Why Apple is investing $1 billion in Didi, China’s version of Uber

BEIJING – With sales of iPhones slowing in mainland China and Apple running into trouble with regulators there, the Cupertino, Calif.-based company may see its $1 billion investment in ride-hailing service Didi Chuxing as a source of new revenue streams and goodwill in the massive market.

Apple recently introduced Apple Pay in the country, but it is up against fierce domestic rivals with a big head start, including Alibaba’s Alipay and Tencent’s WeChat Pay. Apple’s iTunes movie and iBook services were recently suspended in China.

A tie-up with Didi Chuxing – the biggest ride-hailing platform in China – could provide a leg up.

Didi says it works with more than 14 million drivers in 400 Chinese cities and has 300 million users who place 11 million ride orders a day.

The investment, which Didi announced late Thursday, comes as San Francisco-based rival Uber has struggled to gain a foothold in China. Uber Chief Executive Travis Kalanick recently told tech site Betakit that his company is losing $1 billion a year there.

Chinese analysts also speculate that Apple might be interested in tapping Didi’s massive trove of data on ride-hailing and car usage to inform Apple’s own development of a high-tech, self-driving car, which has long been rumored. Map services are another conceivable area of cooperation.

With Apple’s growth prospects stunted – the company’s quarterly sales recently dropped for the first time in 13 years, and its stock price, at about $90 a share, is the lowest since the summer of 2014 – analysts have been anxious to see it invest some of its $200 billion of cash and securities, much of which is stashed overseas.

Apple said late last month that its sales in the “greater China region” – which includes the mainland, Taiwan and Hong Kong – plunged 26 percent in its fiscal second quarter, the biggest percentage drop of any of Apple’s geographic regions.

In announcing the deal – one of Apple’s largest outside investments ever – Apple Chief Executive Tim Cook said Didi “exemplifies the innovation taking place in the iOS developer community in China,” and that Apple “looks forward to supporting (Didi) as they grow.”

Cheng Wei, founder and chief executive of Didi Chuxing, was equally circumspect.

“The recognition from Apple tremendously encourages Didi that was founded four years ago,” he said. “Together with drivers, ride sharers and friends from the world, Didi will continue to make efforts on enabling everyone to have various ways to travel, helping solve urban transportation problems, and environmental and employment challenges.”

Didi later joked on its Weibo social media account that Apple had invested in Didi because both companies were named after fruits. The company’s officially registered name is Beijing Xiaoju Technology Inc.; Xiaoju means “Little Orange.”

Apple’s phone-making rivals in China are rapidly moving into the automotive industry.

Le Eco, which makes smartphones as well as flat-screen TVs and other electronic products, is backing the Faraday Future electric car venture in California and Nevada. The company recently announced plans for its own branded vehicle, promising a seamless user experience that would take entertainment features and control functions from one’s mobile phone to the driver’s seat.

Le Eco has offices in Silicon Valley as well, not far from Apple’s campus.

Le Eco is also cooperating with the Chinese ride-hailing platform Yidao, a rival to Didi. At a recent media event, Le Eco Chief Executive Jia Yueting talked about his vision for integrating the two services. For instance, voice-recognition software built into phones could give users the ability to simply push a button and say “please pick me up” without launching an app or entering any other information.

Didi has recently partnered with U.S. ride-hailing platform Lyft, giving Chinese users access to Lyft services stateside and vice versa.

Uber, meanwhile, continues its efforts to eat into Didi’s market share in China. It has a partnership with the Chinese search giant Baidu and is spending heavily to acquire customers and drivers in the Chinese market.