There’s a paradox in today’s world of mass consumption. People are more inclined to need products and services, but they have less desire to actually buy them. This trend is seen in many corners of the world. But it’s most prominent in Southeast Asia where a great number of the world’s population occupies a small land area. Uber has proven itself to be a rising star and is leading in the ride-hailing arena. The company announced big plans to expand into China, proving itself as a bigger player in its industry.

Why is Uber so Successful? The Worldwide Trend of Usership

The global trend mentioned above is called the shift from ownership to usership. It’s giving rise to what many experts call the sharing economy. The concept is simple: in the occasion that a person needs to do something, instead of going out and buying the “resource” required to do said action, he/she is able to “share” the resource with someone who already has it by paying compensation.

A perfect example of this trend is Uber. Without the need to own a car, anyone with a smartphone can digitally hail a taxi along with a driver. Both parties benefit. You get to where you need to go and the driver gets compensated for the effort.

The shift to usership is seen not only in the transport industry, but also the hotel and service industries. An honorable mention here is AirBnB which connects home-owners willing to rent out their living spaces to tourists who are looking for something more homely and cost-effective than hotels.


Uber’s Grand Plan to Expand into China

However, coming back to Uber, the giant ride-hailing company has announced plans to become even bigger. So far, Uber has already been on a massive expansion plan. In China, an incredible amount of promotion and free rides caused a loss of over US$1 billion in 2015.

The company’s management’s called it an “investment” and not a loss during a press conference earlier this year. This left shareholders confused. But since then, the investment has come to light since it has helped them gain them 30% of the total market share in China, compared to 2% a few years back. Yet Uber still faces tough competition from local firms such as Didi Quaidi, which raised US$2 billion last year.

With a strong foothold in the Chinese ride-hailing market, Uber announced plans to enter a partnership with Alipay – China’s largest mobile wallet. Not only will this make it easier inside of the country to pay for rides, but it will also mean that Chinese Uber users abroad will no longer have to link dual-currency credit cards to be charged in USD.

The strategic alliance reaches out to nearly half of China’s population, as Alipay has over 450 million active users. An Alipay executive said the added convenience will give Chinese people abroad a deciding factor leading to the partnership. “You don’t have to worry about whether you have enough local cash to pay for your rides. All you need is to open your Uber app, find a ride, and pay with Alipay,” he said.

Western tech companies have faced problems before when choosing to expand into China. Will Uber fare better than Microsoft and Google at a time when China’s economy is slowing? Time will tell.


About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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