BIDU Baidu Inc

Uber Technologies Inc.'s Chinese unit wants to overtake local market leader Didi Chuxing Technology Co. in China's private-car ride-sharing sector next year, a senior executive said Friday.

In China's hypercompetitive car-hailing market, UberChina has been locked in a fierce battle with Didi to attract drivers and passengers. While Didi remains the market leader, UberChina has been gaining ground rapidly, said Liu Zhen, the company's senior vice president of strategy, at the Converge technology conference hosted by The Wall Street Journal and f.ounders in Hong Kong.

"Last year we were only operating in eight cities with only a 1% market share [in China]," Ms. Liu said. But since then, Uber's ride-sharing market share has surged to nearly a third, she said. Ms. Liu said that China is "absolutely" the most important market in the world for Uber now.

Still, Uber faces an uphill battle in China against Didi, which dominates China's taxi-hailing market and has a larger share than UberChina in the private-car-hailing segment. The two companies have disagreed on the exact market share figures.

In China, the world's biggest mobile internet market by users, UberChina and Didi are intensifying their battle as they raise more funds from powerful investors. UberChina is backed by Chinese search provider Baidu Inc., while Didi's major investors include Alibaba Group Holding Ltd. and social network giant Tencent Holdings Ltd.

Last month, Apple Inc. poured $1 billion into Didi. Uber Technologies, meanwhile, recently raised $3.5 billion from the investment arm of Saudi Arabia. Ms. Liu said that part of the $3.5 billion fund will flow into Uber's China operations.

Ms. Liu said UberChina's alliance with Baidu is an advantage because passengers can hail an Uber ride using Baidu's mobile map app, which has hundreds of millions of users. Didi, meanwhile, has been working closely with Tencent, which operates the popular WeChat messaging application, which has more than 700 million monthly active users. WeChat comes with a ride-hailing button that directs users to Didi Kuaidi's service.

Intense competition in China's ride-hailing market has forced major players to continue subsidizing the cost of rides for both passengers and drivers. Some investors and analysts have said the companies will need to gradually shift toward more sustainable business models.

Ms. Liu said that UberChina could build a profitable business "soon" as it has been cutting costs and spending less on incentives for drivers. The company is now spending 80% less per trip than it did a year ago, she said.

"We are on the right track" to turn operations profitable, she said.

Discount wars in China's mobile on-demand services sector have already resulted in some high-profile mergers. Didi, for example, was created last year due to the merger between two rival ride-hailing startups.

Asked whether UberChina would ever consider a merger with Didi, Ms. Liu didn't provide an answer but instead talked about UberChina's growth and improvements in the efficiency of its operations.

UberChina and Didi "have a lot in common to talk about," she said.

Write to Juro Osawa at juro.osawa@wsj.com

(END) Dow Jones Newswires

June 03, 2016 02:05 ET (06:05 GMT)

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