The popular taxi service, Uber, sold its Chinese operation to rival, Didi Chuxing. The move brings an end to the long standing rift between the two. It soon followed with mixed reactions from investors & analysts. Here are four key reasons as to why Uber, China gave in to Didi chuxing.
Uber Stops Negative Cash Flow
Uber,China, had reportedly spent over $2 billion during the last two years to win the 20% of market share. Yet, the company managed to pull off a profitable show with its rideshare model. Didi Chuxing, on the other hand, enjoyed an 80% share of the Chinese economy. “Getting to profitability is the only way to build a sustainable business that can best serve Chinese riders, drivers and cities over the long term,” Uber’s chief executive Kalanick said. Now a monopoly, Didi is expected to spare the billions that would otherwise be spent competing.
Relief From Distribution Problem
Though Uber had launched its ridesharing model in China ,the business would have been anything but a disaster without the of the leading search engine, Baidu. Despite Uber’s successful track record in the global market, Didi proved to be a tougher competition, that what Uber had hoped.
Uber Bother Free From New Regulations
Uber’s operation spans across the world, Yet the company received a blunt objection from the local government to operate on-demand taxi service in a minority of cities. According to Chinese regulation, drivers should have three years of experience and licensed by a local taxi regulator. The cars are not eligible to operate more than 600,000 km.
Uber Could Focus On Big Revelries
Although Uber has given profitability in a few of its major cities like San Francisco,the two billion spent on China’s ride-share market was burnt the hole in Uber’s investments. Now, that same capital can be aimed at increasing profit in growing countries like India, Southeast Asia, and parts of Africa & Europe.
The transportation industry has evolved faster than ever. This is the race where entities like Uber should not stand to lose.