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Apple's bet on Uber's Chinese rival makes plenty of sense

A major investment raises some interesting possibilities.
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Early this morning, Apple announced it's spending $1 billion for a stake in the Chinese Uber-like ride-hailing service Didi Chuxing, purportedly for "strategic reasons." But what is Didi, and why is Apple investing so heavily to get a piece of it?

To call Didi Chuxing an Uber competitor would be selling it short. While it offers broadly the same service, Didi is far more successful than the American startup is in China. It currently has an 87 percent share of the market, while Uber has struggled to make a big impact. Didi has also made some small investments in Lyft, a US-based Uber rival. As Didi is valued at over $25 billion, this new investment isn't necessarily a game changer for either company, but its secondary effects might be far stronger.

China is Apple's second-biggest market

The reasons for Apple's focus on China are clear. After a few years building its presence in the country, it's now Apple's second-biggest market. In its last quarterly report, Apple revealed that China accounts for 25 percent of its revenue, up from 19 percent just three years ago. With more than 1.7 billion people calling the country home, Apple obviously thinks the figure has more room to grow, and this deal can help spur that expansion. Announcing the deal, CEO Tim Cook told Reuters it offered "a chance to learn more about certain segments" of the Chinese market. It won't cost the company much, either. Since it's got plenty of cash stored overseas that's too expensive (in tax) to bring back, spending a billion dollars on a reasonably safe investment is a sound use of funds.

Analysts speculate that this investment might help quell some of Apple's regulatory issues in the country. China recently pulled the plug on the iBooks store and the iTunes movie store -- which had only launched last September -- prompting suggestions that authorities were protecting local businesses from foreign elements. By investing in a local giant (that's going to be fighting Uber for years to come), Apple ingratiates itself to government officials, important local businesspeople and the population as a whole.

Of course, Apple's also interested in another area right now: cars. Barely a week goes by between rumors of the company's progress in the field, with more recent articles asserting that it will build its car in Germany. When that'll be ready is all speculation right now, but The Wall Street Journal claims that Apple is targeting a launch in 2019. It's widely reported that any vehicle the company produces will have self-driving capabilities, and today's Didi investment adds a twist to the autonomous Apple car story.

Uber's endgame is self-driving taxis

Closer to home, Uber CEO Travis Kalanick has made no secret of the fact that the endgame for his company is self-driving taxis. Of course, we're likely decades away from that happening on a global scale, but we could see small autonomous fleets operating in some areas far sooner. Google, a leader in publicly visible self-driving tech, is also chasing the same goal. While the two are obviously competing right now, Google owns a sizable -- maybe 2 or 3 percent -- stake in Uber after investing very early, and has a place on the company's board. The prospect of the two working together isn't unthinkable, especially if one of the world's largest companies is focused on the same market.

And Uber is looking for collaborators. According to a report from The Information, Kalanick had planned a meeting at Apple headquarters this week to discuss "future partnership opportunities." Whether that meeting is still on the cards after Apple sided with its biggest competitor in China is unclear.

Regardless of what it's planning with cars, Apple is definitely in the navigation business. It offers mapping services for iOS and OS X devices, and is very keen on you using CarPlay in your vehicle. And just as important as the algorithms that power navigation systems is the information they have access to. By partnering with Didi, Apple could potentially tap into billions of miles of Chinese driving data each year, which would allow it to offer improved navigation or other services in the future.

LeEco envisions its LeSEE self-driving car as a taxi.

The same algorithm/data principle also applies to self-driving cars. Google logs millions of autonomous miles not just to fine-tune its code, but also to gather data on road layouts, traffic flow and pedestrian and vehicular behavior. Obviously autonomous taxis aren't a reality yet -- although tech giant LeEco thinks it's getting close -- but they could nonetheless gather valuable data for Apple.

To be frank, a lot about this Didi deal is uncertain. But we know a few things for sure. We know that Apple wants to learn more about the Chinese market. We know that it's spent $1 billion to do so. We know that that $1 billion went to a company that is currently beating Uber in China and has aspirations to do the same elsewhere, whether alone or through investing in companies like Lyft. Everything else is guesswork. Regardless, for speculators, and even those of us without a horse in the race, the next few years are certainly shaping up to be a fun ride.

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Aaron writes about design, technology, video games and whatever “culture” is supposed to be. In his spare time he enjoys scouring the world for beautiful furniture, taking long walks on the beach, training orphaned dolphins and making up facts about himself.

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