Economists see ride-hailing industry as ripe for competition
By Heather Somerville
SAN FRANCISCO (Reuters) - Chinese powerhouse Didi Chuxing's acquisition of Uber Technologies Inc's China operations marked the biggest move yet toward consolidation in an industry that many investors and Silicon Valley pundits view as a winner-take-all game.
On the day the Didi deal was announced earlier this month, Uber board member Bill Gurley said Uber's rivals in other markets had a slim chance of splitting the market with the dominant player, just as Uber struggled to erode Didi's share in China.
After China, the industry will consolidate in other markets, said Hans Tung, an Asia-focused investor and managing partner at GGV Capital, which backed Didi and Grab, a Singapore-based ride service.
"There will be a dominant No. 1," he said that same day.
The consensus of 11 economists interviewed by Reuters, however, suggests an entirely different scenario, one of perpetual competition in a business with relatively few barriers to entry.
"That one firm wins is a narrow and not accurate way to think about these firms," said David Evans, chairman of the Global Economics Group and co-author of a recent book that included Uber, "Matchmakers: The New Economics of Multisided Platforms."
Ten other economists who have studied ride-hailing agreed that the growing industry, which UBS estimates to be a $40 billion market, has room for at least two successful players, and perhaps a few smaller ones.
The industry, they said, has none of the elements that traditionally have enabled single companies to control a sector. If it is the first of its kind, a company can dominate markets that have huge infrastructure costs, such as putting up cell towers or laying pipes; a large workforce of employees with specialized skills; and customers who get locked into a service and have difficulty leaving for competitors. Continued...