BEIJING (China) – Apple Inc. has invested $1 billion in Chinese ride-hailing service Didi Chuxing, the main competitor in China for Uber Technologies Ltd.
Apple CEO Tim Cook positioned this investment as a way to grow its presence in China. ‘We are making the investment for a number of strategic reasons, including a chance to learn more about certain segments of the China market,’ he told.
Didi Chuxing, formerly known as Didi Kuaidi, said in a statement that this was the single largest investment it has ever received. The company, which previously raised several billion dollars, dominates the ride-sharing market in China. The company said it completes more than 11 million rides a day, with more than 87 percent of the market for private car-hailing in China.
China, Apple’s second-largest market after the U.S., holds vast potential but comes with significant hurdles. It accounts for roughly $59 billion in annual sales for Apple. But the company’s most recent quarterly sales there fell 11% from the year-ago period because of a more saturated smartphone market and a slowing economy.
Apple’s billion-dollar bet on Didi is its biggest since it acquired Beats, a music service and headphone maker, for $3 billion in 2014, and probably its most important since then. Didi, whose investors include Alibaba and Tencent, is the largest service of its kind in China, with operations in 400 cities serving about 300 million people.
Investors are eagerly watching to see whether Apple will enter the automotive business. Apple has hired a wide range of automotive experts, and the company is exploring building a self-driving car, sources have told.
Analysts say the deal offers a glimpse of how Apple may diversify its business as sales of the iPhone level off. Apple has emphasized its burgeoning revenue from services such as Apple Music and mobile payment Apple Pay, a strategy that the ride-sharing investment appears to reinforce, said analyst Patrick Moorhead of Moor Insights & Strategy.
Apple has enjoyed warmer relations with the Chinese government than some American tech companies, but regulators recently shut down its online book and film services, triggering concerns among investors. The true value of Apple’s investment in Didi might be in shoring up that relationship, said analyst Ben Bajarin of Creative Strategies.
Uber has taken the threat of Didi Chuxing seriously. Uber CEO Travis Kalanick has committed to losing $1 billion a year in China to compete with Didi. Didi Chuxing, meanwhile, has partnered up with services like Lyft, Uber’s biggest rival in the US, to form a global ‘Anti-Uber Alliance.’