
Apple invests $1B in Chinese ride-hailing service Didi Chuxing - ssclafani
http://www.reuters.com/article/us-apple-china-idUSKCN0Y404W
======
devy
There were a few ideas floating around Chinese tech blogs, of the most
possible reasons are:

1\. Integrate Apple Pay into Didi Chuxing apps, which is estimated to have
300MM users in China[1]. Didi currently only accepts payment with Weixin(aka
WeChat) Pay and Ali Pay (aka Ant Financial Services Group, owned by Alibaba
Group).

2\. Massive data points for developing Apple's self-driving technology. Didi
operates in 400 Chinese cities with over 11 million rides per day, and
accounts for 80% private car hailing market and 99% taxi hailing market.[2]

3\. And yes, investing into Chinese tech sector give them a better leverage in
negotiations with the government and also like sbuccini said, association with
other Didi's major investors.

[1]: [http://www.theverge.com/2016/5/12/11669178/apple-
invests-1-b...](http://www.theverge.com/2016/5/12/11669178/apple-
invests-1-billion-in-chinese-transportation-service-didi-chuxing)

[2]:
[https://en.wikipedia.org/wiki/Didi_Chuxing](https://en.wikipedia.org/wiki/Didi_Chuxing)

~~~
contingencies
1\. Maybe partly, but 1B USD seems a lot to pay for that.

2\. Self-driving is not going to happen in China the way it happens in the US.
The roads are full of pedestrians, e-bikes, people breaking any sort of
nominal rule or law... it's too accident prone. Plus you have the extra
challenges of the politically accuracy-challenged navigation systems. No, I
don't think this reason floats.

3\. Maybe partly. Locking down stable long term CNY income via a one time USD
investment seems like it could even be seen as long term corporate tax
planning.

~~~
laretluval
Is rule of law in traffic important for self-driving cars? If self-driving
cars are based on neural networks rather than on rule-based systems, do we
have any kind of intuition about under what kinds of traffic circumstances
they will do well?

~~~
brianpgordon
See this gif:
[https://i.imgur.com/loW46yj.gif](https://i.imgur.com/loW46yj.gif)

Humans have the luxury of being able to charge into an uncontrolled
intersection and trusting other drivers to make room. Sure 1% of the time it's
going to cause a fender-bender, but that's just what you have to do in order
to get through the intersection.

There's no way that taking chances like that would fly with a self-driving
car. Even though the human passenger would have done the same thing, they're
still going to feel like the car company owes them for "the car's mistake"
when it's involved in a collision.

~~~
wodenokoto
On what grounds do we have that trust?

You can just as easily teach a computer to trust people to make way as you can
teach it to assume people won't make way.

~~~
brianpgordon
Yes, you could. Like I said. And like I said, good luck marketing a product
that drives recklessly into a busy intersection hoping that people will move.

------
sbuccini
Apple has huge stores of cash sitting overseas. They can't bring it home
without subject to large tax penalties. With that cash stockpile growing, it
seems like they're having trouble finding ways to put that money to work
overseas. I wonder if they would have still made this investment if they had
the ability to bring that money back stateside without hefty tax liabilities.

Regardless, a $1B is not a small chunk of change, even for Apple. Clearly,
natural synergies could arise when Project Titan matures. But Apple tightly
coupling itself with a rising player in the Chinese tech sector is a smart
play (not to mention associating itself with other notable Didi investors like
Alibaba). We've seen similar moves by Uber, who took a large investment from
Baidu.

Interesting times ahead.

~~~
partiallypro
I am pretty sure this has nothing to do with inversion and has a lot more to
do with appeasing the Chinese government with a capital investment.

