Hong Kong/San Francisco: Apple Inc.’s $1 billion investment in Didi is another blow to Uber Technologies Inc. in China, adding a powerful ally and bolstering a rival that already has a greater grip on ride-hailing services in the country.
The iPhone maker will help Didi build up a ride-sharing platform that handles more than 11 million rides a day and serves about 300 million users across China, Didi said in a statement on Friday. It joins other investors including Alibaba Group Holding Ltd. and Tencent Holdings Ltd., the country’s two largest Internet companies.
Uber is spending millions to try and catch Didi in China yet its business in the country is just a fraction of it’s local rival, which has reached break even in twice as many cities as Uber even operates in. Both companies are in an expensive battle for market share, raising capital needed to recruit drivers and subsidize customer fares.
“Didi’s a good partner to have, it’s a good operator, and could provide additional collaboration with Alibaba and Tencent,” said Chi Tsang, an analyst at HSBC Securities Asia Ltd.
Didi, formally known as Xiaoju Kuaizhi Inc., was created last year when separate apps backed by Tencent and Alibaba merged. It now operates in 400 Chinese cities with 14 million registered drivers, offering services from taxis and private cars to social ride sharing and test driving.
Uber, the world’s most valuable startup, has set a target of operating in 100 Chinese cities this year. The company has said its able to support its China push because its making $1 billion annual profit from its 30 largest global markets. Uber didn’t respond to e-mailed requests for comment.
Uber has been battling regulatory and legal issues since its founding. In California it agreed to shell out as much as $100 million to drivers, services in Sweden shut down amid a battle with regulators while its often met with protests from taxi drivers when it enters a new market.
Apple’s investment comes as the iPhone maker is under pressure to find other markets to expand in as its main smartphone business slows. Chief executive officer Tim Cook has highlighted higher-margin services as a growth area and suggested he would use some of its $200 billion-plus cash hoard for investments.
“Didi exemplifies the innovation taking place in the iOS developer community in China,” Cook said in the Chinese company’s statement. “We are extremely impressed by the business they’ve built and their excellent leadership team, and we look forward to supporting them as they grow.”
Didi has been in the process of raising more than $2 billion at a valuation of about $25 billion, people familiar with the matter have said.
The company is Uber’s most potent rival and has formed an international coalition with Lyft Inc. in the US, India’s Ola and Southeast Asia’s Grab to fight the globally expanding San Francisco firm.