Apple Inc. (NASDAQ:AAPL)’s investment in Didi Chuxing is likely one of the things that accelerated Uber’s decision to leave China and weighed on Uber’s decision to merge, says Reuters. Didi raised more money than Uber China, making China the first market where Uber’s strategy of outspending its rivals did not work, thus pushing the U.S.-based company to surrender there..
Apple (AAPL) made the difference
In May, Apple Inc. (NASDAQ:AAPL) invested $1 billion in car-hailing app Didi Chuxing that, according to people close to the companies, helped speed up Uber‘s decision to agree to stop a costly two-year battle with its rival in China, says Reuters.
Billions of dollars were raised by Uber and Didi in funding to spend largely on discounted rides as they slugged it out for passengers, drivers and market share in the second-largest economy of the world. Finally Uber gave in after realizing that it was not a good match for a cash-rich rival backed by three of the world’s largest tech giants. In return for a nearly one-fifth stake in a bigger Didi, Uber agreed to give up its independence.
According to Reuters, Didi and Uber discussed a merger at least five times, but serious talks started only months ago. It probably is not a coincidence that Apple announced its Didi investment the same week Uber CEO Travis Kalanick was scheduled to appear at Apple Inc. (NASDAQ:AAPL) headquarters for a meeting. It is not known who Kalanick was planning to meet.
Uber China is no match for cash-rich Didi
Beating Didi just through funding would be very difficult for its rivals, at least until the former company has Apple Inc. (NASDAQ:AAPL)’s support.
“The Apple investment is one of the factors that influenced the decision,” a person familiar to both the companies (who could not be named because the discussions were private) told Reuters. “Both sides raised enormous amounts of capital. They were probably thinking this was going to escalate to nuclear warfare, which raised the question: do we really want to assure mutual destruction?”
In June, the Chinese firm uncovered a $7.3 billion funding round from investors including China Life Insurance, Apple, Ant Financial and other new shareholders. This gave the China-based company a $28 billion valuation, making it the third highest-valued venture-backed startup in the world. Didi says it has $10.5 billion in available funds with support from Chinese Internet giants Tencent and Alibaba Group.
On Wednesday, Apple Inc. (NASDAQ:AAPL) shares closed up 1.25% at $105.79. Year to date, the stock is down more than 1%, while in the last year, it is down almost 13%.