Apple Inc.’s $1 billion investment in Chinese ride-sharing company Didi Chuxing Technology Co. reflects an intensifying battle over the future of driving and highlights emerging alliances among auto makers, technology firms and ride-sharing companies.
The competition to build and provide autonomous vehicles promises to pit the world’s two most valuable companies, Apple and Google parent Alphabet Inc., among others, against one another and against the world’s most valuable private venture-capital-backed company, Didi rival Uber Technologies Inc.
All hope to capitalize on a historic shift from internal-combustion engines to electric vehicles controlled by software and chips, essentially computers on wheels. At the same time, ride-sharing services are redefining traditional views of transportation, calling into question the future of car ownership and public transport.
Apple’s investment aligns it with Chinese Internet giants Alibaba Group Holding Ltd.and Tencent Holdings Ltd., both of which are investors in Didi, and Lyft Inc., Uber’s biggest U.S. rival, which last year took an investment from Didi.
But the battle is about more than ride-sharing. Lyft’s investors include General Motors Co., which is helping to advance self-driving technology. Lyft last week disclosed it and GM would test a fleet of self-driving electric taxis next year.
Most major auto makers, including GM andToyota Motor Corp., are investing in their own driverless-car technology. Alphabet and Fiat Chrysler Automobiles NV plan to use Alphabet’s self-driving technology in a trial with 100 Chrysler minivans. Tesla Motors Inc.already sells autonomous-driving features that allow drivers to go hands- and feet-free in stop-and-go traffic as well as highway cruising.
For Apple, the deal erased any doubt about the scale of its interest in cars. The iPhone maker has been working on electric- and autonomous-vehicle technology for two years, recruiting from across the company and bringing automotive experts to a project with more than 1,000 employees, according to people familiar with the company’s plans.
And the investment bolsters Apple’s position in China, its second-biggest market, where sales are now falling after a rapid ascent, and where it faces new pressures. Apple’s online book and movies services were suspended by Chinese regulators in the country last month.
“The shift in Apple’s strategy to invest at such a scale highlights the strategic importance of the Chinese market to Apple both in terms of the scale of the opportunity and the need for local knowledge and local partnerships,” said Jack Kent, mobile director for research firm IHS Technology.
Didi, which is valued at $25 billion, is an unusual investment by Apple, which has preferred to buy small startups and absorb their technology into its products. This is the largest investment for Apple since it acquired headphone maker and streaming-music service Beats Electronics for $3 billion in 2014, a deal that helped launch its Apple Music service. It is also unusual for Apple to participate in a fundraising round for a startup.
But that could be changing. Apple Chief Executive Tim Cook recently highlighted the strength of the company’s finances, noting that it has the “mother of all balance sheets,” including $233 billion in cash. In a January interview with The Wall Street Journal, Mr. Cook said cash is “worth more” during periods of economic turmoil like that faced by many startups as valuations dip and funding slows.
Apple hasn’t publicly confirmed its interest in automobiles, but Mr. Cook has said that the automobile industry is on the brink of a “massive change” with software and self-driving technology playing a bigger role in future cars.
Didi provides Apple with a rich data source for its self-driving vehicle push. It also could provide benefits to Apple’s mobile ecosystem. Ride-sharing apps are closely linked to payment services, such as Apple Pay. They also can be the foundation for other mobile commerce transactions such as deliveries.
The investment also underscores how quickly and dramatically the ride-sharing landscape has changed. Apple’s investment strengthens an Uber rival in the one market where Uber is already the underdog. UberChina, a Chinese subsidiary, is vying with Didi to attract riders and investors. Didi and UberChina have competed to raise billions of dollars from investors, using the cash on incentives to win drivers and riders to their services.
Uber is locked in a battle with regulators across the globe and struggling to quell unrest in the ranks of its drivers in some of the more than 400 cities where it operates.
Now, it faces a rival with potential access to Apple’s technology and marketing that could go far to reach millions of new users and develop the next generation of products in transportation.
Travis Kalanick, Uber’s co-founder and CEO, marked Apple’s investment with a jab. In a tweet from his account, Mr. Kalanick wrote that his girlfriend’s stock in Apple makes her an indirect investor in his competitor. It bore the hashtags “#ridesharewars” and “#thanksalottim,” referring to Mr. Cook.
An Uber spokesman declined to comment on Apple’s investment in Didi.
Uber has its own allies, from Chinese search giant Baidu Inc. to Bennett Coleman & Co.,publisher of the Times of India newspaper. Those partners have helped it expand in China and India—two markets Mr. Kalanick has called the company’s largest opportunities for growth.
But in some ways, the ride-hailing leader has used its cash to carve out its competitive position rather than rely on the help of partners. Last year, as an array of deep-pocketed tech giants from Apple to Alphabet upped their investments in autonomous vehicle research, Uber poached 40 of the world’s top robotics researchers and scientists from Carnegie Mellon University and began its own self-driving car project at a new technology center in Pittsburgh.
One of Uber’s relationships now appears fraught. Google Ventures, Alphabet’s investment arm, sank more than $250 million in Uber in 2013, its single largest investment at the time. Since then, Alphabet began to test its own ride-hailing apps, and Uber began to develop its own mapping and self-driving car technology, in competition with Google. David Drummond, senior vice president of corporate development for Alphabet, remains on Uber’s board.
