CEOInterviews.AIEveryone vs. Uber | Jean Liu President, Didi and Anthony Tan CEO, Grab

H

Host0:00

We're now going to talk about car sharing, and not what you think. Let's bring out two people, Jean and Anthony. One of the reasons we're really excited to have you here — Silicon Valley is Uber-obsessed. I know you don't want to say the word Uber, I get it. But they just dropped a big press release: they raised $3.5 billion from the Saudi government's sovereign wealth fund. You raised a billion from Apple, which is fantastic, but now it looks small. Would you rather have a billion from Apple or three and a half billion from the Saudi government?

J

Jean Liu1:37

We're looking for a strategic partner.

H

Host1:39

All right. So let's talk about the money. Anthony, how much have you raised? Close to 700 million?

A

Anthony Tan1:45

Close to 700 million, yeah.

J

Jean Liu1:48

Well, we have raised probably five billion before this round. On the Uber news, our industry is still in a very early stage. More capital means faster growth, benefiting everyone. And the current round we are raising is actually already bigger than the number they just announced. Fundraising can go on forever, but at the end of the day you still need to figure out what's real. If you want to win the market, it's really about winning the hearts of the users. That's what we're focused on.

H

Host2:30

So let's talk about fundraising first. We'll talk about products too, but what is all this money? It's almost like an arms race. Anthony, why don't you talk about it first?

A

Anthony Tan2:40

How we think about it: first, do we have enough capital? For us, we have close to two-thirds of all the capital we raised. We understand what is important as strategic partners, so we chose CIC, the sovereign wealth fund of China, and SoftBank — great partners who believe in Southeast Asia, a population of 630 million people, double the size of the United States, and who believe in Grab's long-term view. More importantly, what is really important is this whole user experience, being locally relevant city by city. Take Indonesia — 230 million people. If you make a cookie-cutter black car model, that's not going to work. People run three hours per day in commute times. With GrabBike, a motorbike taxi, you can run for 30 minutes and save two and a half hours. Being able to offer taxis, cars, and motorbikes — a multimodal transportation system — that really differentiates and is locally relevant.

H

Host4:04

The amounts of money are massive, it's quite mind-blowing. Where does it go? You're operating in China with all kinds of services. What is the strategy behind this fundraising? Is it subsidizing rides? When are you going to stop subsidizing? It seems like a land grab to me.

J

Jean Liu4:43

That's a very good question. In terms of fundraising, what we are really looking for is not just capital — it's more strategic value. That's why we have been partnering with really strategic partners. We partnered with Tencent — every Chinese uses WeChat, 600 million users. You use Tenpay, you use Alipay — everyone knows Alibaba, the largest e-commerce company worldwide. And now we have Apple. Why? Because this industry is still in its infant stage. We just broke a record: 14 million rides on a daily basis — five times the total number of rides in the entire ride-sharing industry in the States. But it still only means 1% penetration. Only 1% of people commuting in China are using us. There's huge room to grow, but you can't just grow by yourself. You need a lot of strategic help.

H

Host6:14

I want to go back to something Cara raised. It sounds like you have a lot of capital — she's saying her current round is bigger than the $3.5 billion Uber announced, and you already had $5 billion. You'll be one of the best-capitalized private companies in any business. Yet you're still subsidizing rides. Does that mean the business itself isn't obvious enough that at a reasonable price customers would just pay without you subsidizing?

J

Jean Liu7:11

Sure. First of all, we're subsidizing much less compared to three or four years ago. The level of subsidy keeps decreasing because the network is already built. When you don't have enough drivers or passengers, it takes an hour or two to get a ride, so at the beginning you need to incentivize people. But once you have 14 million rides including 11 million private car rides, you have a sufficient network and get your ride much quicker. In a lot of mature cities, we don't have subsidy at all. We have business in 400 cities and are profitable in 200 cities.

