2003: Starting with Foreign Trade

Chapter 1004 Taking advantage of your illness to kill you.

The competition in the automotive industry is incredibly fierce, and the internet industry, which had been quiet for half a year, also made a big splash in early July.

On July 9, all 25 apps under Didi were forcibly removed from app stores. This was another fatal blow, following the suspension of new user registration on July 2 and the removal of the main Didi app on July 4.

"We also need to pay attention to data security to avoid any unnecessary misunderstandings, especially when collecting road data for navigation. We must be particularly careful about this."

North America has just announced a new law governing foreign companies, and we will also officially implement a data security law on September 1st of this year. This can be seen as a countermeasure. Technological decoupling has actually been going on all along, and whether it's some old man or us, everyone's attitude is the same.

If there was still some hope in the early stages of the outbreak in 2018, it is now basically impossible. Everyone is quietly developing themselves and engaging in a technological race.

On the issue of data security, everyone is locked in a fierce battle.

Since Gaode Maps was acquired by Tan Jincheng and delisted from the stock market, it has adopted strict measures in terms of data security. Among all companies, Gaode Maps has the highest level of data security.

Despite warnings from domestic regulators, Didi insisted on listing on the US stock market and went public on June 30. Throughout the process, in order to circumvent regulations, Didi's management team kept a remarkably low profile, which was unlike that of an internet company.

Before its IPO on June 30, Didi was valued at over $62 billion in the private market, and its IPO was aiming for a valuation of $100 billion. Although it did not achieve a valuation of $100 billion, its performance on the first day of trading was still good. Its market value once exceeded $80 billion, making it the third most valuable ride-hailing company in the world after Uber and Tesla.

If we include Wei, then Didi is the world's fourth largest ride-hailing company. To be honest, the pre-IPO valuation of $620 billion is not high for Didi. Didi, which has been established for nine years, raised $210 billion in funding before its IPO.

A $620 billion investment only represents a return of about three times the initial investment, and the highest return on the day of listing was no more than four times. For internet companies that often achieve returns of tens or hundreds of times their initial investment, this is hardly a bubble.

Undoubtedly, with a funding round of up to $210 billion and a duration of nine years, early investors did have an exit strategy. Major early investors such as SoftBank, Tencent, and Uber invested through a fund model, along with funds from other investors.

With the funds now maturing and no one willing to take over in the primary market, these large investment institutions urgently need to cash out in the secondary market. Meanwhile, with slowing growth and fierce competition in developing new businesses, Didi also needs to raise more funds through an IPO to cope with its future operations.

Even though Didi's founder, Chen Wei, believed that it would be more appropriate for Didi to postpone its IPO, Didi, which was deeply influenced by capital, still chose to go public secretly despite warnings from regulators, and even chose to list on the US stock market.

After the Data Security Law officially comes into effect in September, Didi's valuation will definitely be greatly affected, and it will not be so easy for it to list on the US stock market with a larger float at that time.

Didi's management, or rather the capital behind it, wants to adopt the same strategy used in the internet industry before, which is to follow the same approach used by Pinduoduo and Ali when they went public: go public first and then make changes.

Didi's attempt to use this outdated approach clearly demonstrates a serious misinterpretation of the policy. To paraphrase a line from a movie, it's like saying, "Sir, times have changed."

Didi's performance in the first few trading days before its listing was also very impressive. On the first trading day, it surged by more than 18%, although it only rose slightly by 1% in the end. However, the optimistic sentiment continued on the second trading day, with a 9.8% increase on July 1.

However, Didi's euphoria lasted only two trading days. Since facing real regulatory scrutiny on the 2nd, Didi's stock price plummeted. By July 9th, when all of its apps were removed from app stores, Didi's stock price closed at $11.21.

Within ten days, the market value shrank by $180 billion, and the resulting chain reaction was that the listing of Chinese concept stocks was almost entirely in a temporary state. For example, Full Truck Alliance and ByteDance, which was seeking to go public, both terminated their listing plans.

Like Didi, Gaode Maps is also in a sensitive industry. However, after it came under the control of Tan Jincheng, Tan Jincheng has never relaxed his control over Gaode. When it comes to doing business, being sensible is the most important thing.

While Gaode Maps' initial independent status made it easier to manage, it was detrimental to the company's development and strategy. After merging with Orange Group, Gaode Maps ushered in a tremendous development opportunity.

Closer cooperation with the capital market has made other companies more confident in their partnerships. Although Gaode Maps still primarily focuses on advertising and business services, enterprise services and other services now account for 40% of its business.

