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Uber in China, Part 2 of 2

The first part of this series explored and discussed the background July 2016 merger of Uber China and its largest competitor, Didi Chuxing. This blog will discuss the particulars of that agreement as well as the developments in the story of the merger that have occurred in recent months.

As discussed more fully in the first part of this series, Uber China found itself in a position where it was hemorrhaging money in a foreign market trying to unseat a successful local competitor with strong financial backing.1 Faced with continued losses and uncertain prospects, Uber China elected to merge with its competitor rather than continue a costly losing contest.2 Given the circumstances, Uber China was able to reach a relatively favorable deal including equity in the merged venture, cash to offset losses, and perhaps most importantly, a strong foreign partner that otherwise may have been a continual thorn in the side of Founder and CEO Travis Kalanick as he pursues his goal of global expansion of Uber.

The terms of the agreement provide for Uber China to be merged with Didi Chuxing in exchange for a $1 billion investment by Didi in Uber global and Uber China’s investors will hold a 20% stake of the merged Chinese company.3 This is a relatively good deal for Uber. The $1 billion paid to Uber will help to offset the $1 billion deficit it had amassed in the first half of 2016. The stake in the merged Chinese company will allow Uber to still profit from the success of ride-hailing services in China along with the financial backers of Uber China, who may be helpful for Uber’s continuing global expansion. The financials, however, are not the best part of the deal for Uber. Rather, in completing its merger with Didi Chuxing, Uber has made an ally of perhaps its biggest rival in global expansion, not just in China, but also elsewhere. As can be seen in the price war between Didi Chuxing and Uber China, expansion bids by Uber can be costly and difficult. For example, although Uber China was able to do 150 million rides per month in China, it failed to begin turning a profit there before its merger.4 While a global presence and increase in customer base are certainly worthy prizes, they are not won without significant outlay of capital. Uber is currently in the same type of capital outlay vying for market share in India, where it is battling domestic carrier Ola.5 This battle with a local competitor, however, looked much more challenging a year ago, when Didi Chuxing (then Didi Kuaidi) was itself helping to buoy the Indian competitor to Uber.6 With fresh money in the coffers and Didi Chuxing as a partner, rather than an adversary, the path is much more clear for Uber to challenge local carriers in markets around the world, which it has already begun to do in earnest in India.7

Meanwhile, the transition for Uber China and Didi Chuxing from competing entities to partners is well underway in China. China’s antitrust regulators have said that they will review the important deal while also “seeking a deeper understanding of the ride-sharing sector.”8 While it does not appear that this review has concluded, it is clear that many steps are being taken ahead of a complete transfer. For example, the Uber app is no longer operational in China, having been replaced by an app which is much more similar to that of Didi.9
This new iteration of the Uber app has removed its English language interface and no longer accepts foreign credit cards.10 In addition, it has removed the luxury Uber Black hailing option in favor of the People’s Uber and Uber X options which target middle-class consumers.11 Some commentators believe that this is in part an attempt by Didi Chuxing to erode the brand of Uber China and allow itself to unify the market as it did in a similar situation when it merged with domestic competitor Kuaidi Dache two years ago.12

Even if it is true that Didi is undermining Uber China’s brand as a part of the merger, it would be hard to say that Uber did not get a good deal. Between the offset of its losses, its stake in the merged venture and the cooperation of a former rival in its global expansion, it appears the Didi-Uber merger may help to propel Uber throughout the world, even as it disappears from China.

  1. See Uber Reportedly Lost More Than $1 Billion Over the First Half of 2016, FORTUNE (Aug. 25, 2016),; See also Juro Osawa & Rick Carew, Didi Chuxing, China’s Rival to Uber, Scores $7 Billion in New Funding, THE WALL ST. J. (Jun. 15, 2016), 

  2. Travis Kalanick, Uber China Merges with Didi Chuxing, UBER NEWSROOM (Aug. 1, 2016), 

  3. Matt Weinberger, Uber to merge with Chinese rival Didi in $35 billion deal, BUSINESS INSIDER (Aug. 1, 2016), 

  4. Id. 

  5. See Sanjeev Singh, Ola vs. Uber: Which One is Indian?, TIMES OF INDIA (Dec. 17, 2016), 

  6. Ingrid Lundun, China’s Didi Kuaidi Confirms Investment in India’s Ola As Uber Rivalrty Heats Up, TECHCRUNCH (Sept. 27, 2015), 

  7. See Itika Sharma Punit, What the Didi-Uber deal in China means for India’s Ola, QUARTZ (Aug. 9, 2016), 

  8. Didi-Uber Deal Draws Probe by China’s Antitrust Watchdog, BLOOMBERG (Sept. 2, 2016), 

  9. Roger Decierdo, Uber China Shuts Down Mobile App, Switches to Didi Platform, YIBADA (Nov. 29, 2016), 

  10. Id. 

  11. Id. 

  12. Scott Cendrowski, Didi Chuxing is Slowly Killing Off Uber China’s Brand, FORTUNE (Oct. 28, 2016), 

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