A

Anthony Tan8:16

Together we are serving 1.3 billion people. Together we are serving 2 billion people worldwide. The capital, acting wisely, has to be the number one priority. In Singapore, less than 1% of all transactions are subsidized from the passenger side because there's excess demand over supply. In Southeast Asia, 630 million people, double the size of the United States, but only about 6% car ownership versus 60% in the US. When you have excess demand, you need taxis to supplement the entire business. In Singapore, we customized technology so one push of a button aggregates all taxis and cars. Singaporean consumers are indifferent between a taxi and a car.

J

Jean Liu9:51

Let me lay out some background first. What's happening in China and why it's different from the States. In the States, everyone has a car. Not really in China — car ownership penetration is less than 10%. We simply can't grow car ownership as fast. Car sales dropped to single-digit growth because of space constraints — the roads can't afford more cars. In Beijing, we have 5.6 million private cars but only 2 million parking spots. Most cars park on the road — even Ferraris. To get a license plate in Beijing is a lottery system because they don't want more cars on the road due to air quality and congestion. We have 44 cities with populations over 2 million. The population of each city outgrows the transit system, creating a dilemma: how do you move people from point A to point B?

H

Host12:00

Isn't this the perfect condition for your company? Why should you have to subsidize anything? Why do you need to raise capital? Aren't you in great shape?

J

Jean Liu12:10

I'll come to that point. First, cars can't grow much. Second, we have mega cities — Beijing has 30 million people. The population of each city outgrows the transit system, creating a dilemma. What we're really trying to do is DiDi Mobility — a big concept of transportation. It's not just private cars. We started as a taxi-hailing app, meaning our software platform can dispatch taxi drivers to pick up passengers from the street. We're more than just a black car service.

H

Host13:20

Let's talk about your partnership together, and then your partnership with Lyft. It could be seen as the two sides in The Avengers. Did you have to decide to get together? Most people saw it as an anti-Uber initiative — the coalition of not-Uber. How did you look at it? Anthony, first.

A

Anthony Tan13:42

I had the pleasure of meeting Cheng Wei several years ago. We were united on one vision: local companies rising and solving real local problems, showing the power of a local company. We wanted to focus on safety, congestion. In Southeast Asia, a very senior government official in Indonesia said it's not the world's most congested traffic situation — it's the world's largest car park. Cars just don't move. Hence the GrabBike solution, and understanding that the P2P car market alone is not sufficient. In Southeast Asia, 95% of all transactions use cash — only 5% use credit or debit cards. We agreed it was about localization, taxis with ample supply, and being able to monetize from cash transactions. Cash was a huge advantage.

J

Jean Liu16:00

There are a lot of reasons for us to be together. First, we're serving 2 billion people together. There's a lot to share — this industry is only at 1% penetration in China. On technology, we have a lot of local innovation. The hitch product is very convenient — drivers preset their destination and pick up anyone going the same way. It's very environment-friendly. China has a lot of people, so the algorithm is well tested. When we invent something, we can share with Anthony, and when they do something interesting, they can share with us. We launched hitch as well.

H

Host16:45

What is the relationship with Lyft then? Is Grab coming to the United States? Is DiDi?

A

Anthony Tan16:51

Today we're very pleased to announce that on the Grab app, you can access all of Lyft's cars. Customers from Singapore, Bali, Jakarta can come to New York or San Francisco — anywhere Lyft offers services. Just with the app you use at home, your same credit card, same user interface, you have full access to all that supply. With that global partnership, we actually have the world's largest number of cars and motorbikes.

H

Host17:44

Why don't you acquire Lyft? You have all this capital. Does that have to happen?

J

Jean Liu17:56

I don't think you necessarily need to own a company in another country to provide good service. The product Anthony just talked about is great — we have that too. A Chinese person coming to the states only needs DiDi to access a Lyft car, and vice versa. You don't even need to know Chinese. This already serves a lot of purpose because our end goal is to serve our customers best. We invested in Lyft — they've almost doubled their market share last year, and even in the first quarter they grew 50%. In San Francisco they have 45% market share. Local champions have their own advantages: they know the people, the market, and the regulatory environment.

