Latin America is open for business. At least the multitude of ride hailing schemes battling to do business there would suggest it is. News that Chinese taxi behemoth Didi Chuxing has expanded its foothold in the Mexican ride hailing market further highlights Latin America as a new commercial hotspot. In the past few years, the continent has become a battleground for the wide array of companies trying to emulate the success of Uber and Lyft in the US. Uber, 99, Easy Taxi, Cabify, Beat and Nekso all have market share in the significant number of metropolises across the region.
The openness of this market, plus the readiness of Latin Americans to try innovative transport solutions, represents a unique opportunity for future business and entrepreneurship in this area. Its early success can also be ascribed, on one side to an outdated public transport system and on the other to a lack of investment in roads, which has deterred many from owning vehicles themselves. On top of which, the region is increasingly dominated by mobile internet usage, 45% of smartphone owners in Latin American cities have used a ride-hailing app, compared to only 23% of Europeans.
As a result, the world’s second-fastest-growing mobile market is about to become a major battleground in a global ride hailing market estimated to grow to as much as $285bn by 2030. In recent years Uber, 99, Easy Taxi, Cabify, Beat and Nekso have established themselves as comfortable leaders in various cities across the region. Several of these companies made use of the negative publicity Uber has faced to ramp up their presence. However, the existing market players’ positions are about to be upset by the arrival of Chinese powerhouse app Didi Chuxing.
Already the main global competitor of Uber, Didi has bought out 99 and has the capacity to significantly expand its operations across Latin America. Having achieved domination in Asia and forced out Uber and Easy Taxi there, Didi is now well positioned to attempt the same in Latin America. Unlike its competitors, who until now have settled for local dominance, it is likely to aim for an economy of scale and expand its holdings from their current bases in Mexico and Brazil. With a powerful new player in the market, existing providers will have to adopt a more aggressive strategy if they want to survive. They will also be pushed to innovate further to remain competitive amongst each other, as well as against car, bike and scooter sharing apps, like the nascent Econduce in Mexico City.
For local businesses, the exponential organic growth, acquisitions, partnerships with domestic players and influx of funding represent an opportunity that needs to be fully taken advantage of. Didi has already announced that, where possible, it will seek to work with local partners in the development of its service. The increasing demand for drivers between these competitors is also likely to mean increasing salaries and stiffer competition to attract drivers.
This newly vibrant market represents an opportunity not only for the private sector, but also for local authorities. To improve the local transport offering they will need to collaborate with these providers. This could resolve infrastructural issues such as traffic jams, but local authorities need to be willing to accept the new role of shared transport companies. It will be important for the various stakeholders to agree, as soon as possible, how this developing market can be integrated in the existing mix of public and private transport, while respecting local conditions. If together they can find solutions that can be developed into long-term structures, both sides will be able to profit. This will necessitate supporting legislation and relevant investment in infrastructure, to provide affordable, regulated services. Traffic in Latin America’s largest cities is amongst the worst in the world. Commuters in Mexico City, for example, spend on average 110 hours per year stuck in traffic. And most drivers are only able to drive their own car a few days per week because of traffic restrictions. Authorities should jump at the chance to reduce traffic because it already represents such a negative issue for denizens of Latin America’s bustling cities.
The arrival of Didi and other ride-hailing and sharing apps have the potential to significantly change the face of local transport through their technological innovation. It is now up to the local players in Latin America to make the most of this change.