[http://www.eweek.com/mobile/apples-tim-cook-heading-to-
china...](http://www.eweek.com/mobile/apples-tim-cook-heading-to-china-to-
improve-relations-with-leaders.html)

Tim Cook meets with Chinese government to smooth over relations and then
immediately Apple announces a capital investment in China, what a major
coincidence!

~~~
seanmcdirmid
Both. Apple earns a lot of money in China, so they want to be seen as doing
something with that in China to look better with the government + its already
been taxed there anyways.

Same with most tech companies actually, just that Apple does very little R&D
in China ATM, so investment it is.

------
salimmadjd
Apple Map/Siri and Google map eventually will become the interface to ordering
car sharing. Especially once there is autonomous cars and Uber or Lyft do not
own the driver-side of the equation, ride sharing will become a bit like
ordering rental cars from Kayak.

The same way Facebook is becoming the interface to content, both google and
apple will own the consumer side of the cars and help you pick the best deal
or cheapest option. It could be from Uber, a guy who owns a fleet of 20
autonomous cars or Hertz, etc.

This moves totally makes sense for Apple as they will move to own the consumer
side of this market.

~~~
losty
Why assume Facebook will remain dominant?

~~~
Zyst
A lack of explicit mention is not an implication.

------
aresant
Are they investing in Didi the ride sharing company or investing in Didi,
Uber's arch rival in China?

The chess game afoot in the autonomous vehicle battle is attracting some
strange bedfellows between Apple, Google, tesla, ford, Mercedes, Uber, Lyft,
Volvo, Nvidia, etc.

The end game is outrageously big, generationally big, and it's going to be a
treat to watch the Titans lock horns.

~~~
laluser
It's the same company.

~~~
stdgy
I believe aresant is questioning the motivation behind the investment.

That is:

\- Is Apple investing in Didi in order to see a straightforward return on
investment?

Or

\- Is Apple investing in Didi in order to counter Uber's global expansion, so
that they can begin to control the ride-share market themselves?

Their motivation for the investment would say a lot about their intent
regarding their automotive plans (Project Titan). If they are doing this
simply because they have a mountain of spare change sitting around and would
like to put it somewhere to see larger gains while rubbing elbows with China's
establishment, it might not signal much about their automotive intent. But if
they are making the investment to staunch Uber's expansion into Asia (And
maybe India, given Didi's investors' related holdings) in order to secure a
spot for themselves at the global table to cash in on autonomous auto service,
that's a whole different ballgame.

Edit: Formatting

------
zer00eyz
Apple didn't do this because they are building a "self driving car" that they
are going to sell.

Apple wants to get ibooks and movies selling in china again, it is vital to
apples car strategy. This move will give them some leverage with china in
getting those markets back to being active.

If you know anything about Tim Cook, you know that he is master of the supply
chain. I don't think that someone like that is going to jump into apple
building its own car.

So if apple isn't going to build a car, what ARE they doing with all these
people on the pay roll who have worked with cars.

Its simple, apple wants to own the dashboard of the car, were not talking
about "carplay" were talking about the WHOLE dashboard. Once you own the
dashboard, your hooked into location, and destination (apple owns a mapping
solution) they can leave it to vendors of vehicles to do the "self driving"
compontent.

Why would any automaker want apple in the dashboard? Why would apple want the
dashboard? Its simple, entertainment! Apple with the beats acquisition owns
something that looks like radio, and music has always been there with iTunes.
There is no reason you can't rent movies and books into the back seat as well.

~~~
phodo
I might be mistaken but it is my understanding that in China, the business
model is different : the mobile operators, eg the PTTs, and not the tech
companies are the ones that capture the revenue. For example, if I buy a piece
of content on my mobile phone, such as the next page or chapter in the story
I'm reading, Apple would not see that revenue but the mobile operators would
(and others in that value chain, but not necessarily Apple ). If someone can
shed more light on the current mobile content business model and value chain
in China, feel free to chime in.

~~~
AllenKids
Mobile operator does not capture anything from the iOS Eco-system, ust like in
the US. Since all mobile operators are state owned, I suspect this arrangement
created a sore point between the Chinese government and Apple.

------
Aelinsaar
It must be nice to have so much cash that a $1B stake can be seen as somewhat
speculative. Incredible really.

------
electriclove
This is about gathering real world data to further autonomous driving.

Google has their small fleet collecting data; Tesla has tons of vehicles now
collecting data; Uber has the potential to start collecting data. Apple has no
ability to collect real world data... Until now?? Smart move Apple

