Apple has invested $1 billion in Chinese Uber rival Didi Chuxing in a move that continues Apple’s push into China and confirms the company’s interest in shaking up the automotive industry.
According to Tim Cook, the deal “reflects our excitement about their growing business … and also our continued confidence in the long term in China’s economy.” Perhaps more importantly, it could give Apple strategic insights and competitive advantages when it comes to Apple Pay and a possible Apple Car.
It’s unknown exactly what size piece $1 billion buys in Didi Chuxing, but it is described as a “sizable stake.” Apple’s backing is the biggest single investment yet for Didi Chuxing, which has previously raised several billion dollars from other sources. Didi Chuxing currently completes more than 11 million rides a day in China, and has upward of 87 percent of the private car-hailing market in the country.
“We are making the investment for a number of strategic reasons, including a chance to learn more about certain segments of the China market,” Cook told Reuters. “Of course, we believe it will deliver a strong return for our invested capital over time as well.”
Jack Kent of tech analytical firm IHS Technology said partnering with Chinese companies is a common way for international companies to get into the massive Asian market. And the partnership could offer Cupertino useful new insights.
“As Didi operates across the Chinese market, not just on Apple devices, it could help Apple gain greater insight into the behavior of users beyond its own ecosystem,” Kent said in a release about Apple’s investment.
And then there’s the payments system that’s a de facto part of ride-hailing apps like Uber and Lyft.
“Unlike many other mobile apps, taxi apps are able to quickly establish a billing relationship with their audience, as they require an immediate transactional relationship with users,” Kent said. “Ride-sharing is often only the first step. Once these apps have started charging users for the journeys they take, they can then use this payment information as a platform for a range of other services, such as deliveries and then wider mobile commerce services. These apps also capture a huge amount of valuable contextual user data.”
If Didi adds Apple Pay as an option as a result of the deal, that could give Apple’s mobile payment platform a boost in China. Apple Pay, which entered the Chinese market in February, “is still a very distant competitor to Alibaba’s Alipay and Tencent’s WeChat Pay” in the country, according to The Wall Street Journal.
Insight for the Apple Car
Getting a shotgun seat view into the operations of a leading car-sharing service also could give Apple invaluable data as the company looks to develop its the rumored Apple Car.
“Taxi apps can also be a way into developing a wider automotive strategy and this investment is further evidence of Apple’s interest in transportation, and perhaps the automotive market, beyond its current Apple Maps software,” Kent said.
Nonetheless, the investment comes at a time when Apple is running into growing problems in China. After Chinese courts stripped Apple of its exclusive iPhone trademark and the government banned Apple from operating its iBooks and iTunes Movies stores in the country, Cook is set to visit China this month to try to smooth out some problems.