Chuxing, China’s largest ride-hailing company, has made no secret of its
admiration for Apple. The company’s official name, Xiao Ju Keji, which
means Little Orange Technology, is a reference to the US technology
group. Visitors to Didi’s campus in Beijing are told how Cheng Wei, its
founder, was looking at the logo on an Apple store and thought, “If I
can’t be an apple, I can be an orange”.
The deal is not a huge outlay for a company that has net cash of $153bn
but it is an unusual move given that Apple has previously shied away
from using its cash to invest in start-ups. Unlike other big tech
companies, such as Google and Intel, which have active venture arms,
Apple has a longstanding tradition of incubating new ideas in-house.
The Didi investment also points to the growing list of challenges facing
Apple in China, a country that has become increasingly important to its
growth prospects. It could have wide ramifications for Apple’s efforts
to move beyond the iPhone into services, say analysts.
For several years, China had been a key source of fresh demand for Apple
as iPhone penetration reached saturation in more developed markets such
as the US. But this reversed dramatically in the most recent quarter,
when sales in greater China dropped 26 per cent, contributing to Apple’s
first drop in revenues in more than a decade.
Following the passage of new laws on internet content this year, Apple’s
film and book services were blocked in April. And this month, the
company lost a lawsuit against a Chinese group that uses the word “iPhone”
on leather cases and accessories. Apple has also tussled with Beijing
Carl Icahn, the activist investor who had been one of Apple’s biggest
shareholders, pointed to the company’s challenges in China as a key
reason behind his decision to sell all his stock. He told CNBC a day
after the disappointing results that Beijing could “come in and make it
very difficult for Apple to sell there”.
Apple may hope to benefit politically from its alliance with one of
China’s leading start-ups. “The policymakers in China have been more and
more open,” said Jean Liu, president of Didi, in a media briefing on
Friday. “There’s a very good foundation where we can help each other in
Apple’s investment in Didi, its first publicly disclosed funding of a
transportation company, which valued the Chinese group at $25bn,
underscores how the company is looking beyond hardware and toward
Meanwhile Apple has been working on a secretive car project, though the
company has never publicly acknowledged this. Several of Apple’s recent
acquisitions have been of small start-ups with technologies that could
be useful in an intelligent car.
Asked on Friday about whether Apple and Didi could go beyond ride
sharing — to work jointly to develop their own smart or driverless cars,
Ms Liu was coy. “We are confident that we will benefit each other on
product, on technology, and on many other levels,” she said.
Ms Liu would not disclose specifics of how Apple and Didi would
collaborate, but she said product integration, marketing and data
science were possible areas.
Geoff Blaber, an analyst at CCS, says: “It’s about diversification into
services and learning about what is becoming a very segmented automobile
market.” As it gets into services, Apple will need to better understand
local markets, he adds, and the Didi partnership could help.
Didi has joined a strategic partnership with fellow Asian car hailing
apps Ola in India, GrabTaxi in Southeast Asia, and Lyft in the US, in
what some say has come to resemble a global coalition against Uber,
Didi’s main competitor.
Apple’s cash arrives at a crucial time for Didi, as it is locked in an
expensive subsidy war with Uber China, as well as two other Chinese
ride-sharing start-ups, Yidao and Shenzhou. Didi has raised more than
$2bn from investors as part of this fundraising round, including the
funds from Apple, bringing its total funds raised to more than $6bn.
Travis Kalanick, Uber’s chief executive, said he had heard of the Apple
deal only on the day it was announced even though the companies worked
together. “We have a partnership with Apple,” he says. “We have done so
many things with them and continue to partner with Apple in ways that
move the industry forward and get us excited.”
For Apple, a single investment in Didi is not going to make its
challenges disappear overnight, particularly when it comes to privacy
“Certainly their various services beyond hardware will continue to face
a lot of pressure here,” says Mark Natkin, managing director at
Marbridge Consulting in Beijing. He adds that privacy is a thorny issue
for any foreign tech company. “If you are not very comfortable giving
the government access to your data you can’t do business here.”
At the same time, Didi is facing its own political challenges in China,
as Beijing is preparing new regulations on ridesharing that could
radically reshape its business. Those rules, first issued in draft form
last October, are being revised and have come to be seen as a litmus
test in the struggle between the government’s pro-innovation and
While Didi already has the backing of China’s most powerful tech
companies, including Tencent and Alibaba, which are both investors, the
relationship between these tech giants and the state-owned sector has at
times been an uneasy one.
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
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 in China 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 it said it was spending
less on subsidies than Uber and was breaking even in more than half of
the 400 cities it operated in. “Investors wouldn’t have shown such
support had we not shown them a clear path towards profitability,” she