H

Host19:13

When you get an investment from Apple, you say it's strategic. Many people think Google will end up buying Uber. Apple could buy you all. Does that have to happen? Is it inevitably heading that way?

J

Jean Liu19:33

From a very big picture perspective, we need to be collaborative and inclusive. You can't do everything yourself.

H

Host19:41

So what does Apple bring? They bring a billion dollars and a shiny brand name. But you keep talking about strategic. Apple isn't in this business — what do they bring to you?

J

Jean Liu19:57

Apple is a leading technology firm. We respect them a lot. There's one thing we share in common: in China, they serve a huge number of Chinese users. A huge percentage of our drivers and customers use Apple. And we serve the 800 million urban Chinese. There's a huge common ground and overlap — we serve the same type of users.

H

Host20:26

How does that manifest itself? If I go back to Beijing and use the app to get a car, is there going to be an iPhone ad in the back?

J

Jean Liu20:36

There are a lot of things you can imagine. This is still in early discussion. We'll talk to them and they'll talk to us about how we can work together.

H

Host20:54

Last question. You each have innovative products people aren't as familiar with. Most people know Uber and Lyft here — ride sharing, UberPool, Lyft Line. What product do you see as most unusual for each of your companies? Let's start with Anthony.

A

Anthony Tan21:31

For us, on one platform we have taxi, car, bikes, and what we're developing now is our payment side. In Southeast Asia, there's no Alipay or WeChat Pay. We think about how to increase engagement. You can pay by cash, credit card, debit card, including direct debit from your bank account. Most people use cash. We launched this a year ago, and in Singapore close to 40% of people are moving towards GrabPay. It's so much more convenient — and the difference is you can now do it with people who have no credit history, just a simple bank account.

H

Host22:35

Now Jean, you had the drunk ride thing where people are drunk and someone gets you and brings you home. But buses are taking over China's transportation system?

J

Jean Liu22:46

There's a whole range of products because China is such a complex market. Taxi is definitely very important — it differentiates us. From a supply perspective, taxi is a very important part of the supply system. We also have private car, hitch, and one thing I want to talk about: chauffeur service. A lot of people on our platform own a car, go to work, have a party, and after some drinks need to get home. Calling a private car is troublesome because the next day you still need to go back to the restaurant to get your car. So we invented this: you press a button and get a driver without a car who comes on a scooter, then drives your car home for you. Drivers like to do this — especially off-shift taxi drivers who find the unit price higher — and it's extremely convenient for partygoers. We have at least 3 million people using that service on a monthly basis.

H

Host25:06

Do you imagine taking over the public transportation systems of your country?

J

Jean Liu25:11

We see ourselves completely integrated — whether you jump on a bike, a car, or a bus. How do we work with the limited rail? We work with the government. We've been the first ones approved and legalized by many governments — completely integrated on a collaborative approach. If you're a mayor, all you care about is less congestion, cleaner air, fewer protests, and more employment. Working with the public transportation system is a very strong advantage for us. Only 20% of people in China are well-covered by bus or subway — the rest rely on bicycling or other means.

H

Host26:16

Great. Questions from the audience.

A

Audience Member26:23

Hi, I'm Rosa. Uber is doing experiments in Colombia — one called Uber Angel, which is exactly what you're doing for people who are drinking. They take your car and drive you home. They also have Uber Pet and Uber Bike. Are you trying to do experiments like that?

J

Jean Liu27:07

We launched the chauffeur business last June — almost a year now. For hitch, we've also been operating almost a year. In terms of local innovation, we've been quite adventurous and successful.

