Uber's China rival says pact with Apple can bear fruit
The tie-up between Apple and Chinese car-hailing app Didi started off with a joke. Didi president Jean Liu said talks began less than a month ago when she stopped by to see Tim Cook at Apple headquarters in California.
Any company named after a fruit "could achieve something big", she jested during the April 20 meeting. Didi's legal name, Xiaoju Kuaizhi Inc., means 'little orange', she explained.
The $1bn (€884m) deal was announced just 22 days later. Liu, a former Goldman Sachs Group banker, frequently meets with tech executives when she visits the US. She didn't go into the meeting to ask for capital, but rather to discuss the China market and opportunities for co-operation. "The whole deal closed in lightning speed," Liu said. "We were very impressed by Tim. He's an amazing, iconic leader."
There's much to gain on both sides. Didi, battling with Uber for supremacy in China, will get additional capital to expand into new cities, recruit drivers and market to potential customers. The Apple investment will bring the amount Didi is raising in its current round of funding to $3bn, sources said.
Apple gets a potentially lucrative investment and wins powerful allies in one of its most important markets. Didi is backed by China's two largest internet companies, Alibaba and Tencent Holdings. They could help Apple market Apple Pay and other services, as well as giving it experience in transportation as it weighs an entry into cars.
Signing Apple as a strategic investor is partly aimed at thwarting investors from putting money into Uber, a source said. Didi is targeting a valuation of $26bn, which would make Didi the forth-most valuable start-up in the world after Uber, Xiaomi and Airbnb, according to research firm CB Insights.
Didi has been waging battle with Uber ever since it was created early last year through the merger of start-ups backed by Tencent and Alibaba. The two sides were engaged in brutal competition with each other and rival apps before deciding to combine, in part to repel the US start-up. The combined company, then known as Didi Kuaidi, held a near monopoly on taxi-hailing and a majority of private-car bookings.
Last May, Didi announced it would give away 1 billion yuan (€135m) in free rides, the first salvo in a price war with Uber that would cause both sides to burn through cash. Uber refused to back down. In June, chief executive Travis Kalanick wrote a letter to investors, explaining the strategic importance of the market and pledging to invest $1bn in the market that year alone.
Over the summer, both sides pushed to attract the cash necessary to finance their operations. Uber raised about $1.4bn for its China operations, including from search giant Baidu. Didi ended up raising about $3bn from Alibaba, Tencent, Japan's SoftBank and Ping An Insurance. The tricks haven't been limited to price competition. In August, Uber complained it had been blocked from using WeChat, China's top messaging service. WeChat is owned by Didi investor Tencent.
Didi, meanwhile, recruited allies. In December, it entered into a four-way alliance with ride-sharing services that compete with Uber, including Lyft in the US. Liu, daughter of the founder of the world's largest PC maker Lenovo, said the Chinese start-up is now in discussions on working with Apple in sectors including technology, marketing and products. "It feels very natural to work with Apple together because philosophically on a company level we share a lot in common," she said.
The iPhone maker will help Didi build up a ride-sharing platform that already handles more than 11 million rides a day and serves about 300 million users across China. Didi operates in 400 Chinese cities with 14 million registered drivers, offering services from taxis and private cars to social ride sharing and test driving.
"It's only natural that two fruit companies team up," Liu said.