After a billion-dollar war over the Chinese taxi market, Uber is selling its operation in China to its chief rival, the Chinese ride-hailing app Didi Chuxing, in exchange for a 20 percent stake, Bloomberg reports. Didi CEO Cheng Wei and Uber CEO Travis Kalanick will also be joining each other’s boards.
“This agreement with Uber will set the mobile transportation industry on a healthier, more sustainable path of growth at a higher level,” Cheng said in a statement. Over the past few years, Uber has been spending more than $1 billion a year in the country trying to take control of the market. Early this year, Didi fortified its own position by accepting a $1 billion investment from Apple.
The deal, which is still pending based on government approval, has been gaining steam over the last few months. Some of Uber’s most prominent investors were pressuring the company to stop burning through so much money in China. Now Uber gets a cut of the market with significantly less expenditure.
As the New York Times points out, Uber’s push into China has been closely watched by the rest of the tech industry. It could arguably have been framed as a trial run for how other tech businesses might break into a populous market that often blocks foreign companies. Instead, Uber — infamous for using its vast cash reserves to spend its way through regulatory red tape — is another cautionary tale.
In an impending blog post announcing the deal, Uber CEO Travis Kalanick says, “As an entrepreneur, I’ve learned that being successful is about listening to your head as well as following your heart. Uber and Didi Chuxing are investing billions of dollars in China and both have yet to turn a profit there.”