South East Asia

Didi Chuxing To Buy Uber Out In China

After a long, expensive and frustrating fight, it looks like Uber is officially ready to retire its efforts in China. Instead of operating and competing directly for Chinese riders, Uber is instead taking a minority stake in the firm that essentially out-competed them in China – Didi Chuxing.

Uber will take a 20 percent stake in Didi – a Chinese ridesharing operation valued at around $28 billion (as of its last fundraising round). The deal will also involve Didi investing $1 billion in Uber at a $68 billion valuation as part of the deal.  Uber will not disappear from China – it will continue to operate under its old name, though now as part of the Didi family.

Uber has been struggling for dominance in the Chinese market since launching there in 2013 – and for a time was considered one of the few America-to-China tech success stories.

But as has been the case, when pushed toe-to-toe with homegrown hero firms like Didi, the battle became expensive and frustrating for Uber, as both firms found themselves in a race to the bottom on pricing for customers – and a race to the top on pay for drivers.

Pressure was also turned up by Chinese regulators, who only determined that ridesharing is officially legal about a week ago.  These regulations ban ridesharing services from running their business at a loss to undercut each other.

And Didi was clearly serious about raising the funds it needed to stay competitive with deep-pocketed Uber.

Didi has been a formidable fundraising machine, refusing to back down as Uber poured billions in subsidies into China.  Didi raised  $7.3 billion in its latest fundraising round in June, which valued it at $28 billion and included a $1 billion investment from Apple.

Since UberChina is currently backed by Baidu – China’s answer to Google – Didi will now have the three biggest tech firms in China as investors – the other two being Alibaba and Tencent.

 

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