The international world of ridesharing is a little bit complicated.
Case in point – new reports today that U.S. ridesharing giant Uber may be getting out of its significant stake in a Chinese company (in the same precise vertical) called Didi.
If you just glanced at the headlines, you’d be forgiven for thinking that Uber wants to minimize its involvement in Chinese companies while the American government is furiously cracking down on all kinds of Sino/U.S. business partnerships.
Reportedly, though, the company says it just wants to get cash.
“Uber … is planning to sell part of its $6.3 billion stake in Chinese ride-hailing firm Didi Chuxing to raise cash, Bloomberg News reported,” write Reuters staff today.
Although people are billing this as a partial financial exit, some of the details being reported make it sound like Uber is getting out entirely.
“(Uber) CEO Dara Khosrowshahi is in talks about the sale with Didi and SoftBank Group … with a possible scenario of the Japanese conglomerate teaming up with other investors to acquire Uber’s 15% stake in Didi,” Reuters adds (bolding added.)
To find out what’s behind the tenuous relationship between Uber and Didi, you only need to dig a little deeper.
Then you find out that originally, Didi bought Uber China.
You also find that since then, Didi has invested $100 million with Lyft, and continues to challenge Uber for market share in other ways.
In other words, the Didi company, which now has an estimated 12,000 employees, used to be Uber’s own foray into the Chinese market, until eventually, Uber sold out, while apparently retaining some financial skin in the game, or to benefit from the success of its competitor, a strange strategy in a purportedly free market.
A Harvard Business Review article provides a rationale for why Uber sold to Didi in the first place.
Author William Kirby says the Chinese essentially regulated Uber out.
“National regulation was an impending disaster for Uber,” Kirby writes. “In retrospect, perhaps the company could have remained in charge and made money had it kept to its initial ‘niche’ market for wealthy Chinese people and expats. But by going for the mass market to reach higher valuation and to fuel its larger platform strategy, Uber brought on extra challenges. Central government regulations were almost inevitable.”
Look for some of the financial fallout to keep weighing on this part of the tech sector.