Uber to invest over $1B in China, expand to 50 more cities
In a letter to investors, CEO Travis Kalanick calls the ride-hailing service's growth in the country "remarkable and unprecedented."
Former CNET contributor Don Reisinger is a technology columnist who has covered everything from HDTVs to computers to Flowbee Haircut Systems. Besides his work with CNET, Don's work has been featured in a variety of other publications including PC World and a host of Ziff-Davis publications.
As ride-hailing service Uber looks to the future, one thing is clear: it's all about China.
In a letter to investors obtained by The Financial Times on Thursday, Uber CEO Travis Kalanick said his company will invest over $1 billion in 2015 to expand its operations in China. He added that Uber plans to add 50 more China cities to its lineup within the next year in response to a rapidly growing user base in the country.
"Since our launch in February 2014, we have found a public that is embracing Uber far beyond our most bullish expectations," Kalanick wrote to investors. He noted that in its first six months of availability in the Chinese city of Chengdu, Uber usage is 46 times greater than it was during its first six months in New York City.
Uber, which celebrated its fifth birthday earlier this month, currently operates in over 300 cities around the world, including 11 in China. The company allows users to hail a car and pay for it via a mobile app. The company's drivers share in the revenue generated from those sales.
In December, Uber touted its global success, saying that its service was used for 1 million daily rides in 2014. In his letter to investors, Kalanick said that in the last month, Uber hit the same mark in China, alone. He called the growth "remarkable and unprecedented."
Kalanick's comments underscore China's vast importance in the technology world. The country's growing middle class has created a veritable market for companies big and small to capitalize. Apple, for instance, has made significant inroads in China, expanding its retail stores and planning more for the country. In its earnings report in April, Apple revealed that China is now its largest market in the world by revenue, topping the US for the first time.
Uber's China success has given the company a much-needed boost as it continues to deal with concerns over its service in nearly every country it operates. From France to Spain to the US to even China, local authorities have tried to take Uber off the roads. Most of those complaints have resulted from taxi consortiums complaining that Uber's service, which pairs drivers and riders, is illegal. In many cities, including New Delhi, those consortiums were successful in getting Uber's service temporarily banned by claiming drivers did not have proper licenses. In most cases, Uber has been able to get back on the road, sometimes after making concessions.
Conspicuously missing from Kalanick's comments on China, however, were his company's ongoing issues with local authorities and competitors. Just last month, Chinese authorities visited Uber's offices in Guangzhou and Chengdu to investigate whether it was operating an unlicensed (and thus, illegal) taxi operation. Both cities require that drivers have standard taxi licenses in order to operate a car service. The car-hailing service said that it's still operating and continues to cooperate with Chinese officials, but the government has not always been kind to foreign companies that compete with homegrown alternatives.
The Chinese taxi-hailing business is dominated by Didi Dache and Kuadi Dache, which are backed by Chinese e-commerce giants Tencent and Alibaba, respectively. Some estimates have placed their market share at 95 percent. However, Uber has been quick to point out that those companies match riders with taxis. Uber says that in the non-taxi business, where it operates, it has about a 50 percent share of the market. Kalanick did, however, acknowledge that the "largest taxi app in China has three-to-four times more daily users" than Uber.
Despite its issues, Uber has garnered interest from the investor community. Uber is planning to raise between $1.5 billion and $2 billion in a new funding round, according to reports that surfaced last month. Uber would be valued at around $50 billion, making it one of the most valuable private technology companies in the world. It's unknown whether that $1 billion China investment would come in part from the reported fundraising or from the company's current cash on-hand. Uber, which is launching a "fundraising process" solely for its operations in China later this month, may also use the cash it generates from that to finance its growth.
Uber did not immediately respond to a request for comment.