Uber is Selling its Chinese Operations to Rival Didi Chuxing

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A few days ago, Chinese authorities finally legalized ride hailing services. This was following months of intense lobbying by the two main companies in this space, Uber China and Didi Chuxing. Now just after the legalization, Uber has announced it is exiting the Chinese market by merging its operations with Didi Chuxing to create a new entity valued at $35 Billion according to Bloomberg News. In the new company  Uber Inc. and other investors in Uber China will receive a 20% stake. In addition, Didi Chuxing will invest $1 Billion in Uber valuing the company at $68 Billion while Uber will become the largest investor in Didi Chuxing.  Its interesting to note that Didi is also an investor in Uber’s rival in the US Lyft.

Uber has been bleeding in the Chinese market owing to intense competition by Didi Chuxing. The company raised $1.3 Billion round of funding in 2015 targeting the Chinese market and had prior to that announced a $1 Billion war chest for the Chinese market.  Uber has been under pressure from its investors to cut on the expensive warfare with Didi, which largely focused on incentives for both riders and drivers. So far, Didi leads in terms of market share with 14 Million drivers in 400 cities while Uber planned to operate in 100 cities.

Didi Chuaxing  previously known as Didi Kuaidi was launched in February 2015 following the merger of rival taxi hailing apps Didi Dache and Kuaidi Dache. As of September 2015, the company boasted of a 78% market share, having raised $3 Billion for to help it scale its operations in China and the Asian markets. The company has also been investing in other startups in the space including Uber’s US rival Lyft and Ola Cabs of India. Didi is valued at $28 Billion following its fund raise in June, which saw Apple Inc. pump $1 Billion.

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