By Daisuke Wakabayashi and Douglas MacMillan
Apple Inc.'s $1 billion investment in Chinese ride-sharing
company Didi Chuxing Technology Co. reflects an intensifying battle
over the future of driving and highlights emerging alliances among
auto makers, technology firms and ride-sharing companies.
The competition to build and provide autonomous vehicles
promises to pit the world's two most valuable companies, Apple and
Google parent Alphabet Inc., among others, against one another and
against the world's most valuable private venture-capital-backed
company, Didi rival Uber Technologies Inc.
All hope to capitalize on a historic shift from
internal-combustion engines to electric vehicles controlled by
software and chips, essentially computers on wheels. At the same
time, ride-sharing services are redefining traditional views of
transportation, calling into question the future of car ownership
and public transport.
Apple's investment aligns it with Chinese Internet giants
Alibaba Group Holding Ltd. and Tencent Holdings Ltd., both of which
are investors in Didi, and Lyft Inc., Uber's biggest U.S. rival,
which last year took an investment from Didi.
But the battle is about more than ride-sharing. Lyft's investors
include General Motors Co., which is helping to advance
self-driving technology. Lyft last week disclosed it and GM would
test a fleet of self-driving electric taxis next year.
Most major auto makers, including GM and Toyota Motor Corp., are
investing in their own driverless-car technology. Alphabet and Fiat
Chrysler Automobiles NV plan to use Alphabet's self-driving
technology in a trial with 100 Chrysler minivans. Tesla Motors Inc.
already sells autonomous-driving features that allow drivers to go
hands- and feet-free in stop-and-go traffic as well as highway
cruising.
For Apple, the deal erased any doubt about the scale of its
interest in cars. The iPhone maker has been working on electric-
and autonomous-vehicle technology for two years, recruiting from
across the company and bringing automotive experts to a project
with more than 1,000 employees, according to people familiar with
the company's plans.
And the investment bolsters Apple's position in China, its
second-biggest market, where sales are now falling after a rapid
ascent, and where it faces new pressures. Apple's online book and
movies services were suspended by Chinese regulators in the country
last month.
"The shift in Apple's strategy to invest at such a scale
highlights the strategic importance of the Chinese market to Apple
both in terms of the scale of the opportunity and the need for
local knowledge and local partnerships," said Jack Kent, mobile
director for research firm IHS Technology.
Didi, which is valued at $25 billion, is an unusual investment
by Apple, which has preferred to buy small startups and absorb
their technology into its products. This is the largest investment
for Apple since it acquired headphone maker and streaming-music
service Beats Electronics for $3 billion in 2014, a deal that
helped launch its Apple Music service. It is also unusual for Apple
to participate in a fundraising round for a startup.
But that could be changing. Apple Chief Executive Tim Cook
recently highlighted the strength of the company's finances, noting
that it has the "mother of all balance sheets," including $233
billion in cash. In a January interview with The Wall Street
Journal, Mr. Cook said cash is "worth more" during periods of
economic turmoil like that faced by many startups as valuations dip
and funding slows.
Apple hasn't publicly confirmed its interest in automobiles, but
Mr. Cook has said that the automobile industry is on the brink of a
"massive change" with software and self-driving technology playing
a bigger role in future cars.
Didi provides Apple with a rich data source for its self-driving
vehicle push. It also could provide benefits to Apple's mobile
ecosystem. Ride-sharing apps are closely linked to payment
services, such as Apple Pay. They also can be the foundation for
other mobile commerce transactions such as deliveries.
The investment also underscores how quickly and dramatically the
ride-sharing landscape has changed. Apple's investment strengthens
an Uber rival in the one market where Uber is already the underdog.
UberChina, a Chinese subsidiary, is vying with Didi to attract
riders and investors. Didi and UberChina have competed to raise
billions of dollars from investors, using the cash on incentives to
win drivers and riders to their services.
Uber is locked in a battle with regulators across the globe and
struggling to quell unrest in the ranks of its drives in some of
the more than 400 cities where it operates.
Now, it faces a rival with potential access to Apple's
technology and marketing that could go far to reach millions of new
users and develop the next generation of products in
transportation.
Travis Kalanick, Uber's co-founder and CEO, marked Apple's
investment with a jab. In a tweet from his account, Mr. Kalanick
wrote that his girlfriend's stock in Apple makes her an indirect
investor in his competitor. It bore the hashtags "#ridesharewars"
and "#thanksalottim," referring to Mr. Cook.
An Uber spokesman declined to comment on Apple's investment in
Didi.
Uber has its own allies, from Chinese search giant Baidu Inc. to
Bennett Coleman & Co., publisher of the Times of India
newspaper. Those partners have helped it expand in China and India
-- two markets Mr. Kalanick has called the company's largest
opportunities for growth.
But in some ways, the ride-hailing leader has used its cash to
carve out its competitive position rather than rely on the help of
partners. Last year, as an array of deep-pocketed tech giants from
Apple to Alphabet upped their investments in autonomous vehicle
research, Uber poached 40 of the world's top robotics researchers
and scientists from Carnegie Mellon University and began its own
self-driving car project at a new technology center in
Pittsburgh.
One of Uber's relationships now appears fraught. Google
Ventures, Alphabet's investment arm, sank more than $250 million in
Uber in 2013, its single largest investment at the time. Since
then, Alphabet began to test its own ride-hailing apps, and Uber
began to develop its own mapping and self-driving car technology,
in competition with Google. David Drummond, senior vice president
of corporate development for Alphabet, remains on Uber's board.
--Eva Dou and Rick Carew contributed to this article.
Write to Daisuke Wakabayashi at Daisuke.Wakabayashi@wsj.com and
Douglas MacMillan at douglas.macmillan@wsj.com
(END) Dow Jones Newswires
May 13, 2016 19:17 ET (23:17 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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