Apple Sinks $1B in China's DiDi Chuxing, A Ride-Sharing Rival to Uber
Rob Enderle, principal analyst of Enderle Group, told eWEEK that he believes that the DiDi investment comes not as a way to appease Chinese leaders in the iBooks and iTunes Movies disagreements, but is more likely closely tied to Apple's own automotive efforts. "Generally, once we move to autonomous cars, a lot of us believe car ownership will evaporate in favor of Uber-like services," said Enderle. "Now a company like Apple likely wouldn't want to compete in a market like China where cabs are government subsidized, but if this gets them needed intimacy with DiDi Chuxing, they could use that to ride this company out of China with an Apple-branded service that would use Apple's autonomous cars." Charles King, principal analyst of Pund-IT, said it is "fair to regard the sum as a symbolic gesture of Apple's faith in the Chinese economy, and of support for the country's 'China for China' strategy. Both of those points are likely to be welcomed by China's government." Asked if Apple could be expected to make similar large investments in China in the future, King said Apple will "need to do the math and decide whether the value of the China markets are worth additional payments. Given the size/importance of Apple's business there and the company's remarkable profit margins, it could well decide that additional payments are worthwhile."Dan Olds, an analyst at Gabriel Consulting Group, called Apple's $1 billion DiDi investment a very large one of the type the company makes often, "particularly in something that's not directly in their supply chain. There is something to say for Apple making this investment in order to bolster their lagging iPhone revenue—figuring that the Chinese version of Uber might give them a great return on investment based on how its valuation skyrocketed in the U.S." At the same time, the money could provide some leverage with China. It's possible the "Chinese government wanted to get Apple to pony up some cash in exchange for opening up the Apple products and services spigot again," said Olds. "Apple, realizing this, found the best investment they could with the Chinese Uber—which has the potential to be a fantastic investment." Overall, said Olds, the move is "a good diversification attempt, one of the best in China, I think, so why not go for it and potentially solve two problems with one transaction."
Apple's move to invest in DiDi in China rather than in Uber there is likely "a lesson that Uber and its investors are also likely pondering today," said King. "The sheer size of consumer and business markets in China make it hugely tempting, but China follows rules and imperatives that are unfamiliar or even counterintuitive for many Western businesses."