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Uber to Sell China Business to Rival Didi After Losing Billions

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Re: Uber to Sell China Business to Rival Didi After Losing Billions

#41

Post by argonaut »

sk5t wrote: post #38
fuzionmonkey wrote: post #30

Earlier quoted context omitted.

It's not a $7 billion "exit". It's an investment for a 20% stake in Didi for $7 billion, which presumably will increase in value as Didi continues to expand in China, especially with less need for ridiculous spending on driver incentives since they will no longer be competing with Uber. Uber probably had something in the ballpark of 20% market share in China so it sounds like the two decided to simply make peace and…

Suppose you spent $1B on a factory to make blenders + blender marketing + distribution channels, etc. Later, you invest $200MM in another blender concern for a 20% stake. How do you value / account for the first $1B in sunk costs?

You answered your own question? You don't - it's sunk costs.

Re: Uber to Sell China Business to Rival Didi After Losing Billions

#42

Post by argonaut »

erdevs wrote: post #24

Well played by Didi. This was a years-long chess game with enormous stakes and Didi came out winning. Make no mistake, Uber's goal was absolutely to dominate in China, if they could. That was a big part of their pitch to investors over the past two years. This deal is an admission of defeat and a retreat from competition, salvaging what value they could in the process. I would imagine this speaks to mounting pressure…

> are clearly still abysmal in almost all markets.

Obviously we can't take their statements at face value, but Uber seems to be claiming they are profitable in most markets.

Re: Uber to Sell China Business to Rival Didi After Losing Billions

#43

Post by johnloeber »

rahimnathwani wrote: post #36
johnloeber wrote: post #7

Earlier quoted context omitted.

Uber's China business was losing money before (I believe to the tune of about $1bn/year), and it looked like they weren't going to get a permanent hold in that market. Local competition was very strong. Consequently, I would conjecture that China was never a large part of Uber's valuation. Leaving it at slightly more than 10% of their valuation seems reasonably realistic to me. Keep in mind: * The major Chinese citie…

"The major Chinese cities generally have very developed and efficient systems of mass public transit, reducing demand for rideshares (and cars in general)" This depends on your frame of reference. If you're comparing with SF, sure. If you're comparing with London or New York, less so. In London, the underground is faster than private car for many (most?) daytime journeys. In Beijing and Shanghai, a private car is alm…

Regarding the second point: sorry, I wasn't being clear. I think that the pricing probably goes like this:

owning/operating a car > using a rideshare > using a personal scooter > using a personal bicycle.

You have to keep in mind that bicycles, scooters, and other small vehicles unsuitable for ridesharing are very popular in China. Since few people own and operate cars, rideshares don't have a large market to undercut.

Re: Uber to Sell China Business to Rival Didi After Losing Billions

#44

Post by theseadroid »

rahimnathwani wrote: post #36
johnloeber wrote: post #7

Earlier quoted context omitted.

Uber's China business was losing money before (I believe to the tune of about $1bn/year), and it looked like they weren't going to get a permanent hold in that market. Local competition was very strong. Consequently, I would conjecture that China was never a large part of Uber's valuation. Leaving it at slightly more than 10% of their valuation seems reasonably realistic to me. Keep in mind: * The major Chinese citie…

"The major Chinese cities generally have very developed and efficient systems of mass public transit, reducing demand for rideshares (and cars in general)" This depends on your frame of reference. If you're comparing with SF, sure. If you're comparing with London or New York, less so. In London, the underground is faster than private car for many (most?) daytime journeys. In Beijing and Shanghai, a private car is alm…

Lived in Beijing for 2 decades. I think in Beijing and Shanghai, a private car is almost always slower than their subway systems. Beijing subway network has 18 lines, 334 stations and 554 km (344 mi) of track in operation and is the second longest subway system in the world after the Shanghai Metro (588 kilometres). Beijing subway also has extensive expansion plans call for 1,050 km (650 mi) of track by 2020.

https://en.wikipedia.org/wiki/Beijing_Subway

Re: Uber to Sell China Business to Rival Didi After Losing Billions

#45

Post by discodave »

johnloeber wrote: post #7
sudoscript wrote: post #3

I can't tell if this is a good deal for Uber investors or not. As I understand it, Uber will own a 20% share in the combined company. The combined company is valued at $35 billion, so Uber's share of the value will be $7 billion (actually less, since they also need to share it with Baidu which invested directly into Uber China too). $7 billion doesn't sound too bad as an exit. However, if Uber's China business is wor…

Uber's China business was losing money before (I believe to the tune of about $1bn/year), and it looked like they weren't going to get a permanent hold in that market. Local competition was very strong. Consequently, I would conjecture that China was never a large part of Uber's valuation. Leaving it at slightly more than 10% of their valuation seems reasonably realistic to me. Keep in mind: * The major Chinese citie…

> Uber's China business was losing money before (I believe to the tune of about $1bn/year)

> I would conjecture that China was never a large part of Uber's valuation

These two statements are not exactly congruent. Investors in later funding rounds would have expected their investment to be used to grow the valuation. In other words, they were funding the losses in China so they should expect a return.... unless they were just investing in Uber due to FOMO.

Re: Uber to Sell China Business to Rival Didi After Losing Billions

#46

Post by rahulgulati »

sudoscript wrote: post #3

I can't tell if this is a good deal for Uber investors or not. As I understand it, Uber will own a 20% share in the combined company. The combined company is valued at $35 billion, so Uber's share of the value will be $7 billion (actually less, since they also need to share it with Baidu which invested directly into Uber China too). $7 billion doesn't sound too bad as an exit. However, if Uber's China business is wor…

One of the factors for Rest of the world vs China gap could be the ticket size of a cab ride. A 5km Uber ride in India/China/SE-Asia costs $1.5 on an average, while in developed countries its $15 on an average (10X). So, I guess, it's value over volume for Uber and markets that are on fast-track to profitability.

source - http://www.priceoftravel.com/6536/price-of-a-5-kilometer-ube...

Re: Uber to Sell China Business to Rival Didi After Losing Billions

#47

Post by 0x80000000 »

For people living in Beijing, this is really a bad news.

Didi and Uber China have been in fierce competition for quite a long time, both of them gave consumers HUGE discount. For example, Uber is showing me a promotion which I can go as far as 5 KM around at the cost of just 5 RMB (0.75$).

After merging, I'm afraid we won't see such a low price anymore.

Re: Uber to Sell China Business to Rival Didi After Losing Billions

#48

Post by mabcat »

ghshephard wrote: post #37

As long as anywhere in the world, I can get out of the airport, open up my Uber App, and summon an Uber - I'm happy.

Don't fly to Sydney then! I don't know what devil-deal was done, but the app won't allow you to summon an UberX inside the airport boundaries.

Re: Uber to Sell China Business to Rival Didi After Losing Billions

#49

Post by germanier »

mbesto wrote: post #26
msvan wrote: post #22

Is there no antitrust law in China? Surely the optimal solution to two big corporations hemorrhaging money in competition for consumers is not that they stop competing, but rather that they cut costs. Or is such a scenario simply not possible in the dog-eat-dog tech world?

> antitrust law in China Ok, seriously? https://en.wikipedia.org/wiki/List_of_largest_Chinese_compan...

So this list means that there is no antitrust law in the US? Because I count twice as many American as Chinese companies on that.

https://en.wikipedia.org/wiki/List_of_largest_companies_by_r...

Fact is, China has monopoly and merger control laws.

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