Uber Surrenders In China, Will Join Forces With Rival Didi

Uber’s prolonged land war in China is over: Uber’s China unit will merge with competitor Didi Chuxing, ending a fierce multi-billion-dollar battle for the largest ridesharing market in the world.
As part of the deal, Uber and its Chinese investors will reportedly receive 20% of the merged company, newly valued at $35 billion. Meanwhile, Didi will invest $1 billion in Uber at a $68 billion valuation. The deal ends months of speculation as to whether the two companies might come to deal or continue to bleed each other dry. Bloomberg first reported the news and sources confirmed the details to FORBES.
Both Uber and Didi have shown a remarkable ability to raise capital. Uber recently raised $3.5 billion from Saudi Arabia’s sovereign wealth fund, capping off a $5.5 billion round, while Didi announced a $7.3 billion round, including debt and a surprise $1 billion investment from American computing giant  Apple. Both companies were using that money to recruit drivers and woo passengers with large sign-up bonuses that made reaching profitability impossible.
Uber CEO Travis Kalanick had taken a personal interest in steering the company’s fight for China, claiming Uber was willing to spend more than $1 billion per year to become the largest ridesharing platform. But Didi has always held a large lead, claiming up to 90% of all rides, making Uber’s quest somewhat quixotic. Last week, the Chinese government legalized ridesharing across the country in a new ruling.
The news apparently leaked when the draft of a blog post written by Kalanick appeared on Chinese social media Weibo and WeChat. FORBES has obtained a copy of that post:
uber china didi travis kalanick letter
Kalanick’s blog post hints at both the opportunity China posed (“to build Amazon and Alibaba at the same time”) and the massive challenges it presented for Uber (“both companies have yet to turn a profit there”). In the end, practicality seems to have won out. Uber’s income statements will begin to look a lot cleaner, clearing one of the obstacles to an initial public offering. And despite losing the battle, Uber investors will own a piece of the Chinese market through Didi.
This merger leaves other Uber competitors out to dry. Lyft in the United States, Ola in India, and Grab in southeast Asia were all partners with Didi in the grand anti-Uber alliance, with ongoing technology and business tie-ups. Lyft, which seeks to carve market share from Uber at home, has Didi as an investor–which means it now indirectly has Uber as an investor too.
The merger and share swap has precedent in Didi’s own history. Originally two companies, Didi Dache and Kuaidi Dache, they merged in February 2015 after cutthroat competition. Despite being supported separately by rival Chinese Internet giants Tencent and Alibaba, the rivals struck a peace accord to avoid spending more–and to team up on Uber.
Uber declined to comment and representatives from Didi did not respond to requests from FORBES.
Brian Solomon covers technology and the on-demand economy for Forbes. Follow him on Twitter, Facebook and LinkedIn.


Uber CEO Travis Kalanick, speaking at the Institute of Directors (IOD) annual convention at the Royal Albert Hall in London, U.K., on Friday, Oct. 3, 2014. (Photographer: Chris Ratcliffe/Bloomberg)

Brian Solomon
Uber Surrenders In China, Will Join Forces With Rival Didi

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