Apple gambles on ride-sharing with $1b investment in Didi Chuxing, China's Uber

May 13, 2016

Most of the recent talk around Apple and automobiles has centered on the company's highly secretive (but not especially secret) work on autonomous electric cars. When and if those vehicles will roll into showrooms is still anyone's guess, but one thing's certain: Apple is increasingly interested in transportation, and it's investing its huge stash of cash accordingly.

Yesterday, Apple confirmed that it has bet $1 billion on the ride-sharing service Didi Chuxing. Though Didi is often described as the "Uber of China", it's quite a lot more: as you can see from the company's website, it not only functions like a taxi service, it also offers longer-term, upscale private car service, as well as car-sharing a la Zipcar. It's currently piloting a bus system, too.

Why would Apple invest such a huge sum of money in a company that has little or nothing to do with its current core business? Apple and analysts have several reasons:

1. It puts Apple in China's good graces. Thanks to a complicated system of tariffs and regulations, breaking into the Chinese market isn't easy for outside companies. Dumping $1 billion into a homegrown outfit like Didi signals Apple's commitment to the country and its consumers, which could generate results large and small--including improved relations with the Chinese government.

2. It helps earn Apple a spot in China's growing auto market. Details of the investment haven't been made public, but we'd be a little surprised if it didn't allow Apple to put its CarPlay product in Didi vehicles, offer streaming tunes from Apple Music, provide iPads for Didi passengers, allow riders to pay with Apple Pay, or other promotional opportunities. Down the road, if Apple cars become a thing, we could envision a deal like the one that General Motors cut with Lyft that would allow Didi drivers to rent Apple vehicles at a deep discount.

3. It generates awareness among Chinese consumers. Apple has had an easy time earning market share in many countries, but not China. If the deal gives Apple more chances to put its name and products in front of more Chinese shoppers, that's a good thing. 

4. It's simply a good investment. Car ownership in China is still a new phenomenon, but taxis, buses, and such have a long history. Didi Chuxing is a big player in that field: according to the company, it provides more than 11 million rides every day. And where private car service is concerned, Didi owns 87 percent of the market. If nothing else, Apple will likely earn good returns on its investment--something that's especially important now that demand for Apple's cash cow, the iPhone, seems to be cooling.

For more on this, be sure to check out our colleagues at Motor Authority.

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