Tim Cook, CEO of Apple, is planning a trip to China later this month. Yesterday, he announced that Apple has just invested $1 billion in Didi Chuxing, a ride hailing service in China that is similar to Uber. Oddly enough, the company name means “little orange,” making the new business relationship an interesting fruit salad. “We are making the investment for a number of strategic reasons, including a chance to learn more about certain segments of the China market,” Cook told Reuters. “Of course, we believe it will deliver a strong return for our invested capital over time as well.”
Didi Chuxing currently dominates the country’s private ride-hailing market. It claims to have 300 million users in 400 cities across China. Combined, they take more than 11,000,000 rides every day. But Uber also has a strong presence in the Chinese market. The two companies are locked in a fierce battle for market share, with both offering large cash incentives to drivers.
Apple has suffered some setbacks in China recently. Regulators shut down its online book and film services last month and the company lost a key trademark case. Globally, Apple’s income fell for the first time in 13 years during the first quarter of this year, causing some investors to liquidate their holdings in the company, including Carl Icahn.
Ultimately, ride sharing and ride hailing services are looking to replace human drivers with autonomous driving vehicles. Uber in particular has suffered some rocky relations with its drivers. Many of them have sued the company, claiming they are actually employees rather than independent contractors. Uber would like nothing better than to dispense with them altogether and as soon as possible. If you are an Uber driver, you may want to keep your employment options open.
Like most online companies, Uber and other ride hailing services get only a portion of their revenue from actual riders. The rest comes from selling data about its customers to marketers, a business model perfected by Amazon.com. Does Apple’s investment in Didi offer any clues about whether an Apple car — assuming there is one — might be manufactured in China? That might be reading to much into this transaction.
Source: Reuters via The Guardian Photo credit: Jason Lee/Reuters