Lyft’s partnership with Didi is on the skids after Chinese app merges with Uber

Lyft, the number two ride-sharing app in the US, says it will reevaluate its partnership with Didi Chuxing, the dominant service in China. This comes after the latter announced Monday it was acquiring Uber’s China operation.

Lyft and Didi have been partners since last December, when the two companies formed what was widely viewed as an anti-Uber alliance, along with Ola and Grab, the largest ride-sharing apps in India and Southeast Asia, respectively. The team-up was meant to stem Uber’s growth in Asia, while also boosting Lyft in the US and preventing a global takeover by the aggressive Uber.

That partnership allowed Didi customers to use their app to hail a Lyft driver when traveling in the US, and vice versa for Lyft users in China. But that now seems unsettled after Didi and Uber announced their merger.

In a statement, a Lyft spokesperson took a veiled swipe at Uber for even bothering to compete with Didi in China, given the favoritism shown to homegrown businesses by Chinese regulators.

“We always believed Didi had a big advantage in China because of the regulatory environment,” the Lyft spokesperson said. “The recent policy changes are exactly why we did not invest in the region. Over the next few weeks, we will evaluate our partnership with Didi.”

Uber’s deal with Didi, which values the combined company at $35 billion, raises serious existential questions for Lyft, which has been struggling to gain sufficient marketshare in the US.

Comments

How is there not legal recourse for Lyft in the wake of this news with Uber?

Such as? It’s not exactly unusual for Silicon Valley competitors to receive investments from the same companies.

Didi and Lyft had a partnership – far more than a typical investment. I would certainly hope that Lyft included legal protections in their partnership contract for reasons exactly like this. Uber merging with Didi in China completely undercuts whatever partnership Lyft had with Didi prior. There is significant loss/damage done to Lyft because of this. Both Lyft’s partnership and Uber’s merger with Didi in China are significantly more nuanced than simple investments in Didi as you appear to believe. Apple made a simple investment in Didi. What Uber and Lyft are doing goes beyond a simple investment as it is more of a joint operational partnership as opposed to straight up cash.

That partnership allowed Didi customers to use their app to hail a Lyft driver when traveling in the US, and vice versa for Lyft users in China. But that now seems unsettled after Didi and Uber announced their merger.

Why? Uber and Didi haven’t announced many of the specifics of their deal, except for Didi acquiring Uber China’s operations — which will have a minimal effect on Lyft. Meanwhile, Lyft still has partnership deals not only with Didi, but also Ola and Grab, and despite its deal with Uber, I would assume the terms of its arrangement with Lyft remain largely the same: Lyft users visiting China can summon Didi cars with their Lyft app, and vice-versa.

Uber’s deal with Didi, which values the combined company at $35 billion, raises serious existential questions for Lyft, which has been struggling to gain sufficient marketshare in the US.

Oh come on now. Have you even been paying attention — on a granular level — to what’s actually been going on at Uber and Lyft? Rather than waste untold billions overseas, as Uber has (and that’s money it’ll likely never recoup – Didi’s acquisition price was considerably less than Uber has spent developing its Chinese operations), Lyft has been focusing on the domestic market. In an increasing number of cities, its market penetration levels are close to, or even higher than, Uber’s, and its recent growth rate among corporate travelers has exceeded Uber’s by a considerable margin.

Finally, Uber has an intractable problem it hasn’t yet been able to solve: its driver attrition rate is massive, as are its expenses for pulling in replacement drivers — and the point at which they will have literally burned through a given market’s entire pool of potential drivers isn’t yet here, but it’s clearly in sight. If you read local reports from passengers in Uber’s oldest markets, you’ll notice a marked pattern of deterioration of service levels; in particular Uber appears to be hiring young and/or inexperienced drivers who often don’t know their way around town and don’t know how to respond if their mapping app goes down (as is commonplace in building-dense cities like NYC and SF).

Lyft admittedly has a driver-attrition problem, too, but on a vastly lower scale because TNC drivers almost universally prefer driving for them over Uber, thanks in large part to its intra-app tipping functionality (and, based on what I hear from drivers, considerably more driver-friendly work policies than Uber). Lyft has also wised up and gotten rid of its silly fistbumps and gargantuan pink mustaches on drivers’ grilles, not to mention lessening its use of hot pink in general, given that all of it was a broad turnoff for male passengers in particular.

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