The sale of Uber’s China operations to rival Didi Chuxing could wind up being a big win for. Didi will have a minority stake in Uber. Uber China had only 200 employees compared with 4,000 with Didi Chuxing.
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Uber will become the largest stakeholder in the Chinese company with its stake.
Kalanik wrote today, “I have no doubt that Uber China and Didi Chuxing will be stronger together”.
No additional terms were disclosed, but media reports say that the combined company will have a domestic market valued of US$35 billion, which consists of Didi Chuxing’s US$28 billion and Uber China’s US$7 billion.
The Chinese government passed a new rule last week that legalized ride-hailing services, paving the way for further expansion of these businesses.
Didi Chuxing, on the other hand, is a Chinese brand that has continued to grow, gobbling up competitors and recently scoring a $1 billion investment from none other than Apple. In February, Kalanick said that Uber was losing $1 billion a year in China.
This merger is not a financial failure for Uber, but representative of USA tech companies’ consistent difficulties in China. It had still set the target of operating in 100 different cities there by the end of the year. “Didi Chuxing commits all our energy to work with regulators, users and partners to meet the transportation, environmental and employment challenges of our cities”.
Besides, Didi, Uber’s cross-town rival Lyft, India’s Ola and Malaysian Grab, formerly GrabTaxi, were part of this alliance to ward off Uber’s threat to these players in different regions of the world.
Liu Zhen, Uber China head of strategy, said in June that most of the money raised will fund Uber’s operations in China.
With funding battles screeching to a halt, Didi Chuxing can now focus on investing in customer service instead of discounts on rides and bonuses to drivers.
Uber, since it entered the Chinese market in 2013, has lost more than 2 billion dollars, according to a source to Bloomberg.
Fitch Ratings noted on Sunday that as new regulation also will bar companies from undercutting each other, it is unclear “if Chinese consumers, having grown accustomed to heavily subsidized rides, would be willing to pay higher fares”.
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The company is backed by Chinese internet giants Tencent and Alibaba, and has also invested in Uber’s rival United States taxi-booking service Lyft.
