Apple invests $1bn in Chinese Uber rival, but motives are unclear
It’s unlikely that many Apple shareholders will have heard of Didi Chuxing, a Chinese ridesharing service, similar to Uber, in which the iPhone giant has invested $1bn. This may be complementary with Apple’s much-discussed but still-hidden automotive project, but it still betrays some confused thinking in the firm’s strategy for the Internet of Things.
China, despite its recent slowdown, is seeing a rapid growth in the middle class, with rising disposable incomes, and that sector is one of the quickest adopters of new digital services, including ridesharing. Reports indicate that the Chinese roads are not coping with the swift increase in car ownership, and congestion is rampant. Now there is a battle for those Chinese roads, between Didi Chuxing and Uber. Didi is claiming to be winning that race, saying its drivers complete 11m trips daily, compared to Uber’s 1m.
So where does Apple fit in? The company looks somewhat confused in its IoT-related portfolio. While smartphones act as portals to interact with other IoT ecosystems, Apple hasn’t done much in the way of expanding its horizons. Its TV project has bubbled under the surface for years, and now centers on a simple net-top box, which may or may not turn into a smart home controller. Its smart home strategy sounds garbled, at best, and the full HomeKit platform has not materialized.
There has been more action in CarPlay, which essentially acts as a bridge between the iPhone and the car itself – allowing the driver to use the smartphone as the in-vehicle infotainment (IVI) system for the car.
CarPlay allows an automotive OEM to package a fairly advanced IVI system into its cars, at very little cost, and like Android Auto, this is a compelling proposition for carmakers. However, the OEMs themselves are trying to take control of the space, and with it, control of the valuable marketing data that can be harvested from drivers and passengers. Apple will continue to fight back against that by enhancing CarPlay, and of course, it is also expected to develop its own car. Its Project Titan is out in the open, although the specifics of the car itself haven’t been confirmed – even whether it will be an autonomous vehicle, or simply an electric drivetrain.
Which is why this investment seems a little strange. Apple already has a very sizeable interest in developing its own vehicles, with the logical extension being a service-oriented offering, leveraging its iOS ecosystem and even its mapping platform, to act as the basis of a ridesharing platform.
But if Apple wants to stake $1bn on gaining the experience needed to launch such a ridesharing platform, there are probably cheaper ways of gaining such expertise – poaching staff from Lyft, Uber, or the Germans being the simplest strategy. Apple’s poaching of Tesla staff drew a public quip from Tesla CEO Elon Musk, who branded Project Titan as the Valley’s worst-kept secret.
Instead, this looks a little like an expansionist move into China – a market in which Apple has seen strong initial success, but needs to brace itself against the rise of the inevitable domestic competition. Apple enjoyed record sales when it entered the Chinese smartphone market, but its most recent quarter saw a 26% drop in sales.
More cynically, the investment, which may in and of itself return a nice chunk of cash to Apple, may be a way towards improving relations with the Chinese regulators themselves. Some have speculated that the move would help Apple move closer to the kind of relationship that domestic technology giants Alibaba and Tencent enjoy with the Chinese government. Both companies are already investors in Didi.