Uber in China Uses Profits from Other Markets to Offset Losses
It’s no news that Uber isn’t doing well in China. In fact, the transportation company is losing about $1 billion a year in the Chinese market—but it’s not worried. Uber recently reported that it is using its profits from other markets to help its Chinese branch out, specifically the $1 billion profit its generating in its 30 top-grossing cities in the world.
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Uber CEO Travis Kalanick explained how Uber China is able to borrow from other markets: “If you took our top 30 cities today, they’re generating over $1 billion in profit a year, just our top 30 cities. And that profit multiples every year because we’re growing. So that helps us to sustainably invest in our Chinese efforts… Because of the profits we have globally, this is something we can do for the long run.”
The reasoning behind Uber’s lackluster performance in China stems from the Chinese government’s move to ban drivers of private cars from offering taxi services through apps. The government has led two raids on Uber offices in Guangzhou and Chengdu, taking a variety of equipment to show that the company is running an illegal taxi service.
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As Uber continues to flounder in the Chinese market, the homegrown transportation called Didi Kuaidi is taking advantage. In January of 2015, Uber’s market share in China was only 1-2%. Now, Uber claims that it has reached about 30%. While there’s no actual data to support this, it’s entirely possible that Uber is finally catching on in the Chinese market.
News Source: Digital Trends