Uber plans to invest $1 billion in China
Updated: 2015-06-13 05:52
China is a priority for riding-hailing app Uber and it is planning to invest more than $1 billion there this year, says the company's chief executive.
According to the Financial Times, CEO Travis Kalanick said in a letter sent to investors ahead of a planned funding raise of $1 billion for China to help Uber expand into 50 new cities there — it currently operates in 11 — that the company believes it has captured close to half of China's non-taxi ride-hailing market.
Kalanick also said Uber is looking to raise the funds for the China operation to better compete with Didi Kuaidi Joint Co, which has backing from Chinese Internet giants Alibaba Group Holding Ltd and Tencent Holding Ltd. Uber's China unit, UberChina, is set to launch a formal fundraising process on June 22, the letter said.
China's dominant taxi-hailing app is Didi Kuaidi. It was created in February by the $6 billion merger of the country's top two taxi-hailing companies, giving it a dominant share in that market. Didi Kuaidi announced plans in May to offer riders subsidies of one billion yuan ($161 million) and to offer services ranging from taxi-hailing to rides in premium cars and carpooling.
The FT also reported that Kalanick revealed that Uber's business in China doubled in the last month, and that the company is providing nearly 1 million trips per day in China, where the company launched in February 2014.
The San Francisco-based company compared its growth in five Chinese cities to New York. At the six-month mark, the number of trips in Chengdu was 46 times larger than that of New York at the same "age", according to Kalanick. After nine months, Chengdu city had 479 times the number of trips that New York did.
"Our early success derives from an organic approach to the market -- we have established a new Chinese entity, Youbu, (which means "an excellent step forward"), and have partnered with Baidu to create a truly Chinese company that is built and supported by local employees, local partners, and local investors," he wrote in the letter to investors, according to the FT.
"This kind of growth is remarkable and unprecedented," Kalanick wrote. "To put it frankly, China represents one of the largest untapped opportunities for Uber, potentially larger than the US Success in China, however, takes commitment over the long haul and a strong will, coupled with a unique understanding of the differences in China."
Uber has faced regulatory hurdles in some countries. France, for example, views the service as an unauthorized taxi or a threat to the traditional cab industry.