~~~
smaili
Does "investing" in a company imply access to their data?

~~~
shimms
If the deal terms stipulate it does then there is nothing implicit about it.
If the data was Apple's motivation for this deal, or even an upside if not
their primary motivation, I'm sure it'd be explicitly stated in an agreement
that they get access to this data, yes.

------
radicsge
I hardly doubt this money is for real investment most probably just to please
to government, this 1B is eventually will be distributed among citizens
without a job. Also the big cities became super crowded as being extremly
urbanized. In some days traffic jams starts at 3 and between 5-7 everything is
just stuck. It might be also a way how goverment try to slightly reduce these
issues.

~~~
Cookingboy
Didi is a private company already worth billions. This isn't money to the
government at all. So I don't see how it will be distributed to the
unemployed.

If they want to please the government they'd just pay more local tax.

~~~
partiallypro
You clearly don't know how business operates in China. China doesn't care
about tax revenue or deficits, they want capital investment and capital
expenditures (especially in light of recent record capital outflows.) They
have strict capital flows for a reason.

In China there isn't really a private/public divide like the U.S., bribing and
knowing people in government is absolutely essential in China. Sure, it helps
in the U.S. (and every other country), but it's not essential. China is a
different beast. Doing business in mainland China is quite the experience, I
know of no one who actually likes doing it. The Chinese are still communists
after all, and if you have a supplier there...they are not loyal. They will
knock your stuff off in a heart beat as soon as you leave.

~~~
Cookingboy
Well I actually know people who like doing business in China, namely my
parents, who own a medium sized tech company there.

There absolutely still is a difference between private and state-owned
companies. There are even cases where Huawei loses government contracts to
Cisco. Like you said, the water is murky in China, and the favor of Chinese
government cannot just be bought by a tiny investment such as this.

There is no guarantee that just because you are a Chinese company, the
government will be on your good side. At one point Alipay was almost banned
due to some central bank regulation. Didi also has a competitor named Kuaidi,
which for all we know can have even deeper connections with the CPC.

~~~
zhte415
Didi acquired Kuaidi some time ago. Changed the name to Didi Kuaidi. Name
changed again a little while ago to Didi Chuxing.

To me, this deal is about "You can sell XXX, if you do YYY" YYY may be
investment, technology transfer, many things. But a lot of China deals and
inward investment in R&D, Operations or Technology are in fact driven by
sales. "We need to sell this, and in order to do so, we've been told we also
need to YYY."

~~~
radicsge
I suspect the same

------
molmalo
While I do believe that they are investing in Didi with the dual intent of
gaining access to their massive riding data, and position themselves as
providers for future autonomous vehicles, I also believe (and I could be very
wrong) that they may be funneling money through China, for their US-based
facilities.

I mean, could this be related with Faraday Future? The mysterious "US-based,
_Chinese-backed_ company" that plans to invest $1B in California, "focused on
the development of intelligent electric vehicles and mobility solutions" [1],
that many suspected it's a front for Apple's car.

[1]
[https://en.wikipedia.org/wiki/Faraday_Future](https://en.wikipedia.org/wiki/Faraday_Future)

~~~
snsr
I doubt it (re: Faraday) -

[http://lasvegassun.com/news/2016/may/11/faraday-futures-
fina...](http://lasvegassun.com/news/2016/may/11/faraday-futures-financial-
strength-in-question-for/)

------
desireco42
And that is it. Owning a piece of such large Chinese company, Apple also gets
a foothold into decision making in China and gets more say. Very smart.

Jobs was a different person, Tim Cook leads company differently. I really like
how he plays this.

