Alibaba-backed Hello could take on ride-hailing giant Didi (BABA)

Hello TransTech, a Chinese mobility startup backed by Ant Financial, Alibaba's financial services arm, announced that it'll launch a car-pooling service in mainland China on February 22, according to TechCrunch.

The company has been piloting the car-pooling service, which enables users to book a ride in a shared vehicle via an app similar to "pooling" options of traditional ride-hailing services, with several consumers for about a month. Hello originally launched as a bike-sharing service in China back in 2016, securing its initial investment from Ant Financial in late 2017.

Hello has an opportunity to steal significant market share from embattled Chinese ride-hailing leader Didi Chuxing, given its series of missteps and Alibaba's massive user base.

Didi Chuxing's struggles have opened up space for an alternative.Last year Didi witnessed a pair of its drivers kill passengers, prompting it to temporarily cease operating its services. A slew of regulatory changes around background checks resulted, putting a further clamp on Didi's business and reportedly causing a shortage of ride-hailing drivers and cars in China overall. Last week Didi reported annual losses of $1.6 billion in 2018, and announced plans to reorganize its workforce slightly thereafter. Ride-hailing and ride-sharing aren't direct substitutes, but given the reported shortage and Didi's difficult year, Hello's ride-sharing service could be a viable alternative.
Hello has a unique advantage in mobility Alibaba's ecosystem of services is massive and immensely popular in China.Alibaba is one of the largest online retailers in the world, posting $15 billion in retail revenue last quarter alone, most of which came from mainland China. Its broader ecosystem is even more massive Alipay counts 1 billion users globally and about 700 million in China alone or about half the country's total population.

Hello and Alibaba would be wise to offer discounts and incentives if they want to pounce on the opportunity presented by Didi's mishaps.Despite the embattled leader's issues and Alibaba's size, outcompeting Didi won't be easy: It still controls 90% of China's ride-hailing market and counts 550 million users.

Hello and Alibaba would be wise to strike soon, while Didi is ironing out its own struggles, to try and quickly drive use. Half the battle may already be done: Hello is integrated with the Alipay app, meaning 1 billion users automatically have the car-pooling service available on their smartphones. The trick will be converting that base into active users of the car-pooling service.

The companies could drive use by way of promotions, with Alibaba offering frequent customers discounts on Hello rides, for instance, or by creating a monthly subscription bundle for both mobility and retail sales. While Hello and Alibaba may not overtake Didi as the market leader immediately over ever they have a rare chance to win away a significant share of users from an overwhelmingly dominant player.