Apple’s US$1 billion investment in Didi Chuxing just became more interesting because the ride sharing company is buying rival Uber’s China business in a deal valued at $35 billion. Didi is also investing in Uber outside of China, and that means Apple’s interest in the ride sharing market may get a lot bigger.
Didi is buying Uber China, Uber’s Chinese subsidiary, in the deal. Uber will get a 17.7% stake in the combined company, and both are hoping to turn a profit—something neither has done so far in China. Didi is also investing about $70 billion in Uber, according to Re/code.
“Didi Chuxing and Uber have learned a great deal from each other over the past two years in China’s burgeoning new economy,” said Didi CEO Cheng Wei. “This agreement with Uber will set the mobile transportation industry on a healthier, more sustainable path of growth at a higher level.”
Uber CEO Travis Kalanick said the deal “frees up substantial resources for bold initiatives focused on the future of cities—from self-driving technology to the future of food and logistics.”
For Apple, the deal is a deeper reach into the ride sharing market without having to directly associate with Uber. TMO’s Bryan Chaffin speculated Apple isn’t too keen on linking its name with Uber and the company’s reputation for treating its drivers and customers poorly. Apple’s association is with Didi, and only indirectly with Uber.
The deal isn’t, however, about Apple—at least not directly. This is about Didi and Uber seeing the writing on the wall: Neither will turn a profit in China any time soon as long as they’re competing. Merging into a single company gives Didi the best chance for success, and lets Uber cut its losses and make some money at the same time.
Didi also has partnerships with other ride sharing services around the world such as Ola in India, Grab in Southeast Asia, and even Uber competitor Lyft in the United States. That’s a pretty wide reach, and one that Apple may want to exploit with its own electric car project.
It’s a safe bet Apple didn’t invest in Didi for the financial return. Apple could be looking to sell cars to ride sharing companies, provide some sort of service to the market, or collect data it finds valuable for its own car designs.
Regardless of Apple’s plans, Uber looks like the big winner. Uber turned the money it sank in China into a financial win, scored a huge investment from Didi, and set itself up on the path for a potential IPO. All that from failing to succeed in China.