Didi Chuxing, the dominant ride-hailing service in China, has announced that it will buy Uber's operations in the country.
The deal between Uber and Didi is valued at $35 billion, putting an end to stiff competition between the two companies in China. The San Francisco-based Uber will have 5.89 percent stake in Didi. Travis Kalanick, Uber's CEO, will join Didi's board, while Cheng Wei, the founder and chairman of Didi, will join Uber's board.
"Sustainably serving China's cities, and the riders and drivers who live in them, is only possible with profitability. This merger paves the way for our team and Didi's to partner on an enormous mission, and it frees up substantial resources for bold initiatives focused on the future of cities - from self-driving technology to the future of food and logistics," says an internal message sent to Uber's staff.
Following the deal, both the companies will retain their individual apps, brands as well as business operations. However, the managerial expertise and technological knowhow will be integrated as part of the merger.
Uber is operating in over 60 cities across China and the company is serving about 40 million rides per week. However, Uber's operations in China are not as big as Didi's. Jean Liu, the president of Didi, says that there are more than 15 million registered drivers in the country and over 300 million registered users of its ride-hailing services.
"With the addition of the strong talents and experience of the Uber China team, Didi Chuxing will be even better-positioned to serve the Chinese people. Didi Chuxing will also continue to expand its international strategy. We look forward to working with our partners at home and abroad to create more value for drivers, passengers and communities," says Liu.
Although Didi has a dominant position in China, the company is also partnering with many other companies to expand its reach outside China. Didi has agreed to work in the United States in partnership with Lyft. The company wants to partner with Ola in India and with Grab in Southeast Asia. These collaborations can get slightly complicated with Didi's deal with Uber in China.
Market experts suggest that China is a tough market in terms of culture, competition and regulations. Uber is not the first company that is selling its Chinese operations to a domestic player. In 2005, Yahoo also sold its operations in the country to Alibaba.
Competition in China has led to losses for Uber. However, a deal with Didi may help the company to reduce losses and prepare itself for an initial public offering soon.
