Wednesday, May 18, 2016

The Main Reason Apple Just Invested $1 Billion in the Uber of China


Apple’s $1 Billion Investment in Didi Chuxing Technology

Apple Inc. has confirmed that it has invested $1 billion in Chinese ride-sharing company, Didi Chuxing Technology Co, which rivals Uber in China. With this investment Didi will have the rights in the Middle Kingdom where it can claim to be one of the few companies to be receiving funding from Apple.

The competition in building and providing autonomous vehicles tends to pit the two most valuable companies in the world, namely Apple and Google parent Alphabet Inc. besides others, against one another as well as against the worlds’ most valuable private venture-capital backed company, the rival of Didi – Uber Technologies Inc.

Apples’ investment lines up with Chinese Internet giants Alibaba Group Holding Ltd together with Tencent Holdings Ltd who are investors for Didi and Lyft Inc., the biggest U.S. rival of Uber who had taken an investment from Didi last year. The high profile venture capital firms such as Coatue Management, Global, GGV, Softbank and Tiger have supported Didi and their support had set the foundation for a global anti-Uber alliance which comprise of Lyft in the US, Grab in Southeast Asia and Ola in India.

Apple the Outlier in the Mix of Tech Heavyweights

In spite of its influence and brand name, Apple seems to be the outlier in this mix of tech heavyweights, a smartphone company among a mass of global investors and Chinese media giants. The assets in mapping as well as artificial intelligence of Apple would definitely help Didi in the future, the emerging self-driving car industry overlaps with the ride-hailing industry.

As of now, it is difficult to imagine what Apple could bring to Didi which Alibaba as well as Tencent cannot. Apple had enjoyed success in the Middle Kingdom due to its popularity of the iPhone and now makes almost a quarter of its revenue from sales to China, though its glorious day seem to be diminishing. Other indications of stress in China have emerged recently.

A high profile Apple investor, Carl Icahn has confirmed that he sold off all his shares in the company two weeks ago, since he was worried about the possibility of reducing sales by the Chinese’s government. Coordinated reports had been published by Chinese state media outlets that Huawei, the Chinese maker of Telco equipment and smartphones, had started charging Apple patent fees linked to wireless communication technologies.

Apple True Beneficiary of Deal

However, in spite of how the $1 billion would be placed in Didi’s reserves, Apple would be the true beneficiary of the deal. It would be a cause for celebration for any tech company to be receiving an investment from Apple but Didi has such an enviable position in China that the funding would be bringing little more than cash at least in the short term, for the company.

If funding seems the gasoline for ride-hailing company, then Didi seems to be leading Uber in China. The company had raised $4 billion in secured funding after a merger last year valued at $15 billion. Meanwhile, Uber China has been reportedly valued at around $8 billion after a $1.2 billion funding somewhere in January. Strong reliable data contrasting the popularity of the services of the company tends to remain scarce.

However, company numbers suggest broadly that Didi seems to occupy around 90% of the ride-hailing market in China. Apple has not confirmed publicly regarding its interest in automobile, though Mr Cook had stated that the automobile industry is on the threshold of a massive change with software and self-driving technology having a huge role in future cars.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.