Car manufacturers, logistics companies, e-commerce platforms, data services, government-enterprise cooperation, etc., are all new growth points for Gaode Maps' revenue.

Didi's pursuit of a rapid IPO is also related to Gaode Maps, which currently boasts over 600 million monthly active users and over 100 million daily active users, firmly holding the top position among map service providers.

With its large user base and map service advantages, Gaode Maps has long coveted the ride-hailing service market. Leveraging its aggregation platform model, Gaode has become the second largest ride-hailing platform after Didi.

The demand for travel, the introduction of the Orange ecosystem, Gaode Maps, the T3 platform, and the mobility companies of major car manufacturers have all posed a certain threat to Didi Chuxing.

All of Gaode's data is stored in China, and it is not listed separately. In addition, Gaode Maps does not disclose specific financial data; it is simply incorporated into Orange Innovation Business segment.

By using this compliant yet ambiguous approach, Gaode aims to avoid attracting the attention of the capital market and North America. As for potential risks, Tan Jincheng doesn't care at all. If North America wants Gaode's data, Tan Jincheng will never pay attention to them like he does to Didi.

At worst, they can just privatize and delist Orange Technology from the US stock market. Anyway, Orange is doing very well on the Hong Kong Stock Exchange right now, and as the relationship between the two sides changes, the Hong Kong Stock Exchange's position is becoming more and more important.

More and more technology, new consumption, and internet companies are listing on the Hong Kong Stock Exchange, such as Ali, JD.com, Meituan, and Kuaishou. These companies are either listing on the Hong Kong Stock Exchange for the second time or listing directly on the Hong Kong Stock Exchange.

If Didi hadn't been in such a rush and insisted on listing on the US stock market, its listing on the Hong Kong Stock Exchange, with regulatory approval, might not have resulted in its eventual delisting.

After multiple rounds of dilution, Tan Jincheng's personal investment and ByteDance's investment in Didi have resulted in a small shareholding, making him not even a financial investor but rather a general shareholder.

On the day of the listing, ByteDance's secondary investment department sold off all of these shares as instructed by Tan Jincheng.

The remaining Didi shares only yielded a cash investment return of US$1.2 million. This investment wasn't particularly profitable, and the return was even lower than when the express car was transferred. Tan Jincheng didn't really care about it.

If he hadn't been in North America in June, he wouldn't have remembered reminding Cheng Linfeng to sell his Didi shares.

Under normal circumstances, ByteDance's advertising platform will observe successful IPO projects for a period of time before finding a suitable time to exit or increase its stake based on market performance. There were many rumors before Didi's listing, most of which concerned regulatory matters.

However, the successful listing has led to some misunderstandings in the capital market, with some believing that Didi will not face the same level of strict regulation as Ali. The stock price performance in the first two trading days was also based on this view.

From January to June 2021, the index of Chinese concept stocks rose by 20%, and the PE ratio of US tech stocks was generally 30 to 50. If Didi had not faced strong regulation, its market value would have almost certainly exceeded 1000 billion US dollars in the short term.

From a long-term perspective, whether compared to Uber or Meituan, Didi's market value should be between US$1200 billion and US$1500 billion, and could even reach US$2000 billion.

However, no if.

“Didi’s entire app has been removed from app stores, and the rectification period will not be short. This period is an opportunity for Gaode to develop its ride-hailing business, and you must seize this opportunity.”

After Didi's incident, Tan Jincheng went to Gaode's headquarters immediately.

Internet-based mobility is actually a good supplement for car companies. The rapid growth of ride-hailing services has brought considerable sales to new energy vehicle companies, both to B-end and C-end users.

The B-end market goes without saying, but in the C-end market, many people have also bought a new energy vehicle to drive for ride-hailing services. Although driving for ride-hailing services is no longer as profitable, it is at least a relatively stable source of income.

In addition, one of the biggest advantages of the two new employment industries, food delivery riders and ride-hailing drivers, is their ability to withdraw money instantly, which brings great convenience to most people with poor economic conditions.

Working in a factory means your wages are held back for at least ten days to two weeks. Although the payday is fixed and stable, it's still inconvenient, and many people in financial difficulty simply can't wait until payday.

However, food delivery riders and ride-hailing drivers are different. Although their daily income may not be much, accumulating several days' worth of income can help them solve their immediate problems.

"Yes, we have already formulated a plan to compete for drivers."

The CEO of Gaode is still Cheng Wu. Unlike in his previous life, when he gradually faded out of Gaode's operations after being acquired by Ali, this founder of Gaode still leads everything about Gaode.

