Unpacked: Apple Invests in China Ride Sharing Platform Didi

News broke late last night that Apple is investing in Chinese ride-hailing service Didi Chuxing to the tune of one billion dollars. I’m sure this investment will be over analyzed but there are a few high level points I think are worth making. First, it is important to note there is a fierce battle between Uber and Didi in China. As of now, Didi is beating Uber in terms of rideshare. Looking at data we have on apps, in this case, ridesharing apps used by Chinese consumers in the last month, we can see Didi has more regular users than Uber. I took the liberty to chart the latest results from Q1 2016 but also filtered the answers by iPhone users and Android users.

Screen Shot 2016-05-12 at 9.25.33 PM

Statistically, Didi has the lead. From a Chinese consumer perspective, having the backing of Apple (along with Alibaba and Tencent who are also investors) can only help strengthen Didi’s position. Apple can more tightly integrate services like maps, Apple Pay, maybe even have Apple Music playing in the background (once they get the service restored) and expose 11m riders a day to more of an Apple experience. Given the Chinese consumer affinity toward Apple, I think this will only further give consumers a reason to choose Didi over Uber.

Some folks on Twitter last night were remarking this could be a competitive move against Uber — if we believe Uber will someday be an Apple competitor in autonomous cars. Fun speculation and game theory if true but the deeper thing I see happening is Apple making a statement about their investment in the Chinese economy and the continued relationship building Apple is doing with Chinese regulators and consumers. This move will be perceived very well within China and will continue to enhance Apple’s position in the country. They have the benefit of playing locally and feeling like a local vendor to Chinese consumers, even if they are a US company.

I thought it would be great, given the timeliness of this and the smart analysts we have on our team, to also have them chime in with a few thoughts on the deal.

Carolina Milanesi
Cook mentioned on the last earnings call that Apple was ready to make large investments and this is certainly substantial. It shows Apple’s commitment to the Chinese markets both to the consumers and the government. It is well known that China wants foreign vendors to spend money in China, not just make money. This is an excellent way for Apple to do exactly that. The ROI on the investment has a different form from a pure source of insight into Chinese consumers to a platform for Apple Pay to, further down the line, a testing ground for autonomous cars.

Jan Dawson

  1. It’s a great way to use some of that offshore cash that’s sitting around.
  2. There’s obviously a car connection, but it’s pretty tenuous. It’s not like whatever car Apple is working on could be used by Didi in China. There’s likely to be a fairly significant mismatch cost wise there.
  3. Apple doesn’t do corporate VC or anything like that. So this is a huge departure from their past pattern. It isn’t an acquisition – the valuation is around $25 billion at this point so this is a very small share. So they don’t benefit directly from the technology or revenue. On the other hand, if they did acquire Didi, it would be a fascinating extension of the services strategy. But again, a huge departure from Apple’s history.
  4. Car wise, this does give Apple new insights into driving in China, which could be useful for other things – maps, self-driving cars, etc.
  5. This also gets Apple deeper into China in ways that could be beneficial for leverage, for other services in China, and so on.

Tim Bajarin
This clearly gives Apple deeper roots into the Chinese market and is a strategic move to expand their presence. It also helps them flesh out a more precise auto-related strategy to fine tune their own approach to enhancing Apple’s connections to cars.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

3 thoughts on “Unpacked: Apple Invests in China Ride Sharing Platform Didi”

  1. Perhaps this is the beginning of Apple using its cash aggressively. Would be nice for the stock.

  2. I think Carolina’s comment

    It is well known that China wants foreign vendors to spend money in China, not just make money.

    is very important. Of course, unlike the situation in India where there is a “make in India” movement, Apple already assembles their iPhones in China. iPhones are already contributing heavily to the Chinese economy, not only in the wages the workers earn, but also in the expertise that they gain. However, it is possible that China demands more, maybe no longer in the hardware market, but in the services.

    Taking a broader look at Silicon Valley’s recent fascination with developing markets (which was not there 5 years ago), if I were a government of a developing country, I would be very wary of US-based services that are using their huge VC cash hordes to fund loss-leader strategies, and are seemingly intent on wiping-out local competition (the quintessential example would be Uber). I therefore do not think that this case is an isolated incident. I suspect that we will see quite a few shrewd governments requesting similar investments from multiple US companies. I think this is less about Apple’s strategy, and more about China and other nations that suffered under colonialism.

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