In response to an earlier report of LanJing TMT (“蓝鲸TMT”) stating that Alibaba has acquired a 10% stake of UCAR, the e-commerce giant released two statements on the same day, reiterating the company’s support for Didi while staying mum on the rumor of the UCAR equity deal. The deal, if confirmed, is believed to have the potential of intensifying the already fierce competition in the chauffeured service market.
Launched by Chinese car rental firm CAR Inc. in January 2015, UCAR received US$250 million from Warburg Pincus LLC, parent company Car Inc., Legend Holdings and other investors in a series A funding round in July 2015.
Alibaba putting out revised comments
LanJing TMT released a screenshot of a stock transfer book provided by a UCAR investor. The paper carries the signature of Mr. Charles Lu, CEO executive director and CEO of CAR Inc. Two Alibaba companies, namely Alibaba.com China Limited (“阿里巴巴网络中国有限公司”) and Alibaba.com (“阿里巴巴(中国)网络技术有限公司”), are said to hold respectively 33,597,312 shares and 33,597,312 shares of UCAR, or 67,194,624 shares combined, which is approximately 9.8% of the total 688,312,935 UCAR shares. Alibaba’s UCAR stake of 9.8% works out to be worth about RMB 3 billion.
The UCAR spokesperson said they had not been informed of such deal while a spokesperson from Alibaba said in a statement:
1) Alibaba’s cooperation with Didi is close and pleasant, and Alibaba will continue to support Didi’s development.
2) Alibaba has no new plan on transport service at the moment.
However, Alibaba soon released an amended statement with revised wordings:
1) Alibaba’s cooperation with Didi is close and pleasant, and Alibaba will continue to support Didi’s development.
2) Alibaba has no plan on making a major investment in transport service providers such as UCAR at the moment.
The company did not respond to Beijing Business Today reporter’s question on “whether acquiring 10% stake of UCAR is considered a major investment”.
Cooperations between the companies have long been underway
Though the deal between Alibaba and UCAR is yet to be officially confirmed, the companies have been collaborating closely and quietly for a while.
Beijing Business Today reported that UCAR and its parent company CAR Inc. have agreed on strategic cooperations with Alibaba and will set up a flagship store on Alitrip by direct links to make available UCAR’s chauffeured and CAR Inc. rental services on the Alitrip platform. Users can access CAR Inc. designated channel on the Alitrip website or its App to book hired car and rental car services.
UCAR and CAR Inc. plan to put together value-added packages combining car hire with travel-related elements such as accommodation, golfing or excursions offered by Alitrip, to leverage the user bases of the car companies and Alitrip that overlap to a great extent.
Heightened competition in ride-sharing
“Alibaba did have shares in Didi but Tencent also has a stake in the car-hailing company, thus there’s probably a bit of arm wrestling between the two,” said Xu Zhang, chief research officer, Online Transport Study of Analysys. “But Alibaba would save itself much trouble if it teams up with UCAR, because in this way Alibaba will be able to provide more transport options for its users.”
According to public financing information about UCAR, among the company’s investors are Warburg Pincus, CAR Inc., Legend Capital, China Industrial Asset Management (“兴业资管”), New China Capital (NCC, or “新华资本”), China Chengtong Group (“中国诚通”). If Alibaba becomes an investor, the internet giant would become UCAR’s first investor with a complete business ecosystem, and would offer much momentum for UCAR’s growth.
UCAR garnered 40% of the market share last year, lagging behind top runner Didi by 6.6%, but UCAR’s average monthly growth of 32.9% outperformed Didi’s, according to Analysis of China's Premium Chauffeured Car Market report in 2015 by Roland Berger. Didi was said to be planning to raise another billion US dollars last month, shortly after Uber’s completion of its B-round funding that raised more than one billion US dollars.
“UCAR’s strength in B2C chauffeured car service will be underscored as the volume of its business expands. And if the report of the Alibaba deal is true, the industry competition will surely be intensified.” (Translated by Jerry)
