Taxi hailing app Uber is set to sell its stake in China to a popular rival company Didi Chuxing.
Uber Agrees To Sell Business In China To Rival Didi Chuxing
Uber and Didi Chuxing have fiercely competed for the Chinese market, with the US taxi-booking app hoping to take over the market. However, Didi Chuxing controls a significant portion of the Chinese market, totaling up to 87%.
Uber launched in China in 2014 but has struggled to make profits.
According to Cheng Wei, chief executive and founder of Didi Chuxing, the two competitors had “taken great lessons from each other in the past two years amidst China’s new booming economy.”
He further pointed out that the deal would help the transportation industry on a path to healthy growth and sustainability.
Mr. Cheng will now be part of Uber’s board while Travis Kalanick, Uber chief executive, will join Didi Chuxing’s board.
In spite of the buyout, Uber China will retain its branding and Uber Technologies based in the US will have a 17.5% stake in the merged company.
Didi Chuxing’s primary investors are Alibaba and Tencent. Didi has also invested in Lyft, a US-taxi booking service that is also Uber’s rival.
Since launching in China, Uber has struggled to dominate the market in spite of strong backing in terms of investment from search giant Baidu.
At the start of the year, the company reported losses of over $1bn yearly in the Chinese market as it spent a lot of money supporting discounted taxi prices.
Duncan Clark of BDA consultancy in Beijing said Uber’s operations in China were becoming too expensive to fund.
He added that such struggles were a hindrance to the company’s own IPO.
In an interview, Travis Kalanick, Uber chief said, ‘As an entrepreneur, I have come to learn that success is about listening to your head and following your heart.
He added, “Reaching profitability is the only way to build a sustainable business that can serve Chinese drivers, riders and cities in the best way over the long term.”