The famous and worldwide ride-hailing service Uber Technologies Inc. will sell their operations and China business to the rival company Didi Chuxing.
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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. “Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there”.
Uber’s chief executive Travis Kalanick wrote on his company’s website: “Sustainably serving China’s cities, and the riders and drivers who live in them, is only possible with profitability”.
The deal will give Uber a 20pc share in the combined firm, Bloomberg News reported, adding it will be valued at $35bn (£26.4bn).
However, the regulations forbid these companies from operating at below cost, which means that the ride-hailing competitors can not engage in subsidy battles like those between Didi and Uber past year.
As part of the arrangement, Didi will reportedly invest $1 billion in Uber’s global company.
After the completion of the long-expected transaction, Uber China will maintain independent branding and business operations to ensure stability and continuity of services for passengers and drivers, says the announcement.
Last week, a long-awaited regulation giving legal status to online car-hailing services in China was approved and released by the nation’s State Council. Didi Chuxing is also backed by Chinese e-commerce giant Alibaba and Tencent. Uber will continue to operate its own app in China for now. Kalanick told the Canadian technology platform BetaKit in February the company was losing $1 billion a year in China.
Uber disputes Didi’s math, claiming to control a third of the Chinese ride-hailing market. Today, Didi Chuxing owns roughly 87 percent of the private auto service market in its home country.
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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.
