Uber is spending money at a breakneck rate to crack the China market — even paying its drivers more than the fares they collect.
Fat with almost $6 billion in venture capital, Uber, based in San Francisco, is doling out bonuses up to three times the amount of its fares, in a bet that its exceptional rise in the United States can be matched in China.
So far, its strategy is working, shattering prevailing assumptions that young American tech companies cannot compete against local rivals.
The spending spree has attracted droves of drivers like Jacky, a systems analyst at an international telecommunications company, who recently began moonlighting for Uber with his Ford Fiesta in Shanghai. In late May, Uber said it had created more than 60,000 jobs in China over the past month.
Though other ride-hailing services also offer driver bonuses, Jacky said Uber pays the most. In the first three weeks of May, he said, he made the equivalent of about $1,000 from Uber — or almost half of his $2,100 monthly salary at the telecommunications company — with the majority of his earnings as a driver coming from the subsidies.
Yet more affluent and cosmopolitan Chinese have flocked to Uber’s service, attracted by fares that are on average at least 35 percent cheaper than taxis, with the cars generally more luxurious than cabs and drivers who offer free water and are typically more polite.
In the central Chinese city of Chengdu alone, Uber has attracted 20,000 drivers since 2014, compared with 26,000 in New York City who have come aboard since 2011. Travis Kalanick, Uber’s chief executive, is teaming up with the Chinese Internet giant Baidu and making multiple visits to the country, including one last month to the provincial capital of Guiyang in the southwest.
Uber began tests in China in late 2013 in the southern cities of Guangzhou and Shenzhen, focusing on a service that would let people hail rides from licensed limousine companies. Instead of following other Western tech firms, which at times have relied on foreign managers with little knowledge of China, Uber hired and empowered local people to act as managers to run city operations as they saw fit. It now operates in nine Chinese cities.
The company also took a more cautious, cooperative approach in China, unlike in other countries, where it has brazenly flouted authorities. In December, Uber sold a stake in itself to Baidu and began working to offer its service directly on Baidu’s popular maps application. Uber recently earned praise from the head of a major Chinese Internet industry group for behaving more like a Chinese company than like an eBay or an Amazon.
“We’re particularly optimistic in China,” Mr. Kalanick said in a speech in China last month. “I’ve just seen cities everywhere and have found that mayors and city governments are far more focused on progress in their cities here in China than I’ve seen elsewhere, and it makes me incredibly optimistic.”