The Financial Express (Delhi Edition)
Apple, Chinese rideshare deal heats up race for tech-smart cars
Apple is the latest entrant in race to acquire technology and talent in a rapidly evolving global personal transportation market
APPLE INC’S $1-billion investment in Chinese ride sharing company Didi Chuxing intensifies a race to acquire technology, talent and market access in a rapidly evolving global personal transportation market.
Apple’s investment comes as auto and technology industry executives and investors are placing bets that self-driving car systems, electric vehicles and ride sharing will eventually converge to allow companies to sell rides in selfdriving vehicles, generating revenue day and night.
For Apple, chief executive Tim Cook said to Reuters that investing in the leading Chinese ride sharing service could expand its presence in that “very, very important” market, and serve other ends as well.
“We are making the investment for a number of strategic reasons, including a chance to learn more about certain segments of the China market, and we also see lots of opportunities for closer cooperation between the two companies. Of course, we believe it will deliver a strong return for our invested capital overtime as well,” Cook said in an interview Thursday.
Analysts said Apple’ s investment also could bolster relations with the Chinese government, and put a roadblock in the way of rivals Alphabet Inc and Uber Technologies, among others looking to profit from re-making the personal transportation market.
“(Apple is) going to learn a ton about what driving a car is like in China,” said analyst Jan Dawson of Jackdaw Research.
Apple’ s ride-sharing investment highlights a surge in automotive technology deals, which have increased by 58% in 2015, with a 154% jump in funding, according to CBInsights, a venture capital database. In 51 deals, investors put $409M into auto tech companies in 2015.
“It’s a reflection of fact there are very few industries in the world... that are going to go through as much disruptive transformation as transportation,” said Michael Linse of Linse Capital– which last week invested another $50 million in electric vehicle charging company Chargepoint.
The ride-sharing investment barely dents Apple’s war chest, which stood at $232.9 billion in cash and cash equivalents as of its most recent earnings. The investment is something of a departure for the iPhone maker, which has made few large deals in its history, with the exception of its roughly $3billion acquisition of headphone maker Beats in 2014.
Pressure is mounting for Apple to untap new sources of growth as sales of the iPhone, which accounts for about twothirds of its revenue, declined for the first time last quarter. Investments and acquisitions could be a short cut for Apple to return to the kind of growth that Wall Street has come to expect, said analyst Bob O’Donnell of TECHnalysis Research.
“It’s clearly time for Apple to dip into their money chest,” he said. “Just moving forward with what they’ve got is not going to really cut it.”
Estimates of the size of the market for transportation servicesvary, but industry executives agree it is big.
Ford Motor chief executive Mark Fields tells investors the market for transportation services could grow to $5.4 trillion a year–which is why Ford earlier this year set up a new business unit, Ford Smart Mobility LLC, to develop ventures and alliances in the sector.
Yoav Leitersdorf, managing partner of California and Israel-based YL Ventures, said self-driving car technology is “the Holy Grail” of investors right now.
“Anything leading to that is very hot right now,” said Leitersdorf, who invests in Israeli technology firms, most recently cybersecurity company Karamba Security.
General Motors on Friday said it had closed its acquisition of San Francisco autonomous driving startup Cruise Automation. That deal is one of a series of moves by global automakers to expand beyond traditional manufacturing.Auto makers are under pressure from investors to demonstrate they can fend off disruption of their traditional profit engines.
GM earlier this year invested $500 million to buy a stake in Lyft, which also has an alliance with Didi. GM executives have outlined plans to use Cruise technology to deliver autonomous, electric vehicles that Lyft could use in its fleets. A GM spokesman on Friday said the automaker has ridesharing pilot projects in China, but not in connection with Didi.
The investment offers tremendous new resources for the collaborative work Didi does with Lyft, said Lyft spokeswoman Sheila Bryson, adding that the executive teams and technical teams of both companies work closely together.