13 ms·

Uber to Sell China Business to Rival Didi After Losing Billions

396 points by igonvalue 10y ago

spacehunt 10y ago
China just legalized ridesharing under a new regulatory framework... coincidence?
fuzionmonkey 10y ago
Didi and Uber have been raising outrageous amounts of money to outspend each other on driver incentives. Seems like a smart deal for both sides.
sudoscript 10y ago
I can't tell if this is a good deal for Uber investors or not. As I understand it, Uber will own a 20% share in the combined company. The combined company is valued at $35 billion, so Uber's share of the value will be $7 billion (actually less, since they also need to share it with Baidu which invested directly into Uber China too). $7 billion doesn't sound too bad as an exit. However, if Uber's China business is worth only $7 billion, and their current valuation is $68 billion, does that mean the rest of the world is worth 9x China, even though China is one of their largest and highest potential market? Suddenly the valuation of Uber's business outside China looks very inflated (even more than before). Doesn't it?
- fuzionmonkey 10y ago
  It's not a $7 billion "exit". It's an investment for a 20% stake in Didi for $7 billion, which presumably will increase in value as Didi continues to expand in China, especially with less need for ridiculous spending on driver incentives since they will no longer be competing with Uber. Uber probably had something in the ballpark of 20% market share in China so it sounds like the two decided to simply make peace and become profitable together instead of duking it out for years on end and throwing away billions.
  - sk5t 10y ago
    Suppose you spent $1B on a factory to make blenders + blender marketing + distribution channels, etc. Later, you invest $200MM in another blender concern for a 20% stake. How do you value / account for the first $1B in sunk costs?
    - argonaut 10y ago
      You answered your own question? You don't - it's sunk costs.
    - fgonzag 10y ago
      As a loss obviously, a sunk cost is exactly that: sunk
  - 20andup 10y ago
    Its not a 20% stake. "Uber Technologies will receive 5.89 percent of the combined company with preferred equity interest equal to 17.7 percent of the economic benefits."
  - deleted 10y ago
    [deleted]
- johnloeber 10y ago
  Uber's China business was losing money before (I believe to the tune of about $1bn/year), and it looked like they weren't going to get a permanent hold in that market. Local competition was very strong. Consequently, I would conjecture that China was never a large part of Uber's valuation. Leaving it at slightly more than 10% of their valuation seems reasonably realistic to me. Keep in mind: * The major Chinese cities generally have very developed and efficient systems of mass public transit, reducing demand for rideshares (and cars in general) * While China is a large country, not everyone can afford an automobile or a rideshare service. There are many reasons why scooters are so popular in SE Asia; this is one of them.
  - seanmcdirmid 10y ago
    Ride sharing is a huge deal here. I use it daily, my wife more so, most of the people I know use it. Car ownership is low, but that created even more opportunity here. And it's not like there was a healthy volume of taxi/black car activity before, the apps have just made it way convenient and much nicer. This will be the biggest market for uber like services, if it isn't already. But it is also way cheaper here, so that changes the dynamics a bit.
    - shimon_e 10y ago
      Biggest volume and lowest prices.
  - rahimnathwani 10y ago
    "The major Chinese cities generally have very developed and efficient systems of mass public transit, reducing demand for rideshares (and cars in general)" This depends on your frame of reference. If you're comparing with SF, sure. If you're comparing with London or New York, less so. In London, the underground is faster than private car for many (most?) daytime journeys. In Beijing and Shanghai, a private car is almost always faster. Subway stations are spaced too far apart, and the walking involved in changing lines is pretty long. Buses are slower than cars even at times when bus lanes are active. "While China is a large country, not everyone can afford an automobile or a rideshare service." The people who don't have cars are precisely the people who use rideshare services. Compared with the West, in China, ridesharing fares are lower, and the cost of owning+operating a car is higher. I ride Uber 10-15 times per week. The total cost of those rides is 20%-30% of what it would cost to lease and operate my own car, even if parking were free (which it's not).
- azernik 10y ago
  A general approximation in business is that the non-US market is 5-8x the US market. So if the world market is only 9x the China market, I'd consider that a very big deal.
  - eru 10y ago
    Is that an approximation for US businesses?
    - azernik 10y ago
      Yeah - used to (once you've worked out the size of the US market) get a vague feel for the international possibilities. Very rough first-order approximation.
- rahulgulati 10y ago
  One of the factors for Rest of the world vs China gap could be the ticket size of a cab ride. A 5km Uber ride in India/China/SE-Asia costs $1.5 on an average, while in developed countries its $15 on an average (10X). So, I guess, it's value over volume for Uber and markets that are on fast-track to profitability. source - http://www.priceoftravel.com/6536/price-of-a-5-kilometer-uber-ride-around-the-world/ http://www.priceoftravel.com/6536/price-of-a-5-kilometer-ube...
  - yomly 10y ago
    Spot on - ubers in China were easily 70% cheaper for me (coming from the UK). I don't think the volumes were appropriately bigger. Also seemed like Uber were going wild at the time - Easter weekend was totally free for all riders all weekend iirc.
- robk 10y ago
  I think this is exactly right. It's a decent face saving move for Uber to have some sort of outcome in an otherwise very very difficult market where they were losing. Seems like the investors in Uber China could have done better to just put the money directly into Didi though. I guess the upside was it got them into the parent company though, which otherwise they may not have had access to.
- robk 10y ago
  Didi was last valued at $28b according to press from June. http://www.forbes.com/sites/ywang/2016/06/17/didi-in-valuation-fantasy-land-with-new-7-bln-funding/#200b38b27e94 http://www.forbes.com/sites/ywang/2016/06/17/didi-in-valuati...
- EGreg 10y ago
  Apple win!
- georgeecollins 10y ago
  This is how you realize that the $68 billion value is suspect?
- fullshark 10y ago
  Looks like a good deal to me because continuing to fight Didi in China was a losing proposition. Also they now own 20% of the dominant chinese ride hailing company.
- aetherson 10y ago
  As always with Uber you have to understand the relative, not absolute, situation. Uber needs to not just be successful, it needs to be MASSIVELY successful. It's valued at north of $60B! If it makes a bunch of modest deals that are successful to the tune of making a 15% return on investment, and that investment is $2B, then it needs like 20 of those deals to justify its valuation, much less to grow. At risk of pointing out the obvious, there aren't 20 Chinas. And Uber doesn't have $40B to spend on a series of 20 $2B deals. Uber's entire existence for at least the last five years has been predicated on being a major global game-changer. Anything that is less than "major global game-changer" for them is a failure.
piyushpr134 10y ago
Merge is such a cute word. "Uber lost China and had to sell to Didi" is more like it
- marcoperaza 10y ago
  Yes, this is a face-saving use of language. Most "mergers" that you hear of are actually acquisitions.
  - netcan 10y ago
    What's the non-face-saving language?
    - marcoperaza 10y ago
      "Bought out" comes to mind as having a very different connotation than "merged", even though they can often refer to the exact same events.
