Struggling to keep up with the competition in the Chinese Taxi market, Uber Technologies Inc. has decided to sell its China business to rival Didi Chuxing. Didi Chuxing is the dominant ride-hailing service in the country. The development was reported by Bloomberg.
The estimated valuation of the combined business is pegged at $35 Bn, as per people close to the development. Investors in Uber China are touted to receive a 20% stake in Didi. For now, Uber will continue to operate its own app in China.
In addition to Uber selling its Chinese subsidiary, Didi is expected to make a $1 Bn investment in Uber, people familiar with the matter said. Didi had no immediate comment, and Uber declined to comment.
In a recent visit to India, talking about the fact that no internet company outside of China has succeeded in China in a big way,Uber CEO Travis Kalanick stated, “But that’s the thing. Doesn’t that make you want to try and show that it can be done? Because my question is are you saying no internet technology company is ever going to make it in China? Or is some time in our history moving forward at least one company that does it? So why can’t I try? And then you get to work because that’s hard.”
But the tables have turned for Uber China now. Travis Kalanick has admitted to the merger with the Chinese rival, in a blog post obtained by Bloomberg, which is all over China’s WeChat service.
Interestingly, last year China’s ride-hailing leaders Didi and Kuaidi joined forces. The merged company Didi Chuxing brought together backers Alibaba Group Holding Ltd. and Tencent Holdings Ltd.
Later in May 2016, Apple invested $1 Bn in Chinese ride-hailing service Didi Chuxing. Also, as per reports the Chinese government passed a new rule last week that legalised ride-hailing services, making it easier for further expansion of taxi-hailing apps.
However, last year, in December four of the world’s largest taxi-hailing apps – India’s Ola, China’s Didi Kuaidi, US-based Lyft and Malaysia’s GrabTaxi, entered into a strategic partnership to allow passengers to book rides on any of these four services using just one app. The merger on Uber and Didi Chuxing however, may complicate Didi’s alliance with these taxi-hailing apps.
