Uber Agrees To Sell Their China Operation To Didi Chuxing, Largest Competitor

Uber has been in an incredible growth for years now, and China has been ground zero for an absolute ton of investment.

Uber recently took on $3.5 billion (yes, with a B) in funding, ostensibly to shore up their market share against the Chinese incumbent Didi Chuxing.

For their part in this massive cash burn, Didi took $1 billion from Apple, with the tech giant picking the Chinese-based company over Uber, possibly as an overture to China so they can dig deeper into that market, while Uber took major funds from Baidu, the dominant search engine/everything platform (think Google) in China.

The battle now appears over, with Uber apparently ready to sell their China operation to Didi Chuxing for a reported 20% stake in Didi:

Investors in Uber’s local China operations will take 20% of rival Didi Chuxing Technology Co., which was valued at $28 billion in its latest fundraising round, as part of the deal, according to people familiar with the situation. A deal could be announced as early as Monday, the people said.

In a race that involved billions of dollars in money to essentially give away rides below their costs, Didi and Uber were fighting to take over the vast China market.  The government wasn’t actually so wild about that approach, but neither company would back down.

Travis Kalanick, the sometimes controversial CEO of Uber, doesn’t make a habit of backing down from pretty much anything, but seems to have done so here.

The move is probably a good thing for both companies and their investors, but likely bad for customers as the price of rides will probably come up.  As the WSJ article notes, the Chinese government is in the process of establishing regulations that make it illegal to operate a ride-hailing service below cost.

I’ve been to China once and don’t have a burning desire to return anytime soon, but I can imagine this will solidify the ride-sharing market pretty quickly if it becomes official today.  Consumers can look forward to higher prices, though possibly some market stability as well.

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