Cracking the Chinese market for any U.S. company is not easy and while Apple has seen huge success there in recent years, for other companies it is a much bigger struggle. One of those companies is Uber, with its CEO revealing that the ride-hailing company is burning through $1 billion in the country each year.
“We’re profitable in the USA, but we’re losing over $1 billion a year in China,” Uber’s CEO Travis Kalanick told Canadian technology platform Betakit. “We have a fierce competitor that’s unprofitable in every city they exist in, but they’re buying up market share. I wish the world wasn’t that way.” Uber officials in China confirmed the comments in an email to Reuters Thursday.
In China, Didi Kuaidi is the dominant ride-hailing app with almost 80 percent of the market, according to Analysys International, and while Uber quickly grew its market share to 11 percent in the space of nine months, it has done so by paying huge subsidies to drivers — which many analysts believe is unsustainable.
Kalanick has been very open about the practice of paying drivers subsidies in China in a bid to win market share, saying this is “how you win” in the country. Didi Kuaidi also subsidizes drivers, though it is unclear how much this is costing the Chinese company.
Didi Kuaidi was created a year ago by the merger of Uber’s two biggest Chinese rivals (Didi Dache and Kuaidi Dache) and is backed by Tencent, SoftBank and Alibaba. Uber is expanding fast in China, currently operating in 40 cities with plans to more than double its footprint to 100 cities by the end of the year.