    - snaky 10y ago
      "Kicked out of China"
    - eva1984 10y ago
      Fail to compete with Didi in China
      - mohsinr 10y ago
        So in future can Didi give challenge to Uber in other markets? or Due to this deal, Didi cannot come to US or other non-China markets and directly compete with Uber?
        eva1984 10y ago
        I don't think so. IMHO, it is even harder for Chinese company to come out than US internet company to go to China. The difficulty felt is mutual.
gesman 10y ago
>> As an entrepreneur, I’ve learned that being successful is about listening to your head as well as following your heart... This is well said.
jeffcaijf 10y ago
no competition will hurt consumers :(
- mc32 10y ago
  Depends, at least they'll be viable entities, rather than ones which were unsustainable (a money losing operation does not stay in business for the long term).
praveenster 10y ago
Strange, since a couple months ago Didi, Lyft and Ola (Indian incumbent) launched a collaborative service … https://techcrunch.com/2016/04/11/lyft-and-didi-kuaidi-launching-cross-platform-service-this-week-in-u-s/ https://techcrunch.com/2016/04/11/lyft-and-didi-kuaidi-launc... https://techcrunch.com/2015/12/03/lyft-didi-ola-and-grabtaxi-partner-in-global-tech-service-alliance-to-rival-uber/ https://techcrunch.com/2015/12/03/lyft-didi-ola-and-grabtaxi...
- rahimnathwani 10y ago
  The Didi/Lyft collaborative service doesn't work in China. Didi customers can visit the US and order Lyft rides. But Lyft customers visiting China cannot use the Lyft app to order Didi rides.
curiousDog 10y ago
Next up, gobbling up Lyft. Looks like they really want to be the monopoly at IPO time. At this rate, they'll probably IPO at more than $100 billion. Sigh, should've interviewed with them last year, haha
- ffumarola 10y ago
  It seems like you're reading this as them gobbling up Didi, instead of admitting defeat?
  - adventured 10y ago
    It's not much of a defeat. They get billions of dollars from a market they were never going to be allowed to dominate to begin with. The only outcome from day one for Uber was being forced out of China, no different than the problems Amazon / Google / Facebook / eBay have all run into in being prevented from competing normally in that market as they do in the rest of the world.
- yladiz 10y ago
  It's extremely unlikely that they'll IPO for anywhere near $100 billion, or even near their current valuation (for reference, the largest IPO in history is Alibaba with $25B). Their accounting practices most likely don't utilize GAAP, which is how they get around saying "we're profitable in the US", so I wouldn't be surprised if they were actually significantly losing money. Plus with the multitude of lawsuits against them right now, it's not hard to imagine they lose a good chunk of their valuation in the near future if the lawsuits don't really favor them. They may IPO (if they are indeed profitable and don't want to keep looking for Series N style fundraising), although I doubt it, and if they did, it's definitely unlikely to be anywhere near $100 billion.
  - menzoic 10y ago
    > the largest IPO in history is Alibaba with $25B Facebook's IPO was much larger at $104B
ameyamk 10y ago
This is pure monopoly play - I hope Lyft continues to compete and do not merge ... I hate to be in world where no taxi service exists and I am at the mercy of random surge pricing...
ww520 10y ago
Looks like it's a case of two rivals trying to outspend each other and one has been outspent.
schappim 10y ago
"Didi is making a $1 billion investment in Uber at a $68 billion valuation, people familiar with the matter said." So that's where Apple's $1 billion in Didi[1] just went! [1] http://www.reuters.com/article/us-apple-china-idUSKCN0Y404W http://www.reuters.com/article/us-apple-china-idUSKCN0Y404W
- known 10y ago
  Insider trading?
nordsieck 10y ago
Seems like a risky move. My understanding is that China doesn't have the same level of minority shareholder protections as Delaware. I suppose it's better than bleeding for the next 10 years and ultimately losing the market, though.
Animats 10y ago
Back in 2014, Didi and Kuaidi, the other big ride-hailing service in China, had a price war. This forced 20 smaller ride-hailing companies out of business. In 2015, Didi and Kuaidi merged.[1] They managed to escape antitrust review by claiming their revenue was below the $65 million threshold for antitrust reporting in China. With their price war, they were both losing money, so the deal was not subjected to antitrust review by the Ministry of Commerce. Unclear if the Uber deal will get through the same loophole. Anyway, Uber exits from China, with a minor stake in Kuaidi. Now Kuaidi can jack up prices. [1] http://www.americanbar.org/content/dam/aba/publishing/antitrust_source/oct15_sobel_10_19f.authcheckdam.pdf http://www.americanbar.org/content/dam/aba/publishing/antitr...
- seanmcdirmid 10y ago
  Not really. Didi doesn't control the taxi industry, and black cabs have always existed inside of the formal taxi business. This doesn't give them a lot of pricing power, they can't jack very high until people start finding alternatives and competition springs up again.
- zhte415 10y ago
  You can order taxi on Didi and pay on cash on a metered fare; surge pricing is not possible. For me, it is a convenience app to hail a taxi, nothing more nor less. Taxis in China are very inexpensive. For ride shares, also pay outside the app, having hailed via it one-time. Driver is happy to have a regular ride-share. And frankly, I'm happy to pay taxi-rate fares, that again are nothing in comparison to North American or European rates, for the convenience.
sethbannon 10y ago
Uber finally threw up the white flag in its fight against Didi in China. I wonder how big of a dent this puts in Uber's sheen of invincibility in other markets. Will investors be braver backing other regional competitors like Ola in India and Lyft in the US?
- ravivyas 10y ago
  China is a whole different market. Nothing can be extrapolated from China. Amazon lost in China, but is doing well in India.
  - adventured 10y ago
    And of course infamously Google and Facebook dominate most of the planet, but can't compete in China (and Baidu can't manage to do much outside of China).
    - sievebrain 10y ago
      It'd be more accurate to say they weren't allowed to compete in China.
    - seanmcdirmid 10y ago
      Its even worse than that: Myanmar, Cambodia, Vietnam, ... most of China's neighbors who are just getting into the internet now...are strictly Facebook/Google territory, Chinese internet companies can't even compete in their backyard.
      - arkitaip 10y ago
        Do they need to, though? The Chinese market is so unbelievably huge that expanding into these small neighboring countries might not be worth the effort.
        seanmcdirmid 10y ago
        Well, why go for a market of 6 billion (people not living in China) when you can go for 1.3 billion (people living in China)? If Facebook becomes popular around the world, and only China and North Korea have locked it out, what does that say about China?
mathattack 10y ago
If you can't beat 'em, join 'em. I think uber's playbook of encouraging local activism to overcome govt and incumbent resistant wouldn't work there. Converting Didi into a partner is a big win for them.
msvan 10y ago
Is there no antitrust law in China? Surely the optimal solution to two big corporations hemorrhaging money in competition for consumers is not that they stop competing, but rather that they cut costs. Or is such a scenario simply not possible in the dog-eat-dog tech world?
- mbesto 10y ago
  > antitrust law in China Ok, seriously? https://en.wikipedia.org/wiki/List_of_largest_Chinese_companies https://en.wikipedia.org/wiki/List_of_largest_Chinese_compan...
  - germanier 10y ago
