In a surprising development, global taxi ride app leader Uber had announced to merge its Chinese businesses with its opponent and local grown rival Didi Chuxing.
The new move will make both firm consolidate their businesses with cross holding of shares rather than making war on each other. As part of the deal Didi will acquire all of Uber China’s operations and investors in Uber China will get a 20 per cent stake in Didi.
Uber exits China with a 5.89 per cent stake in its rival— but would have “economic interests” equivalent to 17.7 per cent in Didi.
Both companies were in intense price and non-price wars during the last few years. incentives to clients and drivers were lavish as both firm used hardly earned funds to make a big battle for the world’s second largest market.
Market analysts read that the deal was a logical one for both parties as their gifts to riders and drivers is dangerous for the existence of the two. An exit from such a price war would improve the financial conditions of the two. Hence, the move was more or less due to pressure from fund providers and shareholders alike to bring a ceasefire. The cross holding of shares indicates both will leave the battle without causing future damage to each other.
Uber’s exit once more underline that Chinese digital market is not for others. Facebook is blocked in China, google is not welcome and Amazon is almost nil.