BEIJING, China – Apple said Friday, May 13, it has invested $1 billion in Chinese ride-hailing app Didi Chuxing, the bitter rival of US-based Uber, as the tech giant seeks to better understand its second-biggest market.
The announcement comes as Apple faces headwinds in China, where it has seen huge drops in sales of its popular electronics, but is working to expand its mobile payments service and is even believed to have ambitions for driverless cars.
Didi, formerly known as Didi Kuaidi, is China’s largest ridesharing service, and the tie-up may serve as a way for Apple to get to know the Chinese market ahead of a long-rumored expansion into the transportation sector.
“We decided to make the investment for a number of strategic reasons, including the chance to learn more about certain segments of the China market,” chief executive Tim Cook told the official news agency Xinhua.
Apple is thought to be one of a number of tech companies, including Google and Chinese search giant Baidu, that are developing driverless cars.
The move may also be intended to help Apple expand its Apple Pay service, which faces strong Chinese competition, analysts said.
The twin prospects may help soothe investors nervous about Apple’s prospects in the Middle Kingdom.
The company’s shares have dropped more than 13% since April 26, when it reported its first ever fall in iPhone sales, largely due to waning interest from Chinese consumers.
On Thursday, May 12, the stock closed down 2.4%, losing its coveted spot as the world’s biggest publicly traded company to Google parent company Alphabet.
The fall from grace, blamed on the company’s failure to expand into the lower-priced handsets popular in developing markets, came amid a string of bad news from China.
Last month, authorities shut down Apple’s movie and book services. Adding insult to injury, it was revealed to have lost a court case over the use of its iPhone trademark.
Hoping for a turnaround, Cook will travel to Beijing later this month to lobby senior leaders.
‘Burning through cash’
Didi, which also has backing from Chinese Internet behemoths Tencent and Alibaba, likely hopes to use the deal to strike a death blow to US-based Uber, its main competitor for the Chinese ridesharing market.
Apple’s injection was the “single largest investment the company has ever received,” said Didi, which dominates the car-hailing sector in China and says it has almost 90% of the market.
Uber, which has received funding from Baidu, along with state-owned Citic Securities – is a small, but scrappy competitor.
Didi and Uber both have deep pockets and have been locked in a war of attrition for riders.
In February, Uber said it lost $1 billion annually in China as it competes for market share and Didi is thought to be dropping similar amounts as both companies subsidize users’ rides, which are much cheaper than regular cab fares.
Last September, Didi’s president Jean Liu said the company was “burning through cash”, according to a report by Bloomberg News.
‘Large user base’
Though Apple’s investment in Didi is large, the deal seems more notable for its strategic rather than financial significance.
There are “lots of opportunities for closer cooperation between the two companies,” Cook told Xinhua.
One area they are likely to explore is mobile payments, according to Chinese analysts who say the investment could be a good opportunity for Apple Pay.
The service was recently launched in China but has to contend with well established existing competitors owned by Alibaba and Tencent – now its fellow shareholders in Didi.
Didi says it has more than 300 million passengers registered and provides over 11 million rides a day – numbers that provide an excellent opportunity for Apple Pay, according to an article on Chinese web site Huxiu.
“It is undoubtedly a good value for Apple to tie up with an app that has a large user base and where frequent payments are made,” it said.
It is technically illegal in China for private cars to offer rides for payment, and authorities occasionally stage stings to arrest drivers, but regulations are not often enforced, creating an opening for ridesharing services to flourish.
Didi invested in Uber’s US rival Lyft last year, along with Alibaba and Tencent, and announced last month that it would cooperate with it to compete with Uber on its own turf. – Ben Dooley, AFP / Rappler.com
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