Uber Throws in the towel in China

In the wake of a fierce price war, Uber Technologies Inc. has decided to  withdraw from the Chinese market and sell out to its competitor, Didi Chuxing. This will allow Uber to focus on other markets on the global scene and prepare for an IPO in the coming months.

At one time, the Chinese market seemed to be one with immense potential to the American ride-sharing startup. However, Didi offered stiff competition and in the past two years of operation Uber has already lost USD 2 billion. As part of Didi’s deal with Uber, Didi will invest USD 1 billion in Uber’s global company. With Uber’s lack of success in China being one of the main barriers to proceeding with an IPO, Uber feels that in the long term, the withdrawal from the Chinese market will benefit the company’s global operations.

Other markets in which Uber is fighting for a share of the ride-hailing market are the United States where it is vying with Lyft, India where Ola is a major competitor and Southeast Asia where it needs to outperform Grab.

As an outcome of the deal between the two companies, Didi will acquire Uber’s brand, business and data in China. Uber Technologies and other shareholders in Uber China like Baidu Inc., will get a 20 percent economic stake in the combined company. Didi founder Cheng Wei and Uber Chief Executive Officer Travis Kalanick will also join each other’s boards.

According to Did’s founder and CEO, Cheng Wei, Uber and Didi have learned a lot from each other in the past two years. He expects the deal with Uber to make growth in the mobile transportation industry healthier, and more sustainable to take it to a higher level. Didi had joined forces with another local ride-hailing company, Kuaidi, to for form Didi Chuxing and fight off the challenge from Uber. After the deal with Uber, Didi’s valuation will be USD 35 billion