Uber’s Unprofitable Chinese Operations to Merge with Main Competitor

A blog post that Bloomberg said obtained from Travis Kalanick, the chief executive officer of Uber, gave a hint of the merger. “As an entrepeneur, I’ve learned that being successful is about listening to your head as well as following your heart”, he wrote.

China’s leading tax-hailing app Didi Chuxing on Monday announced that it would acquire Uber Technologies’ Chinese operation.

But China was a tough market for Uber to crack – especially in the face of stiff opposition from Didi.

If you can’t beat ’em, join ’em. As part of the agreement, Didi will reportedly invest $1 billion in Uber’s global operations.

After three years, Uber now operates in more than 60 Chinese cities, and plans to expand into another 30 soon. Kalanick, meanwhile, will join Didi’s board.

The homegrown cab company is investing $1 billion in Uber based on a $68 billion valuation; the combined value of the new entity will be about $35 billion.

Didi controls nearly 90 percent of the car-sharing market in China, and Uber has been losing over $1 billion (almost 900 million euro) per year trying to box out its share. Uber has lost more than $2 billion in the country, people familiar with the matter said.

Investors of Uber had been insisting the company sell off their China assets.

The two companies have been locked in a bitter battle for customers in China marked by huge customer discounts since past year. For example, there was a calculation of which vehicle service platform is the best choice, and the calculation shows Uber is better for short-distance ride, and Didi is better for longer ones. Uber has faced aggressive competition from Didi Chuxing, which was formed from the 2015 merger between Tencent-backed Didi Dache and Alibaba’s Kuaidi Dache.

This is the latest in a string of moves by foreign companies to separate their China business units. Yum!