Not one to readily admit defeat, bullish Uber CEO Travis Kalanick has come closer than ever in a blog post to the Uber Newsroom titled "Uber China Merges with Didi Chuxing." It's less a merger of the San Francisco-based company's Chinese operations than a wholesale purchase of them by China-based rival Didi, but never mind that — Kalanick has "no doubt that Uber China and Didi Chuxing will be stronger together," and without the headache that their rivalry had become, Uber can focus at home on its long-awaited IPO.
For the past few years, Uber China and Didi have been at each others' throats, waging an expensive price war whose difficulty Kalanick acknowledges."As an entrepreneur, I’ve learned that being successful is about listening to your head as well as following your heart. Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there. Getting to profitability is the only way to build a sustainable business that can best serve Chinese riders, drivers and cities over the long term."
Bloomberg first reported the news of the merger/acquisition/truce, noting that while Uber claims to be profitable in the US and Canada, huge losses in China have hindered the company overall. In China, Uber spent $2 billion in the last two years, with Uber investors pushing for a deal with Didi to stem the tide of those losses.
Didi Chuxing represents the merger of two Chinese Uber rivals, Didi and Kuaidi, who joined forces last year. With backers Alibaba and Tencent as well as $1 billion from Apple, Didi was valued at $28 billion before the merger and $35 billion after it compared to Uber's sky-high $68 billion valuation. “Didi Chuxing and Uber have learned a great deal from each other over the past two years,” Didi founder and CE Cheng Wei said in a statement. “This agreement with Uber will set the mobile transportation industry on a healthier, more sustainable path of growth at a higher level.” Wei and Kalanick will join the boards of each others' global companies, and Didi has invested $1 billion in Uber as part of their deal.
The New York Times characterizes Uber's fight in China as somewhat effective, with frequent trips made by Kalanick and his clever use of Communist party language assuaging political leaders — see "People's Uber," the company's product last year. In the end, Chinese officials laid out a framework for legal ride-hailing apps just last week.