    So this list means that there is no antitrust law in the US? Because I count twice as many American as Chinese companies on that. https://en.wikipedia.org/wiki/List_of_largest_companies_by_revenue https://en.wikipedia.org/wiki/List_of_largest_companies_by_r... Fact is, China has monopoly and merger control laws.
    - a_small_island 10y ago
      I think mbesto's list was supposed to highlight the fact that a large number of China's top companies are state owned.
      - mbesto 10y ago
        Exactly, sorry to the parent if that wasn't obvious. When you have state controlled entities (and very large ones in energy, utilities, etc), then the idea of antitrust laws is laughable.
    - adventured 10y ago
      The US economy is 70% larger than China's, it should have far larger companies. The US also has vastly larger multi-nationals, that have between 30 years and a century of lead time in competing for / capturing international markets - once again, it makes perfect sense that the US should have more mega-corps. The US also has a vastly more evolved economy, including an extremely large services segment (which China is currently attempting to clone as their manufacturing continues to contract). As China develops the services side of its economy, you'll see dramatic consolidation in the number of mom & pop shops, leading to large service companies (which is why KFC is so massive in China; if this were 20 or 30 years later, China's service sector would have already produced it domestically at scale).
erdevs 10y ago
Well played by Didi. This was a years-long chess game with enormous stakes and Didi came out winning. Make no mistake, Uber's goal was absolutely to dominate in China, if they could. That was a big part of their pitch to investors over the past two years. This deal is an admission of defeat and a retreat from competition, salvaging what value they could in the process. I would imagine this speaks to mounting pressure on Uber to begin producing real profits. If so, expect many changes in the coming year+ as the company's unit economics (outside its usurious car leases) are clearly still abysmal in almost all markets.
- flylib 10y ago
  this is bad news for Lyft who Didi basically just abandoned after partnering with them and were hoping that Uber would self implode by overspending in China, Uber has got the US market on lock https://techcrunch.com/2016/04/11/lyft-and-didi-kuaidi-launching-cross-platform-service-this-week-in-u-s/ https://techcrunch.com/2016/04/11/lyft-and-didi-kuaidi-launc...
  - pfarnsworth 10y ago
    Maybe Lyft already knew this, which is why they have been trying to sell themselves.
    - ipince 10y ago
      ? Why do you claim they're trying to sell themselves?
      - mahyarm 10y ago
        lmgtfy: http://www.vanityfair.com/news/2016/06/is-lyft-headed-toward-a-sale http://www.vanityfair.com/news/2016/06/is-lyft-headed-toward...
  - erdevs 10y ago
    Maybe it's bad for Lyft, or maybe it's good. Has it been confirmed that the partnership is void or defunct? If the partnership remains in place, then this is likely a good thing for Lyft. Recall that, unlike Uber, Lyft wasn't trying to storm China and establish itself as a direct player there. Rather, they established a collaboration with Did whereby each company's customers could benefit from the other company's services in their respective countries. As such, assuming the partnership remains alive, this would mean Lyft has an even stronger partner now in China.
0x80000000 10y ago
For people living in Beijing, this is really a bad news. Didi and Uber China have been in fierce competition for quite a long time, both of them gave consumers HUGE discount. For example, Uber is showing me a promotion which I can go as far as 5 KM around at the cost of just 5 RMB (0.75$). After merging, I'm afraid we won't see such a low price anymore.
- puranjay 10y ago
  Yeah there is no way they can sustain these prices in the long term. Here in India, because of the price war between Ola and Uber, you can travel for as low as $0.04/km - cheaper than even the cheapest mode of transport (rickshaws).
- snaky 10y ago
  People living in Beijing enjoy political stability and wise Party decisions. > From disruption to state-sanctioned monopoly in the blink of an eye. Welcome to the Chinese internet > http://www.wsj.com/articles/uber-in-china-why-foreigners-never-win-in-tech-1470043521 http://www.wsj.com/articles/uber-in-china-why-foreigners-nev...
- forgetsusername 10y ago
  Demand (and revenue) will suffer accordingly.
ghshephard 10y ago
As long as anywhere in the world, I can get out of the airport, open up my Uber App, and summon an Uber - I'm happy.
- mabcat 10y ago
  Don't fly to Sydney then! I don't know what devil-deal was done, but the app won't allow you to summon an UberX inside the airport boundaries.
  - cstejerean 10y ago
    Can you get an uber black? UberX is not allowed to pick up at airports in some markets, but I'll settle for Uber black over having to deal with taxis.
    - nnd 10y ago
      There are a lot of cities where any Uber is available outside of airport only.
  - dingdongding 10y ago
    It is because Uber didn't cut a deal with Sydney Airport. Happens in a lot of airports here in USA where Uber doesn't work. But once you're outside airport boundary you can get an Uber.
snaky 10y ago
Jean Liu, the president of Didi, is the daughter of Chinese businessman and Lenovo founder Liu Chuanzhi, and the granddaughter of Liu Gushu, a senior executive banker at the Bank of China. Travis Kalanick is not.
- perlwle 10y ago
  Another fun fact: Jen Liu, Uber’s China head of strategy, is the niece of Lenovo founder Liu Chuanzhi.
  - snaky 10y ago
    Good old state-sponsored family business. It's called Chaebol (재벌) in Korea, Zaibatsu (財閥) in Japan, is there a name for it in modern China?
    - altern8tif 10y ago
      Nepotism.
    - MagnumOpus 10y ago
      "Taizidang" (太子党) - the Party Princelings. They are children and in-laws of of influential "communists" who regularly end up as generals, CEOs and heads of NGOs in their thirties. https://en.wikipedia.org/wiki/Princelings https://en.wikipedia.org/wiki/Princelings
      - snaky 10y ago
        AFAIK Princelings is just one of the political gangs in China. Others are https://en.wikipedia.org/wiki/Shanghai_clique https://en.wikipedia.org/wiki/Shanghai_clique, https://en.wikipedia.org/wiki/Tsinghua_clique https://en.wikipedia.org/wiki/Tsinghua_clique, https://en.wikipedia.org/wiki/New_Zhijiang_Army https://en.wikipedia.org/wiki/New_Zhijiang_Army, and https://en.wikipedia.org/wiki/Xishan_Society https://en.wikipedia.org/wiki/Xishan_Society
    - eva1984 10y ago
free2rhyme214 10y ago
And then Lyft mergers with Uber. I wouldn't be surprised.
- detailyang 10y ago
  2333333333333333:)
free2rhyme214 10y ago
Kudos to Uber. They did better than Google.
- chvid 10y ago
  Exactly - had Google had a local partner they probably still would have access to the Chinese market.
ryanjodonnell 10y ago
Uber was never going to win as a foreign tech company in China. Good thing they are doing this, at least they get a piece of the pie the only way you can in China - as an investor.
bing_dai 10y ago
Interesting fact: Uber China's Senior VP (Liu Zhen) and Didi's President (Liu Qing, or Jean Liu) are cousins.
- dingdongding 10y ago
  This is what is fishy. Probably merger had to happen.
erikpukinskis 10y ago
> “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.” Hm. This makes me wonder if their strategy for doing that is price fixing. The merger lets them do that legally. Are there any other serious players in the market in China?
- thesimpsons1022 10y ago
  as said earlier in this thread: >Jean Liu, the president of Didi, is the daughter of Chinese businessman and Lenovo founder Liu Chuanzhi, and the granddaughter of Liu Gushu, a senior executive banker at the Bank of China. this deal a long with the entrenched interests almost assure a government sanctioned monopoly.
- Eutow 10y ago
