Uber Lost $1bn In China Due To Fierce Competiton

CEO Travis Kalanick claimed that fierce rivalry in China has led to a loss of $1 billion dollar on yearly basis.

Uber disclosed that it is losing over $1 billion on a yearly basis in China, amidst fierce rivalry from domestic ride-sharing competitor ‘Didi Kuaidi’. CEO Travis Kalanick insisted that the American application based taxi service provider is better positioned than its Chinese rival due to its ability to accommodate losses, at least to some extent, by using the profits it earns from other states.

Mr. Travis spoke to Canadian tech news website ‘Betakit’, “We’re profitable in the USA, but we’re losing over $1bn a year in China. We have a fierce competitor that’s unprofitable in every city they exist in, but they’re buying up market share.”

Didi’s spokersperson claimed that the comments made by Mr. Travis regarding its financial performance were “outright untrue”. A breakeven point was reached by it in over 200 cities of China where its operations reside.

The new battle of words is underscoring the fierce war between the two enterprises in the country, where both of them were heavily spending on promotions and discounts in an effort to pursue market share. Uber technologies has planned to increase the number of Chinese cities in which it runs its operations by 100% later this year.

Comments of Mr. Travis also indicated the funds being spent. In January, the documents leaked to the webpage ‘The Information’ revealed that Uber’s global losses increased to approximately $1 billion in first six months of 2015, nearly 50% greater than its entire annual losses in the year before.

Uber refused to share its views on the figures, but Mr Travis spoke to Betakit that the significant difference between Didi Kuaidi and his business is its capability to offset the losses contributed by China.

Uber dominates majority of the markets of the US, and it has raised sales revenues by adding to its commission and booking fee in a large number of US markets. It has received over $10 billion to date. Russian tycoon ‘Mikhail Friedman’ has recently turned into its investor. Other investors of Uber include Fidelity, Goldman Sachs and TPG.

In 2015, the Beijing-based taxi service received $3 billion in a financing round, which raised its cumulative funds to over $4 billion from investors that include Tencent, Alibaba, sovereign wealth fund of China and CIC.

Didi has actively invested in the Uber’s rivals including Grab and Lyft. Both Didi and its Western rival have heavily spent money to provide subsidies to riders and drivers for speeding up adoption and gain scale, hoping that costs will decrease as the number of passengers and drivers grows.