Date
27 July 2017
Uber CEO Travis Kalanick said the China business is being supported by profitable operations outside the region. Photo: Bloomberg
Uber CEO Travis Kalanick said the China business is being supported by profitable operations outside the region. Photo: Bloomberg

Uber losing US$1 bln a year to compete in China

Uber Technologies Inc. is losing more than US$1 billion a year in China as it competes with local rival Didi Kuaidi, chief executive Travis Kalanick said.

The company’s Chinese business boosted its valuation last month to more than US$8 billion after raising more than $1 billion in its latest funding round, but the San Francisco-based ride-hailing service is not yet profitable in mainland China because of the intense competition, Reuters reported.

“We’re profitable in the USA, but we’re losing over US$1 billion a year in China,” Kalanick told Canadian technology platform Betakit.

“We have a fierce competitor that’s unprofitable in every city they exist in, but they’re buying up market share. I wish the world wasn’t that way.”

The US$1 billion figure was confirmed by Uber officials in China in an email to Reuters.

Uber and China’s Didi Kuaidi, backed by Chinese technology giants Tencent Holdings and Alibaba Group Holding, have both spent heavily to subsidize fares to gain market share, believing the country’s internet-linked transport market will become the world’s biggest.

In an email, Uber China said Didi Kuaidi had to spend “many multiples” more than the US company to increase its share of the market, adding that Uber’s China business was being supported by profitable operations outside the region.

A spokesman for Didi Kuaidi, which has the biggest share of the country’s car-hailing app market, said Uber’s claims about its spending were untrue and that it is benefiting from its larger size.

“Smaller competitors have to bleed subsidies to make up for their insufficient driver and rider network,” the spokesman told Reuters in an email.

He added that the Chinese company now operates in 400 cities and had passed break-even point in half of those cities.

In January Kalanick said spending on such pricing strategies is “how you win” in China, adding that Uber aimed to beat Didi Kuaidi by spending more efficiently.

Uber currently operates in more than 40 Chinese cities and plans to be in 100 by the end of the year.

“I prefer building rather than fundraising,” Kalanick told Betakit. “But if I don’t participate in the fundraising bonanza, I’ll get squeezed out by others buying market share.”

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CG

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