  >The deal with Didi Chuxing comes just days after China agreed to provide a legal framework for taxi-ordering apps. Both Uber and Didi have welcomed the decision, having previously operated in a legal grey area in the country. While the apps are widely popular, they have undermined business for normal taxis and have been met with protests by cab drivers. The new rules will take effect on 1 November and will, among other things, forbid such platforms to operate below cost. http://www.bbc.com/news/36938812 http://www.bbc.com/news/36938812
  - chw9e 10y ago
    Perfect excuse for Didi to raise prices after gaining monopoly share of the market...
DavidWanjiru 10y ago
>chief executive of Uber wrote in a blogpost obtained by Bloomberg. You mean obtained it, like it isn't available to the general public or something? Did they let you make a copy or was it FYEO?
- shimon_e 10y ago
  Available only on the exclusive internet.
- tomelgin 10y ago
  https://newsroom.uber.com/uber-china-didi/ https://newsroom.uber.com/uber-china-didi/ Doesn't say much more than what's covered in the Bloomberg article.
imikay 10y ago
Actually it‘s more a buyout than a merge according to Chinese news.
deleted 10y ago
[deleted]
sandGorgon 10y ago
im not completely sure about this - but it seems that the people who run Didi and Uber in China are cousins (http://www.wsj.com/articles/inside-ubers-fight-with-its-chinese-nemesis-didi-kuaidi-1441234010 http://www.wsj.com/articles/inside-ubers-fight-with-its-chin...) - and are both linked to the powerful Lenovo family. China is a huge, closed economy .. where doing business in the country means buying into powerful business families. Money stays within the family!
bogomipz 10y ago
I realize this is a complex deal with many nuances but do elements of all of this not sound a little bit like a ponzi scheme? At least outwardly? Didi which itself has lost billions dollars so far has agreed to invest a billion dollars into another company who has lost billions of dollars. I guess investors are that confident that Uber can not and will not fail?
- Eutow 10y ago
  Apple invests $1 billion in Didi. Didi invests $1 billion in Uber.
- harryh 10y ago
  In order for it to be a ponzi scheme the money being invested in Uber would need to be used to directly pay off previous investors. That is not happening. Investing in Uber may or may not turn out to be a good investment, but it's not a Ponzi scheme.
  - bogomipz 10y ago
    There is now money that can be taken off the table. You don't think investors are going to get any of that?
    - harryh 10y ago
      Shareholders selling stock to other investors is not the same thing as money owned by the company being used to pay off previous investors.
deleted 10y ago
[deleted]
paradite 10y ago
The articled linked has changed the title to: "Uber to Sell China Business to Rival Didi After Losing Billions" This is a more accurate title being used by major news media: "Uber sells Chinese business to Didi Chuxing" - http://www.bbc.com/news/36938812 http://www.bbc.com/news/36938812 "Didi Chuxing to Buy Uber’s China Operations" - http://www.wsj.com/articles/china-s-didi-chuxing-to-acquire-rival-uber-s-chinese-operations-1470024403 http://www.wsj.com/articles/china-s-didi-chuxing-to-acquire-... It is also being used in Didi's official Weibo (in Chinese): http://weibo.com/2838754010/E1ykp4eJn?refer_flag=1001030101_&type=comment#_rnd1470045164071 http://weibo.com/2838754010/E1ykp4eJn?refer_flag=1001030101_...
- eva1984 10y ago
  For non-Chinese audience, this is from Didi's official Weibo account: "滴滴出行宣布收购优步中国，融合资源，促进中国移动出行行业更健康发展。" "Didi Chuxing announces the acquisition of Uber China, (for) integration of resources and facilitating Chinese mobile transportation business for healthier development." Edit: typo
- sctb 10y ago
  Thanks, we updated the submission title from “Uber Said to Merge China Business with Didi in $35B Deal”.
rajacombinator 10y ago
There's going to be a lot of money vaporized in this 2p2 taxi business ...
Bogdanovich 10y ago
From bbc.com: "The deal with Didi Chuxing comes just days after China agreed to provide a legal framework for taxi-ordering apps. Both Uber and Didi have welcomed the decision, having previously operated in a legal grey area in the country. While the apps are widely popular, they have undermined business for normal taxis and have been met with protests by cab drivers. The new rules will take effect on 1 November and will, among other things, forbid such platforms to operate below cost." New regulation prohibits ride subsidizing. Meaning no way for Uber to increase its market share by subsidizing rides after November 1st.
- snaky 10y ago
  Wait for suddenly and unexpectedly these regulations will be pulled off after the deal.
  - jpatokal 10y ago
    Why would Didi need to subsidize to below cost if they don't have Uber to compete against? They already have a 87% market share.
    - Bogdanovich 10y ago
      This regulation was probably a good reason for uber to sell its business as it protects didi's market share
perseusprime11 10y ago
It is interesting to note the Apple investment in Didi just a few months back. Did that in any way play a role in this merger? I think this is a good outcome given the consideration that Uber, an american company cannot own something as fundamental as transportation in China. The government plays too much of a role to let Uber or for that matter any other foreign company. Listen to Trump on this one!
tluyben2 10y ago
I hope that the Uber app will be working still after this in Shanghai as for foreigners Uber is usable; Didi not really.
whack 10y ago
I really hope China adopts some kind of anti-trust regulation sometime soon. This trend of all competitors merging until only one monopolist is left standing, can't be good for their consumers, nor the economy.
- msoad 10y ago
  heh! This is the result of the new policy Chinese government put in place that prohibits ride sharing companies from subsidizing rides to gain market share. It pretty much forced Uber to get out of China! I don't think Chinese government care about anti-trust as long as the monopoly company is from the gang that runs the country.
teslaberry 10y ago
travis chucknack made a huge misjudgement and lost hundreds of millions of dollars with nothing to show. only, in this bubblicious market can something like this go unpunished. same as mayer from yahoo. failure in china for uber's execs should have been forseeable. for all it's 'market policy' , any big western technology company cannot succeed in china without the blessing and connections in the chinese government. uber's travis either mistakenly thought he had this blessing , or he got suckered into it. OR, quite possibly he was ignorant and conceited enough to jump into the shark pool not knowing he needed the consent of the sharks not to get eaten right away. either way, this was a huge lapse of judgment and is a CANARY IN THE COAL MINE for other major business judgement failures that will likely soon be unmasked once the tide of market madness turns to market panic. if i had a million dollars, i'd be betting uber will be one of the biggest financial disasters like enron, but for the startup world.. if only there was place to buy put options of pre-ipo uber stock...........
jddanforth 10y ago
How did Uber get 17.7% of Didi (88% of Uber China shares) if they didn't own more than 50% of Uber China to begin with? Also, it was reported that Uber got 17% of economic interest, but only 5.89% of full equity? I assume the rest of the 17% was non-voting shares?
xbeta 10y ago
So much for "disruption" in startup ideology, but I guess it is China that starts bring them back to reality. This is China, nothing is fair even you optimistically believe it to be. I'm not sure what's the fantasy on China. I'd personally prefer winning the 6b population markets over the 1.3b. Sure, it takes time, but in a long run it is more sustainable. But obviously in a startup world, a sustainable business without the hyper-growth is not much valued.