~~~
seizethecheese
This has much more to do with Apple building a car than it does with
influencing decision making in China.

~~~
CameronBanga
I think you're wrong about this.

The political good favor and potential for growth against competitors in China
is a huge value. Well worth the investment.

~~~
Fricken
Apple could have chosen to throw money at any of a number of Chinese
companies, but they chose Didi. I think it serves more than one strategic
purpose, and hints at their intentions with project Titan.

------
kirykl
With the scale of Chinese companies is $1b a large investment? The article
says Didi has already raised several billion

------
iamgopal
How economics works ? 1B$ for an app ? Innovative Small scale business are
struggling to raise a million, and blatant copy cats raising billions ?
Capitalism works correctly tho, what they have earn has to give back to earn
more.

~~~
ajharrison
It's not $1b for an app. Its for 87% of the ride sharing marketshare. They
eventually want self-driving Apple cars driving people all over China (and
eventually the world).

~~~
rasz_pl
If you knew anything about China you would know this is never going to happen.
No business owned by a foreign entity is allowed to thrive.

This $1B is a temporary ticket out of jail for Apple. Intel had to pay its
$1.5B last year, Qualcomm didnt pay and was fined >$1B for 'abusing monopoly
position'.

~~~
optforfon
"No business owned by a foreign entity is allowed to thrive."

what....? Apple is thriving in China. Everyone and their mom has taken out
loans to buy an IPhone. I'm not even exaggerating.

Foreign cars outsell the locals brands by a large margin

------
eddieplan9
From the article:

> "(The deal reflects) our continued confidence in the long term in China’s
> economy," Cook said.

If this is not kowtowing, I don't know what is. This is very disappointing
coming from a company like Apple.

------
jackieluo
I haven't been this surprised by anything Apple's done in years. If moves like
this one keep happening, the next few years are going to be pretty exciting to
watch.

------
swyman
Probably dumb hypothetical: What happens if Apple comes up with an excuse to
remove Uber from the (Chinese) App Store and corresponding iPhones?

~~~
mmahemoff
A holy shitstorm? But it won't happen. The same logic would apply to apps from
other fierce competition, e.g. Google Maps and Skype. While there have been
some occasional issues with upgrades being rejected, the apps have been
allowed to remain on the store.

The more contentious issue is with builtin apps and platform capabilities,
e.g. it's possible Apple's map could show directions and prompt a one-click
Didi ride. Google already does something like that with Uber, but it could be
even more tightly integrated with payments, and in a way that the platform
could favour certain providers.

~~~
hockley
The Chinese government could certainly come up with an excuse to block Uber in
China.

------
davidiach
"The company said it completes more than 11 million rides a day, with more
than 87 percent of the market for private car-hailing in China."

If they make $1.00 for each ride, that's already more than $4 billion in
revenue per year.

~~~
ndirish1842
China is still a developing market for ride hailing/sharing. The margins
aren't that good. In fact, with the amount Uber/Didi are spending on
driver/rider acquisition, they're both probably bleeding cash like crazy.

------
free2rhyme214
I was just starting to doubt Apple, especially with their lackluster effort in
artificial reality, and now I'm doing an about face.

This is an incredibly smart move and a great long term play which will bode
well for Project Titan.

------
chj
One thing to be sure, uber will have a hard time in China.

------
dingo_bat
Is there any reason Didi Chuxing is valued higher than Uber. Uber is the
innovator and present all around the world. Why is it still lower-valued than
Didi?

------
sangd
It looks like Apple wants to get the Chinese super star startup(s) to depend
more on their giant pile of oversea cash; thus to protect their brand, make
their strong hold on this market which is influenced very much by the state.
Look at their stock today, Google is surpassing and it has no other future
rather than protecting its iPhone, iPad, Macs which are pretty much saturated.

------
qaq
Apple to follow in Yahoo footsteps skip 10 years this might be the most
valuable part of Apple :)

------
JayeshSidhwani
Could this also be because Apple would want to test their experiments in self-
driving cars?