Chengwu's operational strategy is similar to Tan Jincheng's, prioritizing technology and having a deep presence in high-precision maps and autonomous driving. Gaode now collaborates with almost all major domestic automakers, demonstrating its deep involvement in the automotive industry.

2021 was a breakout year for autonomous driving technology, with the adoption rate of L2 intelligent assisted driving systems reaching over 20%. AutoNavi has also achieved great success in this regard.

Tan Jincheng's instructions to Chengwu were that Gaode didn't need to make money, but they needed to produce something technically. This suited Chengwu's background in surveying and mapping very well, which was why he stayed with Gaode.

Over the years, Chengwu has promoted cooperation between AutoNavi and more car companies to provide dedicated maps for autonomous driving, cooperated with the government to participate in smart city transportation projects, consolidated its B-end advantages, and explored vehicle-road collaboration.

Currently, we are working with local governments to test V2X vehicle-to-everything (V2X) projects to enhance Gaode's irreplaceable position in the field of intelligent transportation. We aim to compete using technological barriers rather than subsidies, thus avoiding direct competition with Didi and Meituan.

"Oh? Tell me, you've always been very cautious about expansion."

Tan Jincheng became interested. In his previous life, he preferred using Gaode Maps, but he disliked its overly complicated interfaces. Therefore, now that Gaode was under his control, although it still offered advertising and other services, the interface was much simpler and clearer. Although Gaode was under the Orange Group, it maintained a high degree of independence under Tan Jincheng's requirements. In actual operation, only a few top executives at Orange could have some influence, and any major changes required Tan Jincheng's approval.

Calling them independent companies is really no different. Tan Jincheng has been criticized by Orange Group's investors for this. Every time there is a shareholder conference call, there are several shareholders who complain that Gaode is taking up Orange's resources, but Orange cannot interfere with Gaode's operation.

Especially Tencent, whose map service has never really taken off, despite various traffic redirection methods. As a major shareholder of Orange Group with a certain voting right, Pony Ma has mentioned this issue quite often.

However, Tan Jincheng ignored all of this, saying, "Say whatever you want, I'll listen."

Are you kidding me? How could I possibly give you such core technology? Just follow along and make some money.

In short, Gaode is actually still under the control of Tan Jincheng and Cheng Wu. When Cheng Wu makes a decision, he directly communicates with Tan Jincheng. Lu Qi doesn't care about this. He is focused on developing his artificial intelligence.

Lu Qi had little interest in the rights of the subsidiaries. This was one of the advantages of having a technically-oriented executive. Compared to having a CFO as CEO, a technically-oriented CEO wouldn't be overly concerned with financial data, thus reducing unnecessary power struggles.

"Haha, we are indeed very cautious about expansion, but we certainly won't let such an opportunity slip by."

The saying goes, "Strike while the iron is hot." As the biggest competitor in the ride-hailing industry, Cheng Wu, no matter how cautious he is, could not let go of this huge opportunity when his app was completely removed from app stores.

Although we know we can't touch Didi's core business, it's always good to take in a little more.

"Gaode needs stable profits, not blindly trying to dominate the ride-hailing market. We will make some investments in the ride-hailing sector, but we will strive for niche markets, so we will not use subsidies to gain market share."

"We will continue to focus on the aggregation model, using certain incentives to attract smaller platforms to join us. In addition, we will make some investments in the high-end travel market and try to grab some of Didi's business in this area."

"Boss, take a look, let me show you how it goes."

Cheng Wu was still grateful for Tan Jincheng's support. He rejected Ali's Gaode, which would definitely result in a lower overall valuation and the absence of a super portal platform like Ali's, making business promotion more difficult.

But for Chengwu, this was exactly what he wanted, and that was the reason he rejected Ah Li's offer to be acquired by Tan Jincheng.

Are there any new technologies being introduced?

"Yes, we have launched a one-stop service for booking navigation and travel, and we are also testing an AR real-scene ride-hailing mode, which will differentiate us from Didi in terms of user experience."

"The idea is good. The new internet ecosystem is actually about service. It's already very difficult to compete solely on price."

The first generation of market share grabbing involved subsidy wars and numerous large-scale battles, but the market back then was completely different from the market now, and consumer mindset was also completely different. This model is indeed no longer viable.

Major platforms have already established their own core customer base, making it difficult to truly capture their customers, especially in lower-tier markets. Once subsidies stop, they all leave, and without capital backing, sustainability is hard to achieve.

The ultimate model is to attract new users through product innovation.

Of course, necessary subsidies are essential, and these two are not mutually exclusive.

"Yes, we have indeed implemented some subsidy policies to attract smaller platforms and drivers to join us, but we will not start a full-scale price war. There will definitely not be a ride-hailing war like the one back then."