396 points by igonvalue 10y ago

China just legalized ridesharing under a new regulatory framework... coincidence?

Didi and Uber have been raising outrageous amounts of money to outspend each other on driver incentives. Seems like a smart deal for both sides.

sudoscript 10y ago

I can't tell if this is a good deal for Uber investors or not. As I understand it, Uber will own a 20% share in the combined company. The combined company is valued at $35 billion, so Uber's share of the value will be $7 billion (actually less, since they also need to share it with Baidu which invested directly into Uber China too). $7 billion doesn't sound too bad as an exit. However, if Uber's China business is worth only $7 billion, and their current valuation is $68 billion, does that mean the rest of the world is worth 9x China, even though China is one of their largest and highest potential market? Suddenly the valuation of Uber's business outside China looks very inflated (even more than before). Doesn't it?

fuzionmonkey 10y ago
It's not a $7 billion "exit". It's an investment for a 20% stake in Didi for $7 billion, which presumably will increase in value as Didi continues to expand in China, especially with less need for ridiculous spending on driver incentives since they will no longer be competing with Uber. Uber probably had something in the ballpark of 20% market share in China so it sounds like the two decided to simply make peace and become profitable together instead of duking it out for years on end and throwing away billions.
- sk5t 10y ago
  Suppose you spent $1B on a factory to make blenders + blender marketing + distribution channels, etc. Later, you invest $200MM in another blender concern for a 20% stake. How do you value / account for the first $1B in sunk costs?
  - argonaut 10y ago
    You answered your own question? You don't - it's sunk costs.
  - fgonzag 10y ago
    As a loss obviously, a sunk cost is exactly that: sunk
- 20andup 10y ago
  Its not a 20% stake. "Uber Technologies will receive 5.89 percent of the combined company with preferred equity interest equal to 17.7 percent of the economic benefits."
- deleted 10y ago
  [deleted]
johnloeber 10y ago
Uber's China business was losing money before (I believe to the tune of about $1bn/year), and it looked like they weren't going to get a permanent hold in that market. Local competition was very strong. Consequently, I would conjecture that China was never a large part of Uber's valuation. Leaving it at slightly more than 10% of their valuation seems reasonably realistic to me. Keep in mind: * The major Chinese cities generally have very developed and efficient systems of mass public transit, reducing demand for rideshares (and cars in general) * While China is a large country, not everyone can afford an automobile or a rideshare service. There are many reasons why scooters are so popular in SE Asia; this is one of them.
- seanmcdirmid 10y ago
  Ride sharing is a huge deal here. I use it daily, my wife more so, most of the people I know use it. Car ownership is low, but that created even more opportunity here. And it's not like there was a healthy volume of taxi/black car activity before, the apps have just made it way convenient and much nicer. This will be the biggest market for uber like services, if it isn't already. But it is also way cheaper here, so that changes the dynamics a bit.
  - shimon_e 10y ago
    Biggest volume and lowest prices.
- rahimnathwani 10y ago
  "The major Chinese cities generally have very developed and efficient systems of mass public transit, reducing demand for rideshares (and cars in general)" This depends on your frame of reference. If you're comparing with SF, sure. If you're comparing with London or New York, less so. In London, the underground is faster than private car for many (most?) daytime journeys. In Beijing and Shanghai, a private car is almost always faster. Subway stations are spaced too far apart, and the walking involved in changing lines is pretty long. Buses are slower than cars even at times when bus lanes are active. "While China is a large country, not everyone can afford an automobile or a rideshare service." The people who don't have cars are precisely the people who use rideshare services. Compared with the West, in China, ridesharing fares are lower, and the cost of owning+operating a car is higher. I ride Uber 10-15 times per week. The total cost of those rides is 20%-30% of what it would cost to lease and operate my own car, even if parking were free (which it's not).
azernik 10y ago
A general approximation in business is that the non-US market is 5-8x the US market. So if the world market is only 9x the China market, I'd consider that a very big deal.
- eru 10y ago
  Is that an approximation for US businesses?
  - azernik 10y ago
    Yeah - used to (once you've worked out the size of the US market) get a vague feel for the international possibilities. Very rough first-order approximation.
rahulgulati 10y ago
One of the factors for Rest of the world vs China gap could be the ticket size of a cab ride. A 5km Uber ride in India/China/SE-Asia costs $1.5 on an average, while in developed countries its $15 on an average (10X). So, I guess, it's value over volume for Uber and markets that are on fast-track to profitability. source - http://www.priceoftravel.com/6536/price-of-a-5-kilometer-uber-ride-around-the-world/ http://www.priceoftravel.com/6536/price-of-a-5-kilometer-ube...
- yomly 10y ago
  Spot on - ubers in China were easily 70% cheaper for me (coming from the UK). I don't think the volumes were appropriately bigger. Also seemed like Uber were going wild at the time - Easter weekend was totally free for all riders all weekend iirc.
robk 10y ago
I think this is exactly right. It's a decent face saving move for Uber to have some sort of outcome in an otherwise very very difficult market where they were losing. Seems like the investors in Uber China could have done better to just put the money directly into Didi though. I guess the upside was it got them into the parent company though, which otherwise they may not have had access to.
robk 10y ago
Didi was last valued at $28b according to press from June. http://www.forbes.com/sites/ywang/2016/06/17/didi-in-valuation-fantasy-land-with-new-7-bln-funding/#200b38b27e94 http://www.forbes.com/sites/ywang/2016/06/17/didi-in-valuati...
EGreg 10y ago
Apple win!
georgeecollins 10y ago
This is how you realize that the $68 billion value is suspect?
fullshark 10y ago
Looks like a good deal to me because continuing to fight Didi in China was a losing proposition. Also they now own 20% of the dominant chinese ride hailing company.
aetherson 10y ago
As always with Uber you have to understand the relative, not absolute, situation. Uber needs to not just be successful, it needs to be MASSIVELY successful. It's valued at north of $60B! If it makes a bunch of modest deals that are successful to the tune of making a 15% return on investment, and that investment is $2B, then it needs like 20 of those deals to justify its valuation, much less to grow. At risk of pointing out the obvious, there aren't 20 Chinas. And Uber doesn't have $40B to spend on a series of 20 $2B deals. Uber's entire existence for at least the last five years has been predicated on being a major global game-changer. Anything that is less than "major global game-changer" for them is a failure.

piyushpr134 10y ago

Merge is such a cute word. "Uber lost China and had to sell to Didi" is more like it

marcoperaza 10y ago
Yes, this is a face-saving use of language. Most "mergers" that you hear of are actually acquisitions.
- netcan 10y ago
  What's the non-face-saving language?
  - marcoperaza 10y ago
    "Bought out" comes to mind as having a very different connotation than "merged", even though they can often refer to the exact same events.
  - snaky 10y ago
    "Kicked out of China"
  - eva1984 10y ago
    Fail to compete with Didi in China
    - mohsinr 10y ago
      So in future can Didi give challenge to Uber in other markets? or Due to this deal, Didi cannot come to US or other non-China markets and directly compete with Uber?
      - eva1984 10y ago
        I don't think so. IMHO, it is even harder for Chinese company to come out than US internet company to go to China. The difficulty felt is mutual.

