Apple, Chinese rideshare deal heats up race for tech-smart cars
May 14, 2016
Apple, Chinese rideshare deal heats up race for tech-smart cars
SAN FRANCISCO - Apple Inc's (AAPL.O) $1 billion investment in Chinese ride sharing company Didi Chuxing intensifies
a race to acquire technology, talent and market access in a rapidly evolving global personal transportation market.
Apple's investment comes as auto and technology industry executives and investors are placing bets that self-
driving car systems, electric vehicles and ride sharing will eventually converge to allow companies to sell rides
in self-driving vehicles, generating revenue day and night.
For Apple, Chief Executive Tim Cook said to Reuters that investing in the leading Chinese ride sharing service
could expand its presence in that "very, very important" market, and serve other ends as well.
"We are making the investment for a number of strategic reasons, including a chance to learn more about certain
segments of the China market, and we also see lots of opportunities for closer cooperation between the two
companies. Of course, we believe it will deliver a strong return for our invested capital over time as well," Cook
said in an interview Thursday.
Analysts said Apple's investment also could bolster relations with the Chinese government, and put a roadblock in
the way of rivals Alphabet Inc (GOOGL.O) and Uber Technologies, among others looking to profit from re-making the
personal transportation market.
"(Apple is) going to learn a ton about what driving a car is like in China," said analyst Jan Dawson of Jackdaw
Apple's ride-sharing investment highlights a surge in automotive technology deals, which have increased by 58
percent in 2015, with a 154 percent jump in funding, according to CBInsights, a venture capital database. In 51
deals, investors put $409M into auto tech companies in 2015.
"It's a reflection of fact there are very few industries in the world ... that are going to go through as much
disruptive transformation as transportation," said Michael Linse of Linse Capital – which last week invested
another $50 million in electric vehicle charging company Chargepoint.
DIPPING INTO THE MONEY CHEST
The ride-sharing investment barely dents Apple's war chest, which stood at $232.9 billion in cash and cash
equivalents as of its most recent earnings. The investment is something of a departure for the iPhone maker, which
has made few large deals in its history, with the exception of its roughly $3 billion acquisition of headphone
maker Beats in 2014.
Pressure is mounting for Apple to untap new sources of growth as sales of the iPhone, which accounts for about
two-thirds of its revenue, declined for the first time last quarter. Investments and acquisitions could be a short
cut for Apple to return to the kind of growth that Wall Street has come to expect, said analyst Bob O'Donnell of
"It's clearly time for Apple to dip into their money chest," he said. "Just moving forward with what they've got is
not going to really cut it."
Estimates of the size of the market for transportation services vary, but industry executives agree it is big.
Ford Motor Co (F.N) Chief Executive Mark Fields tells investors the market for transportation services could grow
to $5.4 trillion a year – which is why Ford earlier this year set up a new business unit, Ford Smart Mobility LLC,
to develop ventures and alliances in the sector.
Yoav Leitersdorf, managing partner of California and Israel-based YL Ventures, said self-driving car technology is
"the Holy Grail" of investors right now.
"Anything leading to that is very hot right now," said Leitersdorf, who invests in Israeli technology firms, most
recently cybersecurity company Karamba Security.
General Motors Co (GM.N) on Friday said it had closed its acquisition of San Francisco autonomous driving startup
Cruise Automation. That deal is one of a series of moves by global automakers to expand beyond traditional
manufacturing. Automakers are under pressure from investors to demonstrate they can fend off disruption of their
traditional profit engines.
GM earlier this year invested $500 million to buy a stake in Lyft, which also has an alliance with Didi. GM
executives have outlined plans to use Cruise technology to deliver autonomous, electric vehicles that Lyft could
use in its fleets. A GM spokesman on Friday said the automaker has ridesharing pilot projects in China, but not in
connection with Didi.
The investment offers tremendous new resources for the collaborative work Didi does with Lyft, said Lyft
spokeswoman Sheila Bryson, adding that the executive teams and technical teams of both companies work closely
“It’s really exciting for Lyft, too,” said Bryson.
Apple's alignment with Didi may deliver a blow to Uber, which is fiercely competing for market share in China, one
of its most critical and intense markets. The company is losing more than $1 billion a year there, Uber CEO Travis
Kalanick told Reuters earlier this year.
German automakers BMW AG (BMWG.DE) and Daimler AG (DAIGn.DE) have invested in car-sharing services, and also with
Volkswagen AG (VOWG_p.DE) have acquired stakes in HERE, a European digital mapping company. The German automakers
have said HERE will be integral to their efforts to develop self-driving cars.
Fiat Chrysler Automobiles NV (FCHA.MI) (FCAU.N) earlier this month struck a deal with Alphabet Inc's Google
autonomous car operation to supply 100 Pacifica minivans that Google will outfit with its self-driving vehicle
technology. Both companies have portrayed this as a limited agreement – Google will not share its technology with
Fiat Chrysler. The deal is the first direct collaboration on autonomous vehicle production between an automaker and
Google. - Reuters
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