Uber China, a regional subsidiary of the car-hailing juggernaut app, is merging with its major rival in the Chinese market, Didi Chuxing (formerly Didi Kuaidi). Uber CEO Travis Kalanick has been circulating the news in a personal blog post. Under the terms of the deal, Didi will make a $1 billion investment in Uber global at a $68 billion valuation, while Uber China's investors will own 20% of the merged Chinese company, which will be worth $35 billion. Uber China is a joint venture between the main Uber business, and the China-based internet giant Baidu, as well as other outside investors.
Just as many Chinese companies have trouble getting a foothold in the United States, Uber has had trouble profiting in the Chinese market as it lags behind the first-place Didi Chuxing. Apple recently invested $1 billion in Didi Chuxing, at a valuation that could have been over $25 billion. It also received money from Tencent Holdings and Alibaba. Still, it also was struggling to turn a profit. Didi Chuxing President Jean Liu admitted that she was forced to use subsidies and burn through cash in order to get more cars, which streamlines the service and brings in more users.
Kalanick was happy with the growth of Uber China, which had reached 150 million trips a month, but was faced with a market where all ridesharing apps were failing to turn a profit. Uber China lost more than $1 billion last year, as Didi Chuxing snatched up market share, despite also suffering losses. He sees the merger as an opportunity to strengthen and innovate in the challenging Chinese market. Didi Chuxing provides 14 million rides each day across 400 cities.Didi Chuxing had previously denied early speculation about a merger, as recently as two weeks ago, despite the clear value such a merger would provide for both companies.
Uber is bolstered by its success in other markets, especially its dominance in the United States market. Lyft already has a partnership with Didi Chuxing, and largely avoided entering into the Chinese market. They will now have to reevaluate their position, as they contest Uber on this new front. Other companies have banded together with Lyft to form an anti-Uber alliance, such as Indian ridesharing company Ola and the Southeast Asian service, Grab.