By Gillian Wong And Douglas MacMillan
Uber Technologies Inc. has a new ally in China, a market where
the dominant car-hailing service finds itself in the unfamiliar
role of underdog.
Chinese Internet-search giant Baidu Inc. has agreed to make a
strategic investment in the San Francisco company, people familiar
with the matter said on Friday. Baidu said it plans to disclose an
investment in a U.S. startup on Wednesday, but didn't provide
further details. The size of the investment couldn't be immediately
learned.
The alliance with one of China's top Internet firms could help
the American ride-sharing company play catch up to a pair of
well-heeled local startups that have emerged as leaders in a field
of Chinese cab-booking apps.
Didi Dache, backed by Tencent Holding Ltd. and Kuadi Dache, a
company funded by Alibaba Group Holding Ltd., have raised hundreds
of millions of dollars and expanded rapidly throughout the country
by offering discounts to riders and incentives to new drivers.
Uber, which now operates in 250 cities around the world, has far
outpaced its closest U.S. rival, Lyft, which has raised one-eighth
as much funding and has few users and drivers in most cities where
it operates. Lyft, which took an investment from Alibaba earlier
this year, plans to expand outside of the U.S. next year.
Car-booking apps are just one element of China's quickly
evolving Internet-services economy, which is drawing competitors
seeking to win over the country's 500 million smartphone-wielding
consumers and the revenue they control.
Uber entered China last year and now is available in eight of
the country's largest cities. In addition to competitive pressures,
the company has had to navigate a complex regulatory environment
and technical problems specific to the Chinese market, including
unrivaled traffic congestion and the sheer geographic size of major
cities such as Beijing.
Baidu also could help Uber ward off possible resistance from the
Chinese government, which has historically imposed strict
regulations on U.S. businesses, said Jamian Ronca Spadavecchia,
president of Washington, D.C.-based global risk advisory Oxbow
Advisory.
Teaming up with a Chinese domestic company could lessen the risk
of central government interference," Mr. Spadavecchia said.
Baidu has offered to funnel some of the millions of users of its
online services to Uber's app, one of the people familiar with the
deal said. Baidu operates the country's most popular search engine
and mapping application.
Uber has joined with rental companies to offer its
premium-priced black-car service in China. A separate service
launched this year, called People's Uber, lets non-professional
drivers offer "nonprofit" rides to passengers who pay only to cover
costs like gas and maintenance.
The number of trips booked through Uber's service in the first
six months in Shanghai exceeded the number of trips made in San
Francisco, New York and Paris each during their first six months,
Allen Penn, Uber's head of Asia, said an interview earlier this
year.
Still, Uber is a late arrival to a Chinese market that has
exploded over the past two years.
"To do this two years later than everyone else I think is
tough," said Hans Tung, managing partner at GGV Capital, a venture
capital investor in Didi.
Didi Dache, founded in 2012, says it offers services in more
than 300 Chinese cities and has more than 100 million registered
users and 1 million registered taxi drivers. Didi's daily
taxi-booking orders, which have risen to as much as 5.2 million in
a single day, are now 10 times that of Uber, the taxi-finding app
maker said in an interview with the New York Times this week. The
company said on Tuesday it raised more than $700 million in its
latest funding round led by Singapore state investment firm Temasek
Holdings Pte. Ltd.
When Uber reported last week that it raised $1.2 billion, it
said in a filing that it could seek up to another $600 million from
other investors to support its global expansion. The company has
added foreign investors including Qatar's sovereign-wealth fund in
an effort to build powerful allies in places where it may encounter
government resistance.
Uber's rapid expansion has created new challenges from
regulators in cities around the world. Allegations that a driver on
the service raped a woman in India last weekend triggered a
nationwide ban on smartphone-enabled taxi services in India that
resulted in the Uber temporarily halting operations in the country,
its largest market outside the U.S.
On Friday, however, a French court declined to ban Uber from
operating its service that uses drivers without professional
licenses, winning the company time in a key market amid its
regulatory battles world-wide.
It was a spot of welcome news for the California company, after
facing bans across the globe. In Europe alone, officials in Spain,
the Netherlands, and Brussels have all moved to at least temporary
block some Uber services.
District attorneys in San Francisco and Los Angeles sued Uber
for allegedly misleading consumers and said they are seeking an
injunction until it complies with California law.
Also this week, Thailand barred all app-based taxi service
operators who use personal vehicles; a Spanish judge ordered a
temporary halt to the company's operations in that country; and the
city of Portland, Ore., issued a cease-and-desist order and filed a
lawsuit against Uber.
Sam Schechner contributed to this article.
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