Apple made the bombshell announcement today that it has invested $1 billion in China’s top ride hailing app. Didi Chuxing (formerly called Didi Kuaidi) is often described in U.S. media as Uber’s Chinese rival, but it already dominates the market by far. The company claims it fulfilled one billion rides last year and holds 87 percent of the country’s private ride-hailing market.
In an interview with Reuters, Apple CEO Tim Cook said, “We are making the investment for a number of strategic reasons, including a chance to learn more about certain segments of the China market. Of course, we believe it will deliver a strong return for our invested capital as well.”
Didi Chuxing told Reuters that this is its single largest round of funding so far. It claims to currently complete more than 11 million rides a day and have over 14 million drivers on its platform. The company’s other major investors include Tencent and Alibaba, two of China’s largest Internet companies, and SoftBank.
According to a WSJ report from February, the company was then in the process of finalizing a round for $1 billion at a valuation of $20 billion. A Didi Chuxing representative said Apple’s investment is part of the same round, but declined to confirm the valuation. TechCrunch has also emailed Apple for more information.
In a press release, Didi Chuxing founder and CEO Cheng Wei said, “The endorsement from Apple is an enormous encouragement and inspiration for our four-year-old company. DiDi will work hard with our drivers, riders and global partners, to make available to every citizen flexible and reliable mobility choices, and help cities solve transportation, environmental and employment challenges.”
China is on its way to becoming Apple’s biggest iPhone market, but the company has faced a few recent setbacks there. After years of giving it a relatively free rein for a U.S. tech company, the Chinese government ordered the closure of iBooks Store and iTunes and Movies just six months after the services launched in China.
Furthermore, while Apple’s sales in China are still growing, it’s at a much slower rate than before as the Chinese economy becomes sluggish and the smartphone market in general faces less demand. Concerns about Apple’s reliance on China prompted activist shareholder Carl Icahn to sell his entire stake in the company earlier this year.
Investing in Didi Chuxing allows Apple to grab a foothold in the Chinese tech market that reaches beyond iPhones—and also gives it a new platform for its other technology. For example, if Didi Chuxing uses CarPlay, that gives Apple another outlet to sell software services in China beside the iPhone, as well as valuable data to tailor apps and maps for Chinese users. Didi Chuxing is also a major potential customer once Apple’s self-driving car comes to fruition.