In a foreseeable yet surprising turn of events, Uber China has merged with Didi Chuxing.
Once rivals in the business world, these two big transportation companies are coming together in a $35 billion megamerger. Though, their merger might just be the start of a more complicated saga of business rivalry.
Uber China, a regional subsidiary of Uber, has been steadily losing profits in the Chinese market. While the company does well in developed regions such as the US, Australia and Europe, it has struggled to keep up in Asia.
It has been estimated that Uber China has been losing approximately $1 billion a year just to be able to compete. Meanwhile, Didi Chuxing has been dominating in the region. It’s received significant investments from Apple, has operations in more than 400 cities and has teamed up with other ride-hailing companies making it troublesome for Uber.
With this merger, however, Didi will be investing $1 billion in Uber’s global company, buying its brand, business and data in China.
Didi founder and CEO Cheng Wei was optimistic about the merger, hailing it as a necessity for the industry.
“Didi Chuxing and Uber have learned a great deal from each other over the past two years,” said Cheng. “This agreement with Uber will set the mobile transportation industry on a healthier, more sustainable path of growth at a higher level.”
On the other side, CEO Travis Kalanick wrote in a blog post about how the merger was the best decision moving forward.
“Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there,” wrote Kalanick. “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.”
While the merger is definitely beneficial for both companies, it will definitely complicate things as Didi has been forming alliances with other transportation startups.
Startups like Grab which recently received as much as $600 million in investments from Didi. The once-Uber-rival has also been reported to invest in other ride-hailing startups like Lyft and Ola who’ve been extremely popular in Thailand, Indonesia, Vietnam, Singapore, Malaysia, and the Philippines.
So, despite the fact that Uber has come to a truce in China, it will still be using its investments to claim a place in Asia where it will be competing with Grab, Lyft and Ola who are being helped by Didi.
That being said, with Uber grabbing a large stake in Didi, it will be able to move forward and finally get that sweet IPO. How that plays out, only time will tell.