Chengwu's subsidy policy is mainly aimed at drivers, using commission reductions to attract them to join.

“We don’t know how long the Didi app will be taken off the shelves, but since it’s been taken off the shelves, it’s unlikely to be put back on the shelves in the short term. According to our assessment, Didi should not be put back on the shelves for at least six months, so our policy is based on six months.”

Although the app has been removed from app stores and new users cannot register, users can still use the app. A very real statistic is that even though Gaode is the second largest ride-hailing platform after Didi, its market share was only 5% before Didi's incident.

Didi holds a 90% market share, making it quite dominant.

Capital, you say, he does have strategic vision, but sometimes he is also very short-sighted. With Didi's current market share of up to 90%, even if he does nothing, there is no way he will run into problems.

But they had to pull this stunt.

"Taking six months as an example, we expect Didi to give up at least 20% to 30% of its market share, and that's the market share we want to win over."

Tan Jincheng nodded. Didi's daily orders are currently maintained at over 2500 million, covering all categories, while Gaode's daily orders are only 200 million, which is considered to be struggling to operate and not making any money at all.

The reason for continuing this is simply to collect data. While 200 million orders may not generate much profit for the ride-hailing business, they greatly facilitate data collection.

"So you're planning to increase your daily order volume to around 500 million?"

Giving up about 20% to 30% of the market share, which is roughly 10 million daily orders, is something Gaode cannot handle.

T3 and Meituan have also been eyeing the ride-hailing business.

Wang Xin and Chen Wei are supposed to be good friends, but these two are ruthless when it comes to betraying each other in their core businesses. Wang Xin was drinking with Chen Wei one day, and the next day he launched a ride-hailing service.

Chen Wei didn't hesitate and immediately launched the food delivery business, which was quite successful at one point. Part of the funds raised from Didi's IPO were actually intended for local service businesses, primarily food delivery.

"Yes, that's about the daily order volume. Although we're still not making money, we can collect more data for training, so this investment is worthwhile."

Tan Jincheng nodded. Indeed, this investment was worthwhile and aligned with his strategy as a captain.

In the "Big Boss" strategy, Gaode Maps is also an important part. Gaode is currently implementing a strategy of technological leadership and stable profitability, with limited participation in the ride-hailing business, and proactively avoiding risks and conducting independent audits in terms of data security.

The company is investing heavily in autonomous driving and has established deep partnerships with automakers. Its ultimate goal is to become a technology service provider and a niche mobility service provider, rather than a ride-hailing service platform in the true sense.

In its collaborations with car manufacturers, in addition to Weilai, Gaode currently partners with BMW, Audi, Mercedes-Benz, Xiaopeng, Wenjie, BYD, Geely, and other car companies, with the ultimate goal of increasing revenue from this area to over 50%.

A clear example is that Gaode's marketing expenses only account for 10% of its revenue, while its investment in technology research and development accounts for about 20%, with this portion of the expenses shared with car manufacturers.

"Okay, your plans seem fine for now. Let's get started. If you need money, just let me know."

"Haha, for the time being, our funds are still sufficient to support this plan. Speaking of which, we should thank the boss for reminding us back then."

The shares held by ByteDance's advertising platform and Tan Jincheng in Didi mainly came from the residual value of the merger between Didi and Express. Gaode Maps also holds a certain number of shares in Didi, all of which originated from the initial direct investment.

"So you're basically using Didi's money to hail Didi rides."

While Cheng Linfeng sold his Didi shares on the day of the IPO, Tan Jincheng also notified Cheng Wu that Gaode should sell its shares as well. Now, Gaode has enough cash from its equity investment in Didi to make the initial investment for this plan.

"You bet it is, this feeling is really quite wonderful."

In internet companies, the choice between tech-driven founders and capital giants is essentially a trade-off between long-term technological value and short-term scale expansion. For tech-driven founders like Cheng Wu, collaborating with capital giants like Tan Jincheng is far better than working with Ali.

It's not that Ali is short-sighted; Ali is also very patient in its investments. If Gaode were merged into Ali's portfolio, it would also receive the same attention. However, no matter how much Ali values ​​it, it will never be as important as Tan Jincheng's approach.

All of Ali's investments and acquisitions are centered around Taobao and Alipay, while Tan Jincheng's investments and acquisitions are based on the layout of Weilai Auto. The importance of map service providers to car companies is self-evident.

Baidu has been working on autonomous driving for so many years, but in the end, it still formed a car company with Geely, while Gaode does not have this problem.

Chengwu was very glad he made that choice.

(End of this chapter)