Last updated: 12:00 PM ET, Mon August 01 2016

Uber Sells Chinese Operations to Didi Chuxing

Car Rental & Rail | Michael Schottey | August 01, 2016

Uber Sells Chinese Operations to Didi Chuxing

Photo courtesy of Uber on Facebook 

Uber has given up on trying to go it alone in China.

Just days after the Chinese government unveiled regulations for the ride-sharing business and confirmed its legality, Uber—which had been operating intermittently either illegally or through loopholes—has sold to their main Chinese competitor as the latest foreign company to choose partnership in China rather than competition.

Financial details of the transaction were not released, but Uber will acquire a 20 percent stake in Didi and become the company’s biggest shareholder. That stake is estimated to be worth around $7 billion.

In addition, Didi will operate Uber China as a wholly separate brand, and the two companies’ founders will receive seats on the other company’s management boards. The move links Uber to Apple and Alibaba (among many others) who have invested in Didi, which recently completed an investment round worth $7.3 billion.

Uber founder Travis Kalanick had this to say about the merger:

“I’ve learned that being successful is about listening to your head as much as following your heart. 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.

Uber is a better, stronger company because of our China experience.”

On first glance, the move is surprising for many reasons, especially because Uber had expressed hope to expand their operations in the world’s largest market. Instead, this move mirrors American-market rival Lyft who has already partnered with Didi.

 READ MORE: China Legalizes Ridesharing, Legitimizes World's Biggest Market 

Although Uber is the name most Americans think about when it comes to ride sharing, it was not making money in China and was losing a reported $1 billion a year attempting to compete with Didi under the Chinese government’s previous anti-ride sharing environment. Though last week’s news of the government’s stance was a positive, this move can either be seen as a white flag or a savvy business deal.

It’s very possible this route of partnership rather than competition will be the fastest route toward expanding the brand on Chinese soil and finding a path toward profitability.

The combined company is estimated to be worth around $35 billion, and Didi alone offered around 1.4 billion rides in China last year. 

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