Apple Enters The On-Demand Ride Business With $1 Billion Investment In Didi Chuxing

Didi Chuxing, the largest ride-hailing service in China, just received a huge boost from Apple. The iPhone maker recently invested a whopping $1 billion into the Chinese company.

“Didi exemplifies the innovation taking place in the iOS developer community in China,” said Tim Cook, the chief executive of Apple. “We are extremely impressed by the business they’ve built and their excellent leadership team, and we look forward to supporting them as they grow.”

The investment by Apple in Didi Chuxing is an interesting and unusual move. Sales of Apple products, particularly the iPhone, have been weakening in China. Additionally, the California-based company just shut down its iBooks and iTunes movie stores in the country.

Reported sales in China this past quarter were $12.5 billion, a 26 percent decline from last year. Operating profit in the region also dropped 28 percent to $4.8 billion during the same period.

While sales may be struggling in China, the technology juggernaut has some money to burn. As reported by the New York Times, a statement released by Apple revealed it had almost $233 billion in cash and securities at the end of March.

Meaning “little orange,” Didi Chuxing launched its ride-sharing service in 2012, and its main competitor is American company Uber. The company boasts nearly 300 million users in more than 400 Chinese municipalities.

“The endorsement from Apple is an enormous encouragement and inspiration for our four-year-old company,” Cheng Wei, the founder and chief executive of Didi, said in a statement. “Didi will work hard with our drivers, riders and global partners, to make available to every citizen flexible and reliable mobility choices, and help cities solve transportation, environmental and employment challenges.”

Executives of the two companies met last month in California to discuss the investment. The deal happened rather quickly, according to Didi President Jean Liu.

Apple’s injection of money will help Didi go head-to-head against rival Uber in China. With substantial backing from Chinese company Baidu, Uber has been spending millions as of late in an aggressive attempt to seize market share in the country.

For now, however, Didi remains the dominant player in the region. Still, it is not without challenges.

Last week, one Didi driver was accused of robbing and killing a passenger. Just in the last six months, two other drivers were found guilty and sent to prison for crimes ranging from rape to robbery.

Industry analysts are questioning Apple’s move into the on-demand transportation business. Some think the investment will help test new products in China. Meanwhile, others believe the deal is an effort to rebuild the strained relationship between Apple and the Chinese government.

The money from Apple might help Didi in other, more unexpected ways. The Chinese company also has a science facility named Didi Research that explores technology related to artificial intelligence, machine learning, and data mining. Being Apple’s partner could bring research funding and technology-sharing opportunities to Didi.

Neither Apple nor Didi have released any specific details on how the two will operate together, but many think Apple Pay will be added as a payment option for ride-hailing customers. Since the introduction of Apple Pay earlier this year in China, the app has struggled to gain any traction. Offering the option to millions of Didi’s customers can quickly turn that around.

While the large gamble in Didi Chuxing may seem like a strange move for Apple, the company has made some other big investments in startups over the years. In 2014, Apple bought headphone maker and music service company Beats for $3 billion.

Besides Apple, Didi Chuxing has received financial backing from other tech giants like Tencent and Alibaba. With a reported value of $20 billion, the ride-sharing company also offers numerous other options for users, including taxi-hailing, private bus booking, and even a service where customers can test drive high-end vehicles.

[Photo by Ng Han Guan/AP Images]