Uber China Merges with Didi Chuxing
With more internet users than any other country and a fast-rising middle class, China is one of the most sought-after markets in the world. China is big, but it is hard. China’s infrastructure, financial markets, and banking system are underdeveloped relative to those in the West, making it difficult for Western firms to operate in China as they do at home. Large U.S. technology companies like Amazon, Google, eBay, Yahoo and Facebook have struggled to make inroads in China.
U.S. based sharing economy giant, Uber, officially entered China (Shanghai) Pilot Free Trade Zone in October 2015, but Uber was losing $1 billion a year in China and battling a profitable and well-connected local competitor in Didi Chuxing (formerly Didi Kuaidi) for market share. Didi recently closed a $7.3 billion financing round that includes its recent investments from Apple and China Life, that valued the company at about $28 billion.
Monday August 1st, that after two years and more than $2 billion in cash losses, Uber agreed to sell its Chinese business to Didi. In exchange for its China operations, Uber will receive a 20% minority stake in Didi and a $1 billion equity investment from the Chinese firm. According to the statement, Didi Chuxing will acquire all assets of UberChina–including its brand,business operations and data–for operation within mainland China. This landmark transaction signals a new stage in the development of China’s rideshare industry.
Cheng Wei, founder and CEO of Didi Chuxing, said, “Didi Chuxing and Uber have learned a great deal from each other over the past two years in China’s burgeoning new economy. As a technology leader deeply rooted in China, Didi Chuxing is constantly pushing the frontier of innovation to redefine the future of human mobility. This agreement with Uber will set the mobile transportation industry on a healthier, more sustainable path of growth at a higher level. Didi Chuxing commits all our energy to work with regulators, users and partners to meet the transportation, environmental and employment challenges of our cities.”
Travis Kalanick, chief executive officer of Uber, said, “As an entrepreneur, I’ve learned that being successful is about listening to your head as well as following your heart. I have no doubt that Uber China and Didi Chuxing will be stronger together.” He added, “Getting to profitability is the only way to build a sustainable business that can best serve Chinese riders, drivers and cities over the long term.”