The $5.5bn funding round recently closed by ride hailing service Didi Chuxing made it the second most valuable private company in China, and looks likely to be the one that presages a drive to compete with US-based rival Uber on all fronts.
Didi Chuxing operates an on-demand ride ordering service with the largest market share in China, having seen off its only notable rival, Uber’s Chinese subsidiary, with a $7bn acquisition last year.
The latest funding was supplied by telecommunications and internet group SoftBank as well as financial services firms China Merchants Bank and Bank of Communications, and Silver Lake Kraftwerk, a growth equity branch of private equity group Silver Lake. It valued the company at $50bn.
Didi Chuxing has now raised a total of approximately $13.2bn in equity funding and $2.8bn in debt financing, $7.3bn of which came from a June 2016 round featuring a $1bn investment by computing hardware producer Apple and participation from e-commerce firm Alibaba and its financial services affiliate Ant Financial, internet group Tencent, insurer China Life, Chinese state-owned holding company Poly Group and asset manager BlackRock.
The company’s other investors include contract electronics manufacturer Foxconn, insurance firm Ping An, Temasek, China Investment Corp, Capital International Private Equity Fund, Citic Capital and Coatue Management.
The capital will support what Didi Chuxing described in a statement confirming the round as “active internationalisation plans”. It did not disclose details of what those plans will involve but they may well be linked to the company’s increasing commitment to corporate venturing over the past two years.
As things stand, Didi Chuxing holds stakes in a range of ride hailing companies worldwide, having taken part in US-based Lyft’s series E and F rounds, as well as nine-figure rounds for India-based Ola and Brazil-based 99 (reports had suggested the company was also an investor in Singapore-based Grab, though those were subsequently denied by both companies).
Much as Japan-based SoftBank is currently stamping its presence in the Asian online services market through a string of big-money VC investments, Didi Chuxing may well use its stakes in international counterparts as a way to expand globally and, given its now considerable cash reserves, it may even result in an acquisition or two.
Didi Chuxing used its inside knowledge to outmanoeuvre Uber in China and will likely aim to do the same in other markets using already established local players.
The other place the funding will be directed is intelligent driving and smart transportation technology. Didi Chuxing opened a research and development centre in Silicon Valley called Didi Labs in March that will address artificial intelligence in driving along with deep learning, human-computer interaction, security and imaging, all of which could theoretically be used in future modes of transport.
The drive to enter this new area will also put the company in competition with Uber, which has already ploughed a significant amount into autonomous driving, and which is testing its driverless technology-equipped cars on US roads. Its latest round will give it a big cash base from which to invest, but Didi Chuxing is starting from a fair way back from Uber in this area, and it will be interesting to see how it looks to make up that ground.
– Image courtesy of Didi Chuxing