Uber, an international company from San Francisco, who created the eponymous mobile app to search, call and pay taxi or private drivers refused to competition in China. The company suffered large losses, trying to gain market share.
Uber announced on August 1 that sells its Chinese subsidiary company Chuxing Didi (the largest taxi service in China, serves over 300 million passengers in more than 400 cities in the country).
“Three years ago I went to China with a small group of staff to see if we can run Uber,” said Travis Kalanick, CEO and one of its founders, in an open letter posted on the website of the company. — Most of the people from whom we asked advice, thought we were naive or crazy, or both”. Despite the loss, the success achieved in China in just 2 years, has exceeded the wildest dreams of Kalanick.
In exchange for its Chinese assets will get Uber of 5.89% of the combined company’s preferred share capital with a size of 17.7 percent, according to a press release from Didi Chuxing. In addition, the Chinese search engine Baidu and other Chinese Uber shareholders will receive 2.3 percent stake in Didi Chuxing.
Company, order taxi online in China suffered heavy losses due to tough competition. According to media reports, Uber has lost an estimated $ 2 billion in China within two years. And now he actually sold his business in China in exchange for a share of $7 billion in Didi. It’s a good deal for shareholders Uber.
Cost Didi Chuxing after bringing in June of investors, including Apple, Alibaba, and SoftBank, a $ 28 billion Thus, with the acquisition of Uber for $ 7 billion total cost Didi rose to $ 35 billion.
Under the deal, Didi Chuxing is investing $ 1 billion in the company Uber. Cheng Wei, founder and Chairman of Didi, will become part of the leadership of Uber, Travis Kalanick will be included in the composition of the Board Didi, in accordance with the agreement.
Travis Kalanick, CEO of Uber, in Beijing on 11 January 2016. Photo: WANG ZHAO/AFP/Getty Images
Why U.S. tech firms are leaving China?
Selling Uber marked another surrender of American technology companies in the world’s largest market in terms of fierce competition. For several decades American techno-giants, attracted by the huge population of China, trying to gain a foothold in the country.
They with high hopes and the risk of investing in China billions of dollars, as did Kalanick, but face great difficulties, as soon as enter the China, in particular, with strict government licensing and censorship (Google Inc.).
Google entered China in 2000, but he had to close down their operations because of censorship imposed by the Communist party of China, and cyber-attacks inside the country. Google revealed in 2010 that Chinese hackers had penetrated Gmail accounts of Chinese human rights activists in the United States, Europe and China. As a result Google had to stop its operations in the country.
China banned access to Facebook, YouTube and Twitter 2008-2009
In addition, eBay and Amazon also lost the battle in China, local competitors like Alibaba and Tencent. Chinese firms have strong funding and public support.
The decision to sell the Chinese subsidiary of Uber was accepted after the Ministry of transport of China issued on July 28 of the provisional rules to legitimize the activities of all companies engaged in taxi transport and put them under strict control. Rules are more advantageous for the state than for business.
For example, article 5 of the new rules stipulates that taxi companies must install physical servers in China and store data about customers and cars within two years. This provision seemed aimed directly against Uber.
Beijing also announced that prices will be carefully considered and resolved. It would not allow Uber to attract new customers at prices below cost.
Didi Chuxing was formed in February 2015, two competing taxi companies running Internet giants Tencent Holdings and Alibaba Group. Didi currently serving 300 million users in 400 Chinese cities, according to a press release. According to research firm Analysys, Didi had 42.1 million active users in may, while UberChina — only 10.1 million
