NO BRAKES

Didi Chuxing’s proxy war with Uber has expanded to the Middle East

It’s been one year since Uber’s fiercest battle overseas came to a close. But the larger war is still underway.

Today Chinese ride-hailing giant Didi announced it’s completed a “strategic investment” in Careem, Uber’s main rival in the Middle East. The Dubai-based startup was founded in 2012 and now claims to have more than 12 million customers across 80 cities in the Middle East and North Africa. Didi did not disclose the specific sum it invested.

The company’s investment intensifies its proxy war against Uber, which began in earnest in 2015, when Didi invested individually in Uber competitors Lyft, Ola, and Grab (a leading player in Southeast Asia). Around the same time, a group of investors including Japan’s SoftBank shoveled funding toward Didi, Grab, and Lyft.

In August 2016, Didi acquired Uber’s China division, in exchange for Uber getting a 17.7% stake in its Chinese counterpart. Today, Didi is still funding Uber’s rivals around the world. Most notably, last month the company joined SoftBank to announce a $2 billion funding round for Grab. It’s also invested in regional players outside of Asia. In addition to today’s bet on Careem, Didi has put $100 million into Brazil’s 99, and an undisclosed sum into Taxify, which operates in eastern Europe and South Africa.

Why is Didi investing in Uber rivals, despite Uber owning a significant stake in it?

With Uber’s top leadership in turmoil, its market share sliding in the US (where the bulk of its profits will likely remain), and its funds perpetually depleting, the company will have to make difficult choices about where it continues to fight. In developing markets it will need lots of funding to gain market share against competitors, but low fares in those places means that the payoff will probably come (if at all) far in the future. In addition to calling it a day in China, Uber has already ceded its Russian operations to local rival Yandex.Taxi.

Didi, like many companies, must expand, especially since data suggest that its growth in China is plateauing. But this late in the game, sending forth teams from China to put cars on the road in foreign countries would be unthinkable. Instead, it can invest in Uber’s local rivals, which can eventually buy the Uber operations if and when they falter.

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