Apple invests US$1b in Didi, China’s Uber

Didi Chuxing, operator of China’s top ride-hailing mobile application, has received a massive US$1 billion investment from Apple that could give new vigour to the country’s information technology industry amid the lingering economic slowdown.

It marks the single-largest investment received by DiDi, a four-year-old start-up in Beijing that competes against San Francisco-based ride-hailing giant Uber.

“The endorsement from Apple is an enormous encouragement and inspiration,” DiDi founder and chief executive Cheng Wei said.

Apple has joined Alibaba Group and Tencent Holdings among the biggest stakeholders in DiDi, which serves nearly 300 million users in more than 400 Chinese cities.

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“DiDi exemplifies the innovation taking place in the iOS developer community in China,” said Apple chief executive Tim Cook. “We are extremely impressed by the business they’ve built and their excellent leadership team, and we look forward to supporting them as they grow.”

Backed by an extensive data mining and analysis operation, DiDi now completes over 11 million rides a day on its platform, which provides a diverse range of transportation options – from taxis and private cars to social ride-sharing and corporate services.

“This is positive news for China’s tech industry. Apple’s investment shows great potential in the mainland’s car-hailing sector and the larger sharing economy,” said Dai Keqiang, who runs a venture capital fund in Hangzhou.

“Venture capital funds had been approaching Chinese projects with greater caution since last year because of the uncertain economic situation. They are moving out of the mainland market and turning to the United States and India,” Dai said. “It has become harder this year to attract second or third rounds of financing. But Apple’s investment in Didi could cheer up the industry and the capital market.”

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The Apple investment would certainly help raise the value of DiDi, which was reportedly worth about US$20 billion as of February.

Uber China, the domestic operation backed by Chinese online search titan Baidu, had a reported value of about US$8 billion.

“DiDi will work hard with our drivers, riders and global partners, to make available to every citizen flexible and reliable mobility choices, and help cities solve transportation, environmental and employment challenges,” Cheng said.

Richard Windsor, an analyst at Edison Investment Research, estimated that Apple’s investment represented “0.6 per cent of its net cash balance and two days of cash flow from operations”.

At present, DiDi works with over 14 million Chinese car owners and drivers. It had more than 87 per cent market share in private-car-hailing services and about 99 per cent share in taxi-hailing services last year, according to data from the China National Network Information Centre.

Kitty Fok, managing director at IDC China, said a potential near-term benefit for Apple could be in driving users to its Apple Pay mobile payment system through DiDi.

Apple Pay was rolled out in the world’s second-biggest economy in February with the backing of 19 Chinese banks and China UnionPay, which supports mobile payment for its hundred of millions of cardholders and a vast network of merchant partners.

Competition is tough for Apple Pay on the mainland, where the Alibaba-affiliated Alipay and Tencent’s Tenpay dominate the domestic mobile payments market. Alipay accounts for 70 per cent of this market, according to Marbridge Consulting. Alibaba owns the South China Morning Post.

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Paul Qibo Lau, the chief executive at KUFM, one of China’s leading online audio platforms, said the Apple image “could help Didi become more attractive for promoting other businesses, including cars, smartphones, online-to-offline (O2O) apps and hotel brands”.

Fok said the DiDi investment “will help Apple learn about a complex market that is completely different from the US”.

“DiDi provides Apple with the kind of big data resources to learn about consumer behaviour not only in the transport sector, but also in O2O local services that DiDi connects through its users,” Fok said.

Fok pointed out that such data could prove invaluable for Apple as it learns more about e-commerce on the mainland and for its speculated longer-term plans in the smart car arena.

She said the connection with the Apple brand could provide some help for DiDi as it kickstarts its international expansion.

In December, DiDi announced a partnership with US-based Lyft, India’s Ola and GrabTaxi of Singapore to build an extensive rideshare alliance that covers nearly half of the world’s population. The partners said they will jointly roll out their extended rideshare service this year.

Wang Hong, a 31-year-old female Uber driver, said Apple’s investment could make DiDi more attractive to young Chinese consumers.

“That helps make Didi develop into a world-class tech startup, related to the most innovative and greatest tech company in the world. I’m looking to promote my e-commerce business through Didi’s platform in future,” Wang said.