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Leverage at the table
The talks with Didi ran alongside a daily fight for market share. Whichever side was gaining ground while the deal was being negotiated held the stronger hand at the table, so the message from behind the scenes was to keep pushing on investment. Other people ran the negotiation while the operating team ran the business and spent the money.
The war chests
Both sides had enormous war chests. Travis, who ran Uber then, used to repeat that Uber needed to raise more money than all its competitors in the world combined, because product-market fit in ridesharing was already proven and the market was a land grab. Didi had raised immense amounts too, and SoftBank was investing in the market as well, so past a certain point Uber could not outraise everyone.
The WeChat handicap
Uber was also competing with one hand tied behind its back. Because of how each company's investors were arranged, Uber could not operate on WeChat, which made running a business there like competing in the US without email or a phone number. Local partners helped Uber keep going until the truce came in 2016, when Uber exited China.
Why do ride-hailing companies subsidize rides so heavily?
Ride-hailing is a two-sided marketplace. Riders want short waits, and drivers want back-to-back fares. More drivers in an area shorten waits, shorter waits attract more riders, and more riders keep drivers busy. Because that loop plays out city by city, economists call it a local network effect.
How did Uber's China exit actually work?
In August 2016, Uber China merged into Didi Chuxing instead of being sold for cash. Uber's shareholders received roughly a fifth of the economic interest in the combined business. Didi also invested $1 billion in Uber. Both companies had been losing large sums competing for drivers and riders in Chinese cities.
Why does WeChat matter so much for a business there?
WeChat, launched by Tencent in 2011, grew from a messaging app into a super-app that bundles chat, payments, and small in-app services. Many Chinese consumers use it to pay, order, and book without installing separate apps. Tencent has reported well over a billion monthly active accounts. Its payments arm, WeChat Pay, launched in 2013.
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