A

Anthony Tan27:34

Besides hitch, which many people use for daily commuting, we launched Grab Express — a point-to-point delivery system — because we have the largest number of bikes across all markets. We also launched Grab Food — hot food within 30 to 40 minutes. Very localized services addressing congestion — waiting three hours for lunch just isn't fun.

H

Host28:12

There's Uber Pet in Colombia — that's really interesting. Soon there'll be 'Uber I'm Too Fracking Lazy to Walk.' Any more questions?

A

Audience Member28:26

Where do you imagine this worldwide car-sharing fight to end? Will one company win a country and then it moves on? They're coming at you hard with huge spending — is it going to be a fight over each country?

H

Host28:58

Jean, you answer first, and then Anthony.

J

Jean Liu29:00

In China's private car service, we have 87% market share — even with Uber consistently offering 20 to 30% discounts nationwide. Our market leadership hasn't changed at all. For taxi, we almost own 100%. China is a very special country. At least for China, technology is really the key. On the subsidy question: how many people here would wait an extra 30 minutes for a 30% discount? Nobody. Market leaders don't need to buy more market share — only smaller players do. That's common sense.

H

Host30:07

I'm a pro-subsidy guy. We don't mind taking venture capital people's money and getting free food. I always call San Francisco 'assisted living for millennials.' I benefit as an old lady — free food, great rides, everything. It's wonderful.

J

Jean Liu30:34

For the ride-sharing industry long-term, this will be a network, and cars will be a service, not just an asset. EVs will play a very important part — they don't make sense for individuals to buy, the cost doesn't justify it. But on our platform with 30 rides a day, in five years 50% of cars could be EV. The system will be personalized: every time you go downstairs, Big Data already records what you do. On Monday it could be a seven-seater with a baby seat; on Tuesday a black car. Machine learning makes it very smart. Of course, that's very creepy.

H

Host31:22

Creepy, creepy, creepy. You're creeping us out.

J

Jean Liu31:25

It depends on what you're looking for. Like Jeff said yesterday, you want your best service. And we protect privacy.

H

Host31:40

That doesn't mean Jeff wasn't creepy either. Okay, we got a question.

A

Audience Member32:14

Hi, I'm Jeetu Patel from Box. I had a quick question about autonomous driving vehicles in China. Do you feel traffic conditions there would support that over time? Are you investing heavily in that area?

H

Host32:33

Not the bikes yet — great idea though.

A

Anthony Tan32:35

No cookie-cutter model, very tailor-made. In Singapore, the government is very proactive with the SDV ecosystem — fully autonomous, that's what we're involved with. In markets like Thailand or Indonesia where maps are still not clear — one day a one-way street, tomorrow a four-way street — we spend a lot of time thinking about how to navigate those roads. That's where our data science and dynamic routing algorithms are focused.

H

Host33:15

Jean, we'll give you the last word.

J

Jean Liu33:18

Road conditions in China are very complex and the cost structure is very different for autonomous driving. It would take a while for the technology to mature first, and then how you commercialize it. When autonomous cars get cheaper, normal cars get even cheaper. It's interesting to watch. As the biggest network operator, we will be uniquely positioned. We haven't made investments yet, but we're closely watching it.

H

Host33:51

If autonomous vehicles became a reality in China, would it be additive to your business model or would it disrupt it? Your biggest asset is the supplier network. If GM dropped 10,000 cars in China, wouldn't that level the playing field?

J

Jean Liu34:19

We're working with almost everyone in the OEM field. All the OEMs have come to us because we're an open platform, technology-neutral. From that perspective, we have a very good position. And I want to remind all automakers: when you get an autonomous car in China, you probably want to put it in aggression mode — otherwise you won't be able to move for a week.

H

Host35:01

She's not going to say what Travis said here many years ago — 'someday hopefully we won't have any drivers.' Good try anyway. Thank you both.

Everyone vs. Uber | Jean Liu President, Didi and Anthony Tan CEO, Grab | Code Conference 2016