Uber Technologies Inc. is an American multinational online transportation network company headquartered in San Francisco, California. Uber was founded as “UberCabs” by Travis Kalanick and Garrett Camp in 2009. It develops markets and operates the Uber mobile app, which allows consumers with smartphones to submit a trip request which is then routed to Uber drivers who use their own cars. As of the August 2016, the service was available in over 66 countries and 507 cities worldwide.
DiDi Chuxing is a mobile platform taxi-calling application developed by Chinese mobile application company Beijing Xiaoju Keji Co-operated Limited. The founder of Didi Dache is Cheng Wei. It provides vehicles and taxis for hire in China via smartphone applications. This app was established in June 2012. The application is one of the major taxi apps in China, with over 100 million users in more than 300 cities.
And now Uber has sold its China business to DiDi Chuxing. According to the people who are familiar with this matter, Uber has already lost $2 billion in China in the last two years. The huge losses in China have been one of the main sticking points of selling the Uber technologies to fierce rival Didi Chuxing.
Arun Sundararajan, a New York University professor said in a conference, “The biggest existential threat to Uber over the last two months was that in China they were losing capital in a way that potentially threatened the rest of their worldwide operations. The fact is that in the short term it may see as a loss, but in the long run, it’s a good move. Now they can focus on the rest of the world”.
Where, Cheng, who is the CEO of DiDi said in a statement, “Didi Chuxing and Uber have learned a great deal from each other over the past two years. This agreement with Uber will set the mobile transportation industry on a healthier, more sustainable path of growth at a higher level”.
There are several reasons why Uber sold its China business to DiDi Chuxing. And they are as under:
- Uber has bowed out of the world’s second-largest economy after selling its China business to domestic rival Didi Chuxing. After selling its business to DiDi, Uber can now focus on the hundreds of other regions.
- Uber can now invest most of their resources in India for its big potential growth. Rob Kniaz who is the partner at London-based venture capital firm Hoxton Ventures, told CNBC by phone, “India is the single biggest un-won opportunity, there it is a much more level playing field than in China”.
- Uber can focus on developing some of its other products such as UberEats, the food delivery business which is a great idea for more growth.
Kalanick wrote in the blog post that Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there. And 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.