The Strategist

Apple to tie up with Uber's competitor in China

05/13/2016 - 15:23

Apple is investing in China's largest online taxi service Didi. The investment’s size will amount to $ 1 billion. Didi is one of the fastest growing Chinese technology startups. According to experts, by devoting the money, Apple hopes to strengthen its position in the Chinese market, one of the most important for the corporation.

American Apple Inc. reported that it is going to invest $ 1 billion in Chinese online taxi service Didi Chuxing. (Previously - Didi Kuaidi). The corporation considers the Chinese market as one of majors, the second in sales after the US. According to experts, one of Apple objectives is to strengthen its position in the Chinese market. Sales there have recently started to decline. In the second quarter of 2016 fiscal year, which ended in March, sales of Apple devices in the region fell by 26%.  

Experts believe that the decision to invest in Didi is quite unusual for Apple, as previously the corporation has sought primarily to invest in its own services and development, as well as to buy small startups, unlike most other technology corporations, actively investing in other companies. Now, however, the current situation in the company makes it to recourse to non-standard decisions. Phil Lisio, head of Shanghai consulting firm The Foote Group believes that "Apple has a lot of money and no acceleration of internal growth. So aggressive M&As with the market leaders in China have meaning." 

For a long time, Apple has been working on creating its own unmanned vehicle, although the company itself does not reveal it. According to experts, cooperation with Didi could be helpful in this relation as well. "This investment shows that they think not only about cars, but also the business models related to transport in general, and it is a very encouraging and interesting sign," - said Bob O'Donnell, analyst at TECHnalysis Research. In addition, in February Apple launched its own billing system Apple Pay in China. Integration with Didi’s app can help the corporation to expand the system’s use in the country.

Despite the fact that over the past year Didi reported a loss of $ 1 billion, experts say the company is one of the most promising technological corporations in China. In February, the company announced that it managed to reach a profit in more than half of 400 Chinese cities where the service is valid. According to Didi, its drivers make over 11 million trips per day. Didi is now the leader of the Chinese market, according to its own statements, it controls 87% of the market. Its main competitor UberChina is valid only in 45 cities. In April, it became known that Didi raised $ 1.5 billion from its main investors - retail giant Alibaba Group and telecommunications company Tencent Holding, as well as a number of new investors. Now Didi Chuxing’s cost is estimated at $ 25 billion. Autumn of last year, the company was worth $ 16 billion, and $ 6 billion - in February 2015.