China ride-hailing showdown ends as Uber China and Didi Chuxing merge

A monumental deal has come to fruition reshaping China’s ride-hailing market with the merger of its two top competing services Uber China, and Didi Chuxing.

Uber

The US company’s China operation has reportedly set to seal a $35bn merger with market leader Didi Chuxing.

Quoting "a source familiar with the matter," Reuters has reported that the valuation comes from Didi’s $28bn and Uber China’s supposed $7bn. Uber will have a 5.89 percent stake in the new company. Search firm Baidu will have 2.3 per cent of the company.

Didi will invest $1bn in Uber global, granting it a "minority interest" in the company. Uber China will maintain its separate branding and app in the region.

Didi chief Cheng, said: "Didi Chuxing and Uber have learned a great deal from each other over the past two years in China’s burgeoning new economy. As a technology leader deeply rooted in China, Didi Chuxing is constantly pushing the frontier of innovation to redefine the future of human mobility. This agreement with Uber will set the mobile transportation industry on a healthier, more sustainable path of growth at a higher level."

Uber chief Travis Kalanick, said according to TechCrunch: "Three years ago I traveled to China with a small group of people to see if we might be able to launch Uber there. It was an ambitious idea, given that we were still a relatively small start-up and no one there had ever heard of the company. Most of the people we asked for advice thought we were naive, crazy—or both."

"Fast forward to today and Uber China—in just two years—has exceeded even my wildest dreams. We’ve grown super fast and are now doing more than 150 million trips a month. This is no small feat given that most U.S technology companies struggle to crack the code there. That’s why I’m so proud of what our amazing China team has accomplished."

He concluded: "as an entrepreneur, I’ve learned that being successful is about listening to your head as well as following your heart. Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there... I have no doubt that Uber China and Didi Chuxing will be stronger together. That’s why I’m so excited about our future."

Back in 2015, China’s leading transportation services, Kuaidi Dache and Didi Dache merged forming Didi Kuaidi which then became Didi Chuxing, backed by Alibaba Group Holding and Tencent Holdings - in vehement opposition of ay competition from Uber that loomed over the region.

The report comes after a lot of posturing from Uber, that was set to make good use of its war chest to seize the market from competitors. In June it said it was set to overtake Didi as the dominant force in the sector.

On the other hand, back in the US, Didi threatened Uber with its investments in Lyft – an Uber competitor known for its moustachioed cars.

Forrester analyst Xiaofeng Wang, said: "Investors of both Didi Chuxing and Uber are keen to put an end to the cash-burning competition in China, and the sooner they turn profitable, the better."

Didi is now reportedly in a position to leverage Uber's global status to better break beyond China.

"Unlike the Didi-Kuaidi merger where the two platforms offer almost identical services, Uber and Didi have different offerings that have different benefits to consumers. For example, there was a calculation of which car service platform is the best choice, and the calculation shows Uber is better for short-distance ride, and Didi is better for longer ones. They have different loyalty programs as well, and consumers can choose whichever best for them."

He concluded that Uber could also benefit from Didi's good relationship with the Chinese government.

The reported deal has also been separated reported by the Wall Street Journal and Bloomberg.

Uber has operated in China since 2014.

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