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Apple Snubs Uber, Invests $1 Billion in Top Chinese Ride Sharing Company

On Friday, news broke that iPhone maker Apple, Inc. AAPL has invested $1 billion in Didi Chuxing, the biggest ride-hailing company in China and one of Uber’s main competitors. This move could help the tech giant in its China efforts, especially after the company has run into regulatory issues and increased competition for its Apple Pay service in the country.

CEO Tim Cook hopes that this rare investment will help Apple understand the important Chinese market. "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 said in an interview. "Of course, we believe it will deliver a strong return for our invested capital over time as well."

Cheng Wei, founder and chief executive of Didi Chuxing, said that “the recognition from Apple tremendously encourages Didi that was founded four years ago. Together with drivers, ride sharers and friends from the world, Didi will continue to make efforts on enabling everyone to have various ways to travel, helping solve urban transportation problems, and environmental and employment challenges.”

Formerly known as Didi Kuaidi, Didi Chuxing said in a statement that this was the single biggest investment it has ever received. The company, which has previously raised billions of dollars, rules the ride-sharing market in China. Didi said it completes more than 11 million rides a day, and it works with more than 14 million drivers across 400 Chinese cities with 200 million users.

Didi is reportedly valued at upwards of $25 billion, but is nowhere near Uber’s valuation of $51 billion. According to Reuters, Didi “has been losing billions in a costly battle with Uber for market share in China.” And similarly enough, Uber CEO Travis Kalanick recently told tech site Betakit that his company is losing $1 billion a year in China.

In response to the news, Kalanick jokingly tweeted:

 

girlfriend owns

shares which makes her a didi investor...

— travis kalanick (@travisk)

It will be interesting to see how Uber reacts, especially as IPO rumors for the ride-sharing giant continue to swirl. Uber has struggled to create a footprint in China, and unfortunately for the ride-hailing giant, reports indicate that Didi occupies anywhere between 70-90% of the market in China. In an increasingly crowded space, Apple managed to find a way in.

Apple’s investment in Didi may be just what the company needs to bring itself back from its disappointing performance last quarter; its sales dropped for the first time in 13 years, and its current stock price, at about $90 per share, is the lowest it has been since summer 2014.

Analysts should keep a close eye on how this investment pans out, as it offers a preview on how Apple could potentially expand its business as iPhone sales level off.

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