company, but he quit for the freedom to set his own schedule. Initially, Mr. Wang drove for DiDi, although he said, “I make more money with Uber, and the customers are better.” He thought many riders were switching to Uber from DiDi, because it is easier to get a car. “DiDi drivers can see the customer’s destination before they pick him up, so often they will reject a fare they don’t like, while with Uber, we don’t know until the customer gets into our car,” he said.
Not a Cop
When I climbed into Mr. Zhou’s Toyota Camry, he said he was thrilled to discover that his next passenger was a foreigner. “This business isn’t really legal, and other drivers have told me that cops are ordering rides and then fining drivers 10,000 renmimbi (RMB or US$1,570). And when I saw you, I knew you couldn’t be a cop!”
Mr. Zhou told me that his son, who is studying in the U.S., bought the car for him specifically so he could drive for Uber. I asked if he was retired. “Ha, no. But I work for a state-owned company, which is almost like being retired! I’ve got nothing to do all day, so I just leave the office and drive to make extra cash!”
Better than Driving a Truck
Mr. Luo quit his job driving a truck to join the ride-sharing economy. He told me he started with DiDi, but said Uber passengers are “better behaved,” something I heard frequently from drivers who couldn’t really explain the difference.
He said the money was okay, taking home RMB700 (US$110) for a 12-hour day of driving.
Better than Driving a Taxi
Mr. Yu gave up a long career as a taxi driver to strike out on his own. He also started with DiDi, but switched to Uber because “DiDi charged me too many fees. Either is much better than a taxi. More relaxing as there is no boss, and I can take a break anytime. And Uber passengers are much better than taxi passengers,” he said. He estimated that he took home about RMB7,000 (US$1,099) a month driving for Uber.
The Long Haul
Overall, the Shanghai Uber experience was pretty good. Two drivers never appeared—I watched as one drove by without stopping, possibly assuming that a foreigner couldn’t have been the customer—and in both cases I was automatically charged a cancellation fee of RMB10 (US$1.60). But when I filed a complaint through the app, those fees were immediately refunded.
The fares were ridiculously low, presumably due to large subsidies from Uber as they try to grab market share from DiDi. That will be just one of the many challenges the American firm faces in the future, along with an uncertain regulatory environment, and the issue of retaining drivers after the novelty wears off.
Andy Rothman is Investment Strategist at Matthews Asia.