gesman 10y ago

>> As an entrepreneur, I’ve learned that being successful is about listening to your head as well as following your heart... This is well said.

jeffcaijf 10y ago

no competition will hurt consumers :(

mc32 10y ago
Depends, at least they'll be viable entities, rather than ones which were unsustainable (a money losing operation does not stay in business for the long term).

praveenster 10y ago

Strange, since a couple months ago Didi, Lyft and Ola (Indian incumbent) launched a collaborative service … https://techcrunch.com/2016/04/11/lyft-and-didi-kuaidi-launching-cross-platform-service-this-week-in-u-s/ https://techcrunch.com/2016/04/11/lyft-and-didi-kuaidi-launc... https://techcrunch.com/2015/12/03/lyft-didi-ola-and-grabtaxi-partner-in-global-tech-service-alliance-to-rival-uber/ https://techcrunch.com/2015/12/03/lyft-didi-ola-and-grabtaxi...

rahimnathwani 10y ago
The Didi/Lyft collaborative service doesn't work in China. Didi customers can visit the US and order Lyft rides. But Lyft customers visiting China cannot use the Lyft app to order Didi rides.

curiousDog 10y ago

Next up, gobbling up Lyft. Looks like they really want to be the monopoly at IPO time. At this rate, they'll probably IPO at more than $100 billion. Sigh, should've interviewed with them last year, haha

ffumarola 10y ago
It seems like you're reading this as them gobbling up Didi, instead of admitting defeat?
- adventured 10y ago
  It's not much of a defeat. They get billions of dollars from a market they were never going to be allowed to dominate to begin with. The only outcome from day one for Uber was being forced out of China, no different than the problems Amazon / Google / Facebook / eBay have all run into in being prevented from competing normally in that market as they do in the rest of the world.
yladiz 10y ago
It's extremely unlikely that they'll IPO for anywhere near $100 billion, or even near their current valuation (for reference, the largest IPO in history is Alibaba with $25B). Their accounting practices most likely don't utilize GAAP, which is how they get around saying "we're profitable in the US", so I wouldn't be surprised if they were actually significantly losing money. Plus with the multitude of lawsuits against them right now, it's not hard to imagine they lose a good chunk of their valuation in the near future if the lawsuits don't really favor them. They may IPO (if they are indeed profitable and don't want to keep looking for Series N style fundraising), although I doubt it, and if they did, it's definitely unlikely to be anywhere near $100 billion.
- menzoic 10y ago
  > the largest IPO in history is Alibaba with $25B Facebook's IPO was much larger at $104B

ameyamk 10y ago

This is pure monopoly play - I hope Lyft continues to compete and do not merge ... I hate to be in world where no taxi service exists and I am at the mercy of random surge pricing...

ww520 10y ago

Looks like it's a case of two rivals trying to outspend each other and one has been outspent.

schappim 10y ago

"Didi is making a $1 billion investment in Uber at a $68 billion valuation, people familiar with the matter said." So that's where Apple's $1 billion in Didi[1] just went! [1] http://www.reuters.com/article/us-apple-china-idUSKCN0Y404W http://www.reuters.com/article/us-apple-china-idUSKCN0Y404W

known 10y ago
Insider trading?

nordsieck 10y ago

Seems like a risky move. My understanding is that China doesn't have the same level of minority shareholder protections as Delaware. I suppose it's better than bleeding for the next 10 years and ultimately losing the market, though.

Animats 10y ago

Back in 2014, Didi and Kuaidi, the other big ride-hailing service in China, had a price war. This forced 20 smaller ride-hailing companies out of business. In 2015, Didi and Kuaidi merged.[1] They managed to escape antitrust review by claiming their revenue was below the $65 million threshold for antitrust reporting in China. With their price war, they were both losing money, so the deal was not subjected to antitrust review by the Ministry of Commerce. Unclear if the Uber deal will get through the same loophole. Anyway, Uber exits from China, with a minor stake in Kuaidi. Now Kuaidi can jack up prices. [1] http://www.americanbar.org/content/dam/aba/publishing/antitrust_source/oct15_sobel_10_19f.authcheckdam.pdf http://www.americanbar.org/content/dam/aba/publishing/antitr...

seanmcdirmid 10y ago
Not really. Didi doesn't control the taxi industry, and black cabs have always existed inside of the formal taxi business. This doesn't give them a lot of pricing power, they can't jack very high until people start finding alternatives and competition springs up again.
zhte415 10y ago
You can order taxi on Didi and pay on cash on a metered fare; surge pricing is not possible. For me, it is a convenience app to hail a taxi, nothing more nor less. Taxis in China are very inexpensive. For ride shares, also pay outside the app, having hailed via it one-time. Driver is happy to have a regular ride-share. And frankly, I'm happy to pay taxi-rate fares, that again are nothing in comparison to North American or European rates, for the convenience.

sethbannon 10y ago

Uber finally threw up the white flag in its fight against Didi in China. I wonder how big of a dent this puts in Uber's sheen of invincibility in other markets. Will investors be braver backing other regional competitors like Ola in India and Lyft in the US?

ravivyas 10y ago
China is a whole different market. Nothing can be extrapolated from China. Amazon lost in China, but is doing well in India.
- adventured 10y ago
  And of course infamously Google and Facebook dominate most of the planet, but can't compete in China (and Baidu can't manage to do much outside of China).
  - sievebrain 10y ago
    It'd be more accurate to say they weren't allowed to compete in China.
  - seanmcdirmid 10y ago
    Its even worse than that: Myanmar, Cambodia, Vietnam, ... most of China's neighbors who are just getting into the internet now...are strictly Facebook/Google territory, Chinese internet companies can't even compete in their backyard.
    - arkitaip 10y ago
      Do they need to, though? The Chinese market is so unbelievably huge that expanding into these small neighboring countries might not be worth the effort.
      - seanmcdirmid 10y ago
        Well, why go for a market of 6 billion (people not living in China) when you can go for 1.3 billion (people living in China)? If Facebook becomes popular around the world, and only China and North Korea have locked it out, what does that say about China?

mathattack 10y ago

If you can't beat 'em, join 'em. I think uber's playbook of encouraging local activism to overcome govt and incumbent resistant wouldn't work there. Converting Didi into a partner is a big win for them.

msvan 10y ago

Is there no antitrust law in China? Surely the optimal solution to two big corporations hemorrhaging money in competition for consumers is not that they stop competing, but rather that they cut costs. Or is such a scenario simply not possible in the dog-eat-dog tech world?

