Apple invests $1 bn in Uber's China ride-hailing service rival Didi Chuxing

13 May 2016

Apple Inc said on Thursday it has invested $1 billion in Chinese ride-hailing service Didi Chuxing, a move that Apple chief executive Tim Cook said would help the company better understand the critical Chinese market.

The tech giant's unusual investment gives it a stake in two burgeoning waves of technology - the sharing economy and car technology - as the iPhone business that propelled it to record profitability shows signs of maturing.

Apple is trying to reinvigorate sales in China, where it has come under greater pressure from regulators, and Cook is travelling to the country this month.

"We are making the investment for a number of strategic reasons, including a chance to learn more about certain segments of the China market," Apple CEO Tim Cook said. "Of course, we believe it will deliver a strong return for our invested capital over time as well."

Apple is widely rumored to be building a car of its own. Currently, it develops the CarPlay infotainment system that links to drivers' iPhones. "That is what we do today in the car business, so we will have to see what the future holds," said Cook.

The move aligns Apple with Uber Technologies Inc's chief rival in China, as automakers and technology companies forge new alliances and make cross investments.

General Motors, for example, recently bought autonomous driving technology company Cruise Automation and has also taken a stake in US ride-sharing company Lyft.

Cook said in an interview that he saw opportunities for Apple and Didi Chuxing to collaborate in the future.

Didi Chuxing, formerly known as Didi Kuaidi, said in a statement that the funding from Apple was the single largest investment it had ever received.

The company dominates the ride-sharing market in China. The company said it completes more than 11 million rides a day, with more than 87 per cent of the market for private car-hailing in China.

Last month, The Wall Street Journal reported that Didi Chuxing was close to completing its latest funding round to raise more than $1.5 billion, with a valuation of more than $25 billion.

Existing investors in Didi Chuxing include Alibaba Group, SoftBank, Beijing Automotive, Ping An Insurance Group, Tencent, Tiger Global Management, Coature Management and D.E. Shaw.

Analysts say the deal offers a glimpse of how Apple may diversify its business as sales of the iPhone level off. Apple has emphasized its burgeoning revenue from services such as Apple Music and mobile payment Apple Pay, a strategy that the ride-sharing investment appears to reinforce.

Investors are eagerly watching to see whether Apple will enter the automotive business. Apple has hired a wide range of automotive experts, and the company is exploring building a self-driving car, sources have told Reuters.

Apple reaps much higher margins on the iPhone than most auto makers enjoy, but the investment suggests that the tech giant is contemplating transportation services that could prove more lucrative, said Bob O'Donnell, an analyst with TECHnalysis Research.

"This investment shows they are thinking not just about cars but business models around transportation, and that is a very encouraging and interesting sign," he said.

Although Apple's sales in China have slumped amid slowing economic growth there, Cook stressed he remained confident in the market.

"(The deal) reflects our excitement about their growing business ... and also our continued confidence in the long term in China's economy," Cook said. Apple has enjoyed warmer relations with the Chinese government than some American tech companies, but regulators recently shut down its online book and film services, triggering concerns among investors.