Why Apple spent $1 billion on the ride-hailing industry – in China
The hefty investment into the burgeoning industry is the latest signal from Silicon Valley that it sees a profitable future in collaborations with the auto industry.
When it comes to ride-hailing services, Apple is betting big – and heading overseas.
On Thursday, Apple announced that it would be investing $1 billion in the Chinese ride-hailing service Didi Chuxing, according to media reports. It's a move that not only gives Apple a stake in one of the biggest ride-hailing companies abroad, but also expands Apple's profitability and durability beyond its core product base. Sales of the iPhone have been slumping, even in overseas markets.
The investment is also just the latest signal from Silicon Valley that it sees durability and viability in a partnership with the auto industry. In March, General Motors purchased Cruise Automation, a self-driving car startup. In early May, Ford backed Pivotal, a cloud computing firm, for $182.2 million during the company's latest funding round.
Didi Chuxing says that the investment is the largest the company has ever received.
Formerly known as Didi Kuaidi, the company is Uber's biggest competitor in mainland China. Uber has attempted to break into the Asian ride-hailing market, but with little success. The company has said it loses approximately $1 billion a year on costs related to Uber China, its Chinese operations that are separately owned and operated from those the company runs in other countries.
Apple Chief Executive Officer Tim Cook told Reuters he's looking forward to the opportunities this invites for future collaborations between Apple and Didi Chuxing.
"We are making the investment for a number of strategic reasons, including a chance to learn more about certain segments of the China market," he said. "Of course, we believe it will deliver a strong return for our invested capital over time as well."
Didi Chuxing is valued at more than $20 billion. Analysts anticipate that Apple’s investment could help the company diversify beyond its current portfolio, and possibly even into the realm of self-driving cars. But Mr. Cook says that for the short term, Apple remains focused on its CarPlay in-vehicle entertainment system.