Didi Chuxing, China’s state operated taxi hailing service and rival to Uber, announced on Monday a move which effectively ends the rivalry between the two competing firms.
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In addition to the merger, Didi will invest US$ 1 billion in the San Francisco-based ride-sharing company valued at US$ 68 billion as part of the deal, a source said.
Didi will buy Uber’s brand, business and data in the country, the Chinese company said.
He wrote that as an entrepreneur, he has learned that being successful is about listening to your head as well as following your heart.
Uber, which has been spending hugely in China over the last two years, has appeared to have folded, striking a deal in which is will merge its operations with its main rival there, Didi Chuxing.
Both companies burned through investment funds by subsidizing drivers and prices in an effort to capture more of the market. It is expected that Uber will run its app in China under Didi Chuxing for a brief period.
The new entity combines Didi’s most recent valuation of $28 billion and Uber China’s $7 billion valuation for the $35 billion market capitalization. Alibaba and Tencent have pitched in during several rounds of Didi’s fundraising, while Baidu has stakes in Uber China.
Uber’s attempt to establish itself in China, where many other western companies have failed, saw it grow to around 150 million trips per month – but even with that sort of scale, it wasn’t making any money.
In the meantime, Uber’s China operations were not as fortunate.
This is not the first time two high profile riding companies in China have come together.
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Uber founder Travis Kalanick and Didi Chuxing founder Cheng Wei will join the boards of each other’s companies. Unfortunately Uber has been losing billion per year building trying to build market share in China. Uber investors forced their leadership to work in collaboration with Didi Chuxing to avoid the losses it was facing in the region. Uber’s investors had been clamouring for the company to sell off its China assets.
