After investing billions of dollars in the Chinese market, and failing to turn a profit, Uber China is merging with its biggest competition in the region, Didi Chuxing. This deal, which is set to grow Didi’s valuation to a healthy $35 billion, will improve profitability as the two companies will be able to combine their research, development, and marketing efforts.
As a result of the merger, Uber China’s investors will gain 20% of the newly-merged company. Uber China is a join effort between Uber’s parent company, self-driving car brand Baidu, and others. Also as part of the deal Didi Chuxing will invest $1 billion in Uber global, putting it at a $65 billion valuation.
In a blog post circulating on Chinese social media, CEO Travis Kalanick announced the new deal:
Today we’re announcing our intention to merge Uber China with Didi Chuxing.
Three years ago I traveled to China with a small group of people to see if we might be able to launch Uber there. It was an ambitious idea, given that we were a relatively small start-up and no one there had ever heard of the company. Most of the people we asked for advice thought we were naive, crazy, or both.
I came away with a different view. First, China is an amazing country and if you aspire to make “transportation as reliable as running water, everywhere for everyone,” you can’t ignore a fifth of the world’s population. And second, as an entrepreneur, if you have the opportunity to build both Amazon and Alibaba at the same time, you’d be crazy not to try.
Fast forward to today and Uber China — in just two years — has exceeded even my wildest dreams. We’ve grown super fast and are now doing more than 150 million trips a month. This is no small feat given that most U.S. technology companies struggle to crack the code there. That’s why I’m so proud of what our amazing China team has accomplished.
However, as an entrepreneur, I’ve learned that being successful is about listening to your head as well as following your heart. Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there. Getting to profitability is the only way to build a sustainable business that can best serve Chinese riders, drivers and cities over the long term.
I have no doubt that Uber China and Didi Chuxing will be stronger together. That’s why I’m so excited about our future, both in China — a country which has been incredibly open to innovation in our industry — and the rest of the world, where ridesharing is increasingly becoming a credible alternative to car ownership.
Bracing for self-driving impact?
What isn’t immediately clear is how this new company will factor in to Uber’s long-time plan to phase in autonomous vehicles into its fleet. Baidu, which is one of Uber China’s investors, is already working on a strategy to deploy self-driving tours around China to aid tourists in sightseeing. It has long been speculated that Uber’s efforts to ramp up its autonomous vehicle program in China would be largely aided by the Chinese search giant, a plan that could extend into the new merged business.
Among Didi Chuxing’s biggest investors is Apple, a company long rumored to be developing its own self-driving car. With these different companies coming together, it’s clear that Didi is a company that investors in the automotive and ridesharing realm are going to be watching a lot more closely.