Apple Inc. (NASDAQ:AAPL) has more than $200 billion in cash and cash equivalents. It has the deep pockets to make big-ticket investments. Last month, the Cupertino company invested $1 billion in Didi Chuxing, China’s dominant ride-hailing firm that is expanding its international footprint. The iPhone maker is doing something big related to transportation. Why else would you hire more than a thousand automobile engineers and invest $1 billion in a ride-hailing firm?
Tim Cook is late to the party
Apple Inc. (NASDAQ:AAPL) is reportedly working on an electric car with autonomous driving capabilities that are expected to arrive in 2020. Its recent patents indicate that the company envisions a future where users will be able to unlock and control their cars using their iPhones. The problem is that Apple is way behind others in transforming transportation. Tesla CEO Elon Musk recently called the rumored Apple car a “missed opportunity.”
One way Apple can catch up is by acquiring an already established player in the transportation space. A few days ago, Uber raised a mammoth $3.5 billion from Saudi Arabia’s sovereign wealth fund. Its co-founder and CEO Travis Kalanick has made it clear that he would want to delay Uber’s IPO for as long as possible. So, its earlier investors might be looking for an exit strategy.
Apple’s big bet on Didi Chixing
Matthew Debord of Business Insider makes a strong case why Apple should buy Uber. His arguments seem logical. Buying Uber would allow the iPhone maker to catch up rapidly (Uber has also been working on a self-driving car). It could also give the upcoming Apple car a huge user base. Uber was valued at above $60 billion in its latest funding round. However, Tim Cook seems to be gravitating towards Uber’s Chinese rival Didi Chuxing, which averages 11 million rides a day across 400 cities in China.
Apple Inc. (NASDAQ:AAPL)’s investment in Didi has more to do with the future of transportation than appeasing Beijing. The deal will give the iPhone maker access to tons of valuable data it needs to dominate the autonomous driving technology. Didi is also expanding its footprint outside China to challenge Uber. It has formed an international coalition with Lyft in the US and Ola In India.
The whole transportation business is undergoing massive transformation rapidly. If the iPhone maker wants to catch up, it should buy an established player rather than doing everything on its own.