Tuesday, August 2, 2016

Uber abdicated in China by selling its activities in Didi – Les Echos

After two and a half years of struggles to the Chinese market, Uber surrenders. The company CEO, Travis Kalanick, announced Monday in a blog post sell Chinese business activities in Didi Chuxing, the market leader.

If the California company had managed to enter the Chinese market with the authority in 2014, Travis Kalanick multiplying traveling to meet with officials of the Communist Party, though it has not managed to s impose facing a “fierce competitor” in the words of CEO of Uber. Didi Chuxing managed to grab 87% market bookings of private cars with driver, with 300 million users and 11 million journeys made every day through 400 Chinese cities. The extent of Uber is it, more limited, with 60 Chinese cities and 40 million trips a week – which was the country, after all, the first market in number of trips made to society.

Price discount

The merger of the two companies would be encouraged by investors Uber, worried that California startup burn tens of millions of dollars a month in an attempt to catch his Chinese rival. The company multiplied subsidies to recruit drivers and price discounts to attract users, widespread practices among Chuxing Didi, whose losses were equivalent to three times its revenue in 2015, according to documents obtained by the “Financial Times” . In February, Travis Kalanick had explained that he was losing $ 1 billion a year in China, which weighed on the financial health of the company, profitable since this summer in North America, Australia, Europe, the Middle East and Africa. “Uber and Didi Chuxing investing billions in China, but the two companies must pass to become profitable in this market,” Travis Kalanick acknowledged Monday. Especially since a law on VTC passed last week in China banishes the possibility of a fare below operating cost … The Californian company was also struggling to make the weight against the giants of the Net Chinese behind Didi Chuxing, born of a merger between startups financed by Alibaba and Tencent. In August, Uber and had complained of not being able to advertise on WeChat application developed by Tencent. Didi Chuxing was also strengthened with a new round of financing of $ 7 billion in June, shortly after receiving an investment of $ 1 billion of Apple, a coup for the Chinese company.

The operation is however not unfavorable for Uber, which becomes the largest shareholder of a new behemoth valued $ 35 billion – a combination of the valuations of Didi (28 billion) Uber and China ($ 7 billion) – in a market VTC legalized by China on Thursday, away tensions with the authorities that the company can find in Europe. Uber now holds a 20% share in the new entity and Travis Kalanick joined the board of Didi. Uber keep intact its brand in China, now its implementation in place. For its part, Didi gets a minority stake in Uber, through an investment of $ 1 billion in the company.

Travis Kalanick was quick to show what use “liberated considerable resources.” Sunday, the company announced to invest $ 500 million in a mapping service, central to the driverless car technology on which the company works.

Anaïs Moutot, Les Echos
Correspondent in San Francisco

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