mbesto 10y ago
> antitrust law in China Ok, seriously? https://en.wikipedia.org/wiki/List_of_largest_Chinese_companies https://en.wikipedia.org/wiki/List_of_largest_Chinese_compan...
- germanier 10y ago
  So this list means that there is no antitrust law in the US? Because I count twice as many American as Chinese companies on that. https://en.wikipedia.org/wiki/List_of_largest_companies_by_revenue https://en.wikipedia.org/wiki/List_of_largest_companies_by_r... Fact is, China has monopoly and merger control laws.
  - a_small_island 10y ago
    I think mbesto's list was supposed to highlight the fact that a large number of China's top companies are state owned.
    - mbesto 10y ago
      Exactly, sorry to the parent if that wasn't obvious. When you have state controlled entities (and very large ones in energy, utilities, etc), then the idea of antitrust laws is laughable.
  - adventured 10y ago
    The US economy is 70% larger than China's, it should have far larger companies. The US also has vastly larger multi-nationals, that have between 30 years and a century of lead time in competing for / capturing international markets - once again, it makes perfect sense that the US should have more mega-corps. The US also has a vastly more evolved economy, including an extremely large services segment (which China is currently attempting to clone as their manufacturing continues to contract). As China develops the services side of its economy, you'll see dramatic consolidation in the number of mom & pop shops, leading to large service companies (which is why KFC is so massive in China; if this were 20 or 30 years later, China's service sector would have already produced it domestically at scale).

erdevs 10y ago

Well played by Didi. This was a years-long chess game with enormous stakes and Didi came out winning. Make no mistake, Uber's goal was absolutely to dominate in China, if they could. That was a big part of their pitch to investors over the past two years. This deal is an admission of defeat and a retreat from competition, salvaging what value they could in the process. I would imagine this speaks to mounting pressure on Uber to begin producing real profits. If so, expect many changes in the coming year+ as the company's unit economics (outside its usurious car leases) are clearly still abysmal in almost all markets.

flylib 10y ago
this is bad news for Lyft who Didi basically just abandoned after partnering with them and were hoping that Uber would self implode by overspending in China, Uber has got the US market on lock https://techcrunch.com/2016/04/11/lyft-and-didi-kuaidi-launching-cross-platform-service-this-week-in-u-s/ https://techcrunch.com/2016/04/11/lyft-and-didi-kuaidi-launc...
- pfarnsworth 10y ago
  Maybe Lyft already knew this, which is why they have been trying to sell themselves.
  - ipince 10y ago
    ? Why do you claim they're trying to sell themselves?
    - mahyarm 10y ago
      lmgtfy: http://www.vanityfair.com/news/2016/06/is-lyft-headed-toward-a-sale http://www.vanityfair.com/news/2016/06/is-lyft-headed-toward...
- erdevs 10y ago
  Maybe it's bad for Lyft, or maybe it's good. Has it been confirmed that the partnership is void or defunct? If the partnership remains in place, then this is likely a good thing for Lyft. Recall that, unlike Uber, Lyft wasn't trying to storm China and establish itself as a direct player there. Rather, they established a collaboration with Did whereby each company's customers could benefit from the other company's services in their respective countries. As such, assuming the partnership remains alive, this would mean Lyft has an even stronger partner now in China.

0x80000000 10y ago

For people living in Beijing, this is really a bad news. Didi and Uber China have been in fierce competition for quite a long time, both of them gave consumers HUGE discount. For example, Uber is showing me a promotion which I can go as far as 5 KM around at the cost of just 5 RMB (0.75$). After merging, I'm afraid we won't see such a low price anymore.

puranjay 10y ago
Yeah there is no way they can sustain these prices in the long term. Here in India, because of the price war between Ola and Uber, you can travel for as low as $0.04/km - cheaper than even the cheapest mode of transport (rickshaws).
snaky 10y ago
People living in Beijing enjoy political stability and wise Party decisions. > From disruption to state-sanctioned monopoly in the blink of an eye. Welcome to the Chinese internet > http://www.wsj.com/articles/uber-in-china-why-foreigners-never-win-in-tech-1470043521 http://www.wsj.com/articles/uber-in-china-why-foreigners-nev...
forgetsusername 10y ago
Demand (and revenue) will suffer accordingly.

ghshephard 10y ago

As long as anywhere in the world, I can get out of the airport, open up my Uber App, and summon an Uber - I'm happy.

mabcat 10y ago
Don't fly to Sydney then! I don't know what devil-deal was done, but the app won't allow you to summon an UberX inside the airport boundaries.
- cstejerean 10y ago
  Can you get an uber black? UberX is not allowed to pick up at airports in some markets, but I'll settle for Uber black over having to deal with taxis.
  - nnd 10y ago
    There are a lot of cities where any Uber is available outside of airport only.
- dingdongding 10y ago
  It is because Uber didn't cut a deal with Sydney Airport. Happens in a lot of airports here in USA where Uber doesn't work. But once you're outside airport boundary you can get an Uber.

snaky 10y ago

Jean Liu, the president of Didi, is the daughter of Chinese businessman and Lenovo founder Liu Chuanzhi, and the granddaughter of Liu Gushu, a senior executive banker at the Bank of China. Travis Kalanick is not.

perlwle 10y ago
Another fun fact: Jen Liu, Uber’s China head of strategy, is the niece of Lenovo founder Liu Chuanzhi.
- snaky 10y ago
  Good old state-sponsored family business. It's called Chaebol (재벌) in Korea, Zaibatsu (財閥) in Japan, is there a name for it in modern China?
  - altern8tif 10y ago
    Nepotism.
  - MagnumOpus 10y ago
    "Taizidang" (太子党) - the Party Princelings. They are children and in-laws of of influential "communists" who regularly end up as generals, CEOs and heads of NGOs in their thirties. https://en.wikipedia.org/wiki/Princelings https://en.wikipedia.org/wiki/Princelings
    - snaky 10y ago
      AFAIK Princelings is just one of the political gangs in China. Others are https://en.wikipedia.org/wiki/Shanghai_clique https://en.wikipedia.org/wiki/Shanghai_clique, https://en.wikipedia.org/wiki/Tsinghua_clique https://en.wikipedia.org/wiki/Tsinghua_clique, https://en.wikipedia.org/wiki/New_Zhijiang_Army https://en.wikipedia.org/wiki/New_Zhijiang_Army, and https://en.wikipedia.org/wiki/Xishan_Society https://en.wikipedia.org/wiki/Xishan_Society
  - eva1984 10y ago

free2rhyme214 10y ago

And then Lyft mergers with Uber. I wouldn't be surprised.

detailyang 10y ago
2333333333333333:)

free2rhyme214 10y ago

Kudos to Uber. They did better than Google.

chvid 10y ago
Exactly - had Google had a local partner they probably still would have access to the Chinese market.

ryanjodonnell 10y ago

Uber was never going to win as a foreign tech company in China. Good thing they are doing this, at least they get a piece of the pie the only way you can in China - as an investor.

bing_dai 10y ago

Interesting fact: Uber China's Senior VP (Liu Zhen) and Didi's President (Liu Qing, or Jean Liu) are cousins.

dingdongding 10y ago
This is what is fishy. Probably merger had to happen.

erikpukinskis 10y ago

> “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.” Hm. This makes me wonder if their strategy for doing that is price fixing. The merger lets them do that legally. Are there any other serious players in the market in China?

thesimpsons1022 10y ago
as said earlier in this thread: >Jean Liu, the president of Didi, is the daughter of Chinese businessman and Lenovo founder Liu Chuanzhi, and the granddaughter of Liu Gushu, a senior executive banker at the Bank of China. this deal a long with the entrenched interests almost assure a government sanctioned monopoly.
Eutow 10y ago
>The deal with Didi Chuxing comes just days after China agreed to provide a legal framework for taxi-ordering apps. Both Uber and Didi have welcomed the decision, having previously operated in a legal grey area in the country. While the apps are widely popular, they have undermined business for normal taxis and have been met with protests by cab drivers. The new rules will take effect on 1 November and will, among other things, forbid such platforms to operate below cost. http://www.bbc.com/news/36938812 http://www.bbc.com/news/36938812
- chw9e 10y ago
  Perfect excuse for Didi to raise prices after gaining monopoly share of the market...

