The notion of ride sharing, where most anyone with a mobile device can not only summon a ride from said device but also pay for it from the same and go just about anywhere in an immediate area, isn’t new anywhere any more, even in China.
With several companies, including the Uber service, operating in the region, it was likely only a matter of time until some consolidation of the market took place.
That’s just what happened recently as Uber sold its entire Chinese operation to its rival Didi Chuxing.
It’s considered odd that Uber would sell out, given that not only was the Chinese market the personal project of co-founder Travis Kalanick but also that the Chinese market was one of Uber’s largest in terms of sheer number of rides.
It’s a founder’s pet project and a major source of revenue, so why bail out? Given the sheer fight that Uber was in almost from the beginning—rival Didi Chuxing reportedly put almost as much effort into getting riders as Uber did, and Uber reportedly spent “tens of millions of dollars every month,” according to the New York Times—it may simply be that Uber wanted to refocus its efforts elsewhere.
As for how much Uber got out of the deal, reports suggest that the $2 billion Uber put into the Chinese market gained the company a $7 billion stake in a growing firm, which is a pretty impressive return on investment. Uber gets a 20 percent stake in the new company, and Didi Chuxing will chip in $1 billioni in Uber Global, or the worldwide Uber operation.
Moreover, Uber no longer needs to drop that “tens of millions of dollars” on a monthly basis, which can allow it to go after other markets. The various headaches the company ran into in the Chinese market—being unable to advertise on certain social networks, drivers who faked rides for extra commissions, and so on—are also out of the picture.
It’s not outlandish that Uber would exit a crowded market, and though Didi is now pretty much the biggest fish in the pond, there were other,.smaller operations in play as well. Uber likely got the better part of this deal, and should be able to press its newfound advantage—and investment—elsewhere.
