Funding lifts Uber China unit’s valuation to US$8 billion but profits absent
Uber CEO Travis Kalanick says massive spending can’t continue forever
Uber Technologies’ China unit boosted its valuation to US$8 billion after it raised more than US$1 billion in its latest funding round, although the US ride-hailing app is not yet profitable in the mainland due to intense competition.
Uber and its larger China rival, Didi Kuaidi, have spent heavily to subsidise rides to gain market share, betting on China’s internet-linked transport market becoming the world’s biggest.
Uber CEO Travis Kalanick told reporters in the Chinese capital on Friday he recognises that spending on subsidies is “how you win” in China and that the company aims to beat Didi Kuaidi by spending subsidies more efficiently.
“I worry about it every day,” he said, regarding the heavy spending on subsidies. Uber currently operates in 22 cities in China but Kalanick said it does not turn a profit in any city.
Didi Kuaidi, backed by Chinese internet heavyweights Alibaba Group Holding and Tencent Holdings, has the country’s biggest market share of car-hailing apps.
Uber China’s recently-closed Series B fundraising brought in “well over US$1 billion”, Kalanick said.
A spokeswoman for Uber said the series had raised over US$1.2 billion but declined to give an exact figure.
“I thought we did remarkably well, especially given some of the macro trends that were going on,” Kalanick said.
In September, Kalanick had said the unit had already raised US$1.2 billion, while Didi Kuaidi said it had raised over twice this much. He also announced plans to operate in a further 100 Chinese cities within 12 months.
But he did not comment on Friday on precisely how much had been raised in the four months since then. Before the latest fundraising, Uber’s China unit was valued at US$7 billion.
Kalanick warned that the market for fundraising would calm down at some point and the current high spending on subsidies cannot continue forever.
Uber’s profits in other markets can be invested in Uber China and that income will eventually become a more important source of investment than fundraising, he said.