DavidWanjiru 10y ago

>chief executive of Uber wrote in a blogpost obtained by Bloomberg. You mean obtained it, like it isn't available to the general public or something? Did they let you make a copy or was it FYEO?

shimon_e 10y ago
Available only on the exclusive internet.
tomelgin 10y ago
https://newsroom.uber.com/uber-china-didi/ https://newsroom.uber.com/uber-china-didi/ Doesn't say much more than what's covered in the Bloomberg article.

imikay 10y ago

Actually it‘s more a buyout than a merge according to Chinese news.

deleted 10y ago

[deleted]

sandGorgon 10y ago

im not completely sure about this - but it seems that the people who run Didi and Uber in China are cousins (http://www.wsj.com/articles/inside-ubers-fight-with-its-chinese-nemesis-didi-kuaidi-1441234010 http://www.wsj.com/articles/inside-ubers-fight-with-its-chin...) - and are both linked to the powerful Lenovo family. China is a huge, closed economy .. where doing business in the country means buying into powerful business families. Money stays within the family!

bogomipz 10y ago

I realize this is a complex deal with many nuances but do elements of all of this not sound a little bit like a ponzi scheme? At least outwardly? Didi which itself has lost billions dollars so far has agreed to invest a billion dollars into another company who has lost billions of dollars. I guess investors are that confident that Uber can not and will not fail?

Eutow 10y ago
Apple invests $1 billion in Didi. Didi invests $1 billion in Uber.
harryh 10y ago
In order for it to be a ponzi scheme the money being invested in Uber would need to be used to directly pay off previous investors. That is not happening. Investing in Uber may or may not turn out to be a good investment, but it's not a Ponzi scheme.
- bogomipz 10y ago
  There is now money that can be taken off the table. You don't think investors are going to get any of that?
  - harryh 10y ago
    Shareholders selling stock to other investors is not the same thing as money owned by the company being used to pay off previous investors.

deleted 10y ago

[deleted]

paradite 10y ago

The articled linked has changed the title to: "Uber to Sell China Business to Rival Didi After Losing Billions" This is a more accurate title being used by major news media: "Uber sells Chinese business to Didi Chuxing" - http://www.bbc.com/news/36938812 http://www.bbc.com/news/36938812 "Didi Chuxing to Buy Uber’s China Operations" - http://www.wsj.com/articles/china-s-didi-chuxing-to-acquire-rival-uber-s-chinese-operations-1470024403 http://www.wsj.com/articles/china-s-didi-chuxing-to-acquire-... It is also being used in Didi's official Weibo (in Chinese): http://weibo.com/2838754010/E1ykp4eJn?refer_flag=1001030101_&type=comment#_rnd1470045164071 http://weibo.com/2838754010/E1ykp4eJn?refer_flag=1001030101_...

eva1984 10y ago
For non-Chinese audience, this is from Didi's official Weibo account: "滴滴出行宣布收购优步中国，融合资源，促进中国移动出行行业更健康发展。" "Didi Chuxing announces the acquisition of Uber China, (for) integration of resources and facilitating Chinese mobile transportation business for healthier development." Edit: typo
sctb 10y ago
Thanks, we updated the submission title from “Uber Said to Merge China Business with Didi in $35B Deal”.

rajacombinator 10y ago

There's going to be a lot of money vaporized in this 2p2 taxi business ...

Bogdanovich 10y ago

From bbc.com: "The deal with Didi Chuxing comes just days after China agreed to provide a legal framework for taxi-ordering apps. Both Uber and Didi have welcomed the decision, having previously operated in a legal grey area in the country. While the apps are widely popular, they have undermined business for normal taxis and have been met with protests by cab drivers. The new rules will take effect on 1 November and will, among other things, forbid such platforms to operate below cost." New regulation prohibits ride subsidizing. Meaning no way for Uber to increase its market share by subsidizing rides after November 1st.

snaky 10y ago
Wait for suddenly and unexpectedly these regulations will be pulled off after the deal.
- jpatokal 10y ago
  Why would Didi need to subsidize to below cost if they don't have Uber to compete against? They already have a 87% market share.
  - Bogdanovich 10y ago
    This regulation was probably a good reason for uber to sell its business as it protects didi's market share

perseusprime11 10y ago

It is interesting to note the Apple investment in Didi just a few months back. Did that in any way play a role in this merger? I think this is a good outcome given the consideration that Uber, an american company cannot own something as fundamental as transportation in China. The government plays too much of a role to let Uber or for that matter any other foreign company. Listen to Trump on this one!

tluyben2 10y ago

I hope that the Uber app will be working still after this in Shanghai as for foreigners Uber is usable; Didi not really.

whack 10y ago

I really hope China adopts some kind of anti-trust regulation sometime soon. This trend of all competitors merging until only one monopolist is left standing, can't be good for their consumers, nor the economy.

msoad 10y ago
heh! This is the result of the new policy Chinese government put in place that prohibits ride sharing companies from subsidizing rides to gain market share. It pretty much forced Uber to get out of China! I don't think Chinese government care about anti-trust as long as the monopoly company is from the gang that runs the country.

teslaberry 10y ago

travis chucknack made a huge misjudgement and lost hundreds of millions of dollars with nothing to show. only, in this bubblicious market can something like this go unpunished. same as mayer from yahoo. failure in china for uber's execs should have been forseeable. for all it's 'market policy' , any big western technology company cannot succeed in china without the blessing and connections in the chinese government. uber's travis either mistakenly thought he had this blessing , or he got suckered into it. OR, quite possibly he was ignorant and conceited enough to jump into the shark pool not knowing he needed the consent of the sharks not to get eaten right away. either way, this was a huge lapse of judgment and is a CANARY IN THE COAL MINE for other major business judgement failures that will likely soon be unmasked once the tide of market madness turns to market panic. if i had a million dollars, i'd be betting uber will be one of the biggest financial disasters like enron, but for the startup world.. if only there was place to buy put options of pre-ipo uber stock...........

jddanforth 10y ago

How did Uber get 17.7% of Didi (88% of Uber China shares) if they didn't own more than 50% of Uber China to begin with? Also, it was reported that Uber got 17% of economic interest, but only 5.89% of full equity? I assume the rest of the 17% was non-voting shares?

xbeta 10y ago

So much for "disruption" in startup ideology, but I guess it is China that starts bring them back to reality. This is China, nothing is fair even you optimistically believe it to be. I'm not sure what's the fantasy on China. I'd personally prefer winning the 6b population markets over the 1.3b. Sure, it takes time, but in a long run it is more sustainable. But obviously in a startup world, a sustainable business without the hyper-growth is not much valued.