Uber Burned $52 Million a Week to Gain Leverage on Didi in China

In the final weeks before Uber left China, Andrew MacDonald was not in the negotiating room. He was running the business while others ran the talks, and the order from behind the scenes was simple: push harder and spend more.

MacDonald, Uber's president and chief operating officer and its longest tenured active employee, had run the China operation. While the deal was being haggled over, his job was to gain ground day by day, because every extra point of share showed up at the table.

That is what the China fight had become: a daily land grab in which market share meant bargaining power. If one side looked like it was pulling ahead during the negotiations, it gained relative strength. Both sides understood that, and both sides were rich enough to pay for it.

The logic came from Travis Kalanick, who led Uber at the time. He used to say, "we need to raise more money than all our competitors in the world combined." Once it was clear riders wanted the service, the contest became a race to claim territory, and money helped win that race.

So Uber raised immense amounts of capital. So did Didi, the Chinese ride hailing rival. With firms like SoftBank also pouring money into the market, MacDonald said, out raising everyone was "never going to happen past a certain point."

In the last few weeks of talks, Uber was losing about $52 million a week in China on discounts for riders and drivers. The spending fed a heated, behind the scenes battle to reach the surrender, or truce, with the best economics.

Uber was doing it with one hand tied behind its back. At one point it could not operate on WeChat, the Chinese app that combines messaging, payments, and everyday services. MacDonald compared the loss to trying to compete in America without email or a phone number.

In the end, MacDonald said, winning was never plausible, for geopolitical reasons alone. He did not think an American tech company would become China's largest mobility service. The only realistic outcome was handing the business to a Chinese operator, and he called the Didi deal a pretty good one, even if, as MacDonald put it, "you're never pleased to take the silver medal."

What stung was not losing the market. That growth had been heavily subsidized anyway. It was the Uber China team, people who had bet their careers on Uber when friends and family told them not to. Uber tried to find roles for as many of them as wanted one in the global company, and some are still there today. Kalanick, MacDonald said, stayed loyal to people who were fully committed to the firm, and the China team had been fully committed.