Along for the ride

Apple makes unconventional investment in Didi Chuxing

Apple CEO Tim Cook speaks during an event at Apple headquarters in Cupertino, California

Taxi Tim: Cook buys into Didi

In the battle for dominion on China’s roads, Uber and local rival Didi Chuxing (formerly Didi Kuaidi) have plundered their war chests to pay subsidies to their customers to gain market share.

To do so Didi has replenished its coffers with huge fundraising rounds (its major backers are Alibaba and Tencent). And this week it added a newcomer to its roster of investors, receiving a $1 billion injection from Apple.

The move is out of character for Apple, notes the Financial Times, which rarely buys minority stakes in other firms, preferring to acquire firms outright (such as Beats) or build new businesses internally.

Other media outlets have seen the investment as a sign of Apple’s interest in autonomous driving systems, speculating that the partnership with the ride-hailing app will give it access to reams of data on Chinese driving habits and traffic flows. “We are making the investment for a number of strategic reasons,” Apple’s CEO Tim Cook explained, “including a chance to learn more about certain segments of the China market.”

Didi is a bigger player than Uber: it claims to have arranged 1.43 billion trips in 2015 alone, while Uber announced its billionth ride since launch in December the same year.

Apple’s investment in Didi comes at a time in which the Californian firm has suffered a series of setbacks in its second largest market, including the suspension of its film and books services (see WiC323 and WiC324). So some commentators took the view that the move was designed to curry favour with the Chinese government. It could also be an attempt to broaden the company’s focus: demand for iPhones has been slackening in China, pushing Apple’s share price down substantially this year.

Another benefit of the partnership could be promotion of Apple Pay to cover the fares for Didi journeys. Apple Pay was launched in China in February, against steep competition from Alibaba and Tencent’s mobile payment systems (see WiC314). But even in Didi taxis, Apple would be competing against China’s two tech giants, suggesting Apple Pay may struggle to gain traction.

Apple is investing at a time in which media scrutiny of the Chinese ride-hailing system has been increasing. Last week, a woman from Tianjin ordered a car to take her to work. Some distance into the journey, she took her first real look at the driver and noticed that he was naked below the waist. The passenger took a picture as proof, then left the car and alerted Didi to her encounter. After receiving her complaint, Didi permanently suspended the man’s account, and he has been detained by the police for 10 days (but not before he was able to send a message to his passenger accusing her of “trying to make trouble”).

Guangzhou Daily reported at the beginning of May that another female customer of Didi received a threatening message from a driver, who also tried to hit her with his car, after a dispute over payment. Two days prior to that, a group of students from Hainan reported that a Didi driver had started masturbating during a journey; and on May 2 things got much worse for the company when a teacher in Shenzhen was robbed and murdered by her Didi driver.

These crimes have turned attention to the car-hailing app’s safety measures. Beijing Times reported that in Shenzhen alone over 8,000 Didi drivers have had their accounts suspended after violating the company’s rules. But a writer for Shanghai news board Guancha reckons that the measures amount to “fixing the pen after the sheep have been lost” – or reacting to misdemeanours rather than preventing them from happening in the first place.

New provisions for ride-hailing apps are due to be implemented this year, following a draft proposal last October. In the wake of the afore-mentioned scandals, the operational restrictions could get more onerous, making Apple’s ride in China potentially bumpier.

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