Uber’s CEO Travis Kalanick said earlier this month that in one of Uber’s most popular cities in China, the ride-hailing company is turning out close to 1 million trips a day.
That was at the same time he announced Uber’s plans to invest $1 billion in the country, saying China is a key market for the company’s global expansion. Uber estimates it already has secured nearly half of the ride-hailing market of the region.
Now that big bet on China is paying off as Uber has secured a major Chinese backer to help propel the company closer to its IPO date. The Wall Street Journal reported yesterday (June 23) that Chinese fund manager Hillhouse Capital Group has kicked off an investment for Uber that involves purchasing bonds that will later be transformed into shares once Uber sets an IPO price.
This investment deal could be as much as $1 billion, one source indicated, while another said the deal is likely closer to the range of hundreds of millions of dollars.
“We are achieving a level of success in China that few other U.S. technology companies have ever enjoyed. Our early success derives from an organic approach to the market,” Kalanick said in a recent letter to shareholders.
“This kind of growth is remarkable and unprecedented. To put it frankly, China represents one of the largest untapped opportunities for Uber, potentially larger than the U.S. Success in China, however, takes commitment over the long haul and a strong will, coupled with a unique understanding of the differences in China,” Kalanick said.
Uber hasn’t publicly announced its official IPO plans. The fact that its got this major backer leading its funding round could show Uber is preparing the next steps toward going public. Uber has already raised about $1.6 billion in a funding round that was led by Goldman Sachs.
Hillhouse Capital’s involvement in the latest funding round might also create some conflict, however, as WSJ points out that its also an investor in Didi Kuaidi Joint Co. — Uber’s local competition.
Didi Kuaidi Joint Co., which is only about four months old, was created when two major companies merged. That merge, of course, came when Chinese companies Alibaba and Tencent agreed to a rare truce in the taxicab industry and combined Kuaidi Dache and Didi Dache into one entity to gain a better market share in the ride-hailing industry.
The two taxicab companies were seen as a mini battleground for the two payments companies given that consumers could hail and pay for rides using their smartphones, paying through Alibaba (Kuaidi) or Tencent (Didi) systems, depending on what cab was being hailed.
To check out what else is HOT in the world of payments, click here.