How is Didi Chuxing likely to spend the $1bn investment from Apple?
Didi says it will be invested in products and new technology. But some experts say it will be needed to fuel its battle with US-based Uber for market share in China.
China’s car-hailing wars have seen both sides spend billions of dollars funding discounts for customers and subsidies to drivers.
In March Didi’s chairman, Cheng Wei, told the website QQ Tech that the company had set aside $4bn raised since last year to spend on what he called “market fostering”. It was not clear how much of it had already been spent, though estimates based on a financial presentation made last year suggest Didi could have lost $1.4bn last year mainly on subsidies. Uber lost $1bn last year in China according to chief executive Travis Kalanick.
Ge Jia, an influential tech blogger, says he believes Didi may be spending more on subsidies than it lets on – Didi is three or four times the size of Uber and drivers who work for both say the rate of subsidies is roughly the same. “Didi cannot afford to lower subsidies or that will just be surrendering its users to competitors.”
Didi will not disclose its financial losses but a spokeswoman said it was spending less on subsidies than Uber and was breaking even in more than half of the 400 cities it operates in. “Investors wouldn’t have shown such support had we not shown them a clear path towards profitability,” she said.
As for how Apple’s money will be spent, she added: “All investments are going to be focused in product and tech innovations as we see more and more cities pass the breakeven point.”