Billion-dollar Didi deal seen as sign Apple's automotive interests go beyond just Maps
As rumors of an "Apple Car" continue to grow, the company's $1 billion investment in Chinese ride hailing company Didi Chuxing has further driven speculation that Apple's interest in the automotive market goes far beyond improving its Maps service.
The Didi investment could actually prove to be a key element in Apple's wider automotive strategy, according to Jack Kent, mobile director at IHS Technology. He believes Didi's taxi service could provide a number of strategic opportunities for Apple to expand its focus into more lucrative services.
In a surprise announcement, Apple revealed on Thursday that it used $1 billion from its massive cash hoard to invest in Didi Chuxing. It's the single-largest investment that Didi has received to date.
Apple has been coy about its intentions with Didi, as Chief Executive Tim Cook simply said his company hopes to gain insight on the Chinese market through Didi's expertise. But with Apple widely believed to be working on its own automotive initiative, dubbed "Project Titan," the alignment with Didi has inspired some, including IHS's Kent, to see potential well beyond just a regional investment opportunity.
For example, unlike many traditional mobile applications, taxi apps are able to quickly establish a billing relationship with their audience, since they require immediate payment. The apps can then use this billing information as a platform to deliver a range of other services, such as deliveries and wider mobile commerce services.
These apps can also capture other valuable information about users in the process of ferrying them about.
In a research note published Friday, Kent said that the Didi deal represents a strategic shift in Apple's approach to companies in which it has an interest.
Traditionally, Apple usually acquires such companies outright and integrates them into its existing product strategy, or into new products. For example, Apple acquired Beats for $3 billion prior to launching its Apple Music streaming service. That stands in contrast to competitors such as Google, who have actively invested in other ventures rather than acquiring them outright.
Apple's decision in this case to invest on such an enormous scale highlights the strategic importance of the Chinese market to Apple. Not only is the market of over 1 billion people enormous, but it has recently proven problematic for Apple as the Chinese government abruptly shuttered two of its services last month --?iTunes Movies and iBooks. Kent believes the spat with the Chinese government shows that Apple has a distinct need for local knowledge and local partnerships, such as the one with Didi, to further its position in China.
Apple's investment also comes against the backdrop of Apple's recent quarterly results that showed its iPhone business to be slowing. Sales were down 26 percent in China last quarter, though Cook has said he remains optimistic on the market.
The Didi investment could actually prove to be a key element in Apple's wider automotive strategy, according to Jack Kent, mobile director at IHS Technology. He believes Didi's taxi service could provide a number of strategic opportunities for Apple to expand its focus into more lucrative services.
In a surprise announcement, Apple revealed on Thursday that it used $1 billion from its massive cash hoard to invest in Didi Chuxing. It's the single-largest investment that Didi has received to date.
Apple has been coy about its intentions with Didi, as Chief Executive Tim Cook simply said his company hopes to gain insight on the Chinese market through Didi's expertise. But with Apple widely believed to be working on its own automotive initiative, dubbed "Project Titan," the alignment with Didi has inspired some, including IHS's Kent, to see potential well beyond just a regional investment opportunity.
For example, unlike many traditional mobile applications, taxi apps are able to quickly establish a billing relationship with their audience, since they require immediate payment. The apps can then use this billing information as a platform to deliver a range of other services, such as deliveries and wider mobile commerce services.
These apps can also capture other valuable information about users in the process of ferrying them about.
In a research note published Friday, Kent said that the Didi deal represents a strategic shift in Apple's approach to companies in which it has an interest.
Traditionally, Apple usually acquires such companies outright and integrates them into its existing product strategy, or into new products. For example, Apple acquired Beats for $3 billion prior to launching its Apple Music streaming service. That stands in contrast to competitors such as Google, who have actively invested in other ventures rather than acquiring them outright.
Apple's decision in this case to invest on such an enormous scale highlights the strategic importance of the Chinese market to Apple. Not only is the market of over 1 billion people enormous, but it has recently proven problematic for Apple as the Chinese government abruptly shuttered two of its services last month --?iTunes Movies and iBooks. Kent believes the spat with the Chinese government shows that Apple has a distinct need for local knowledge and local partnerships, such as the one with Didi, to further its position in China.
Apple's investment also comes against the backdrop of Apple's recent quarterly results that showed its iPhone business to be slowing. Sales were down 26 percent in China last quarter, though Cook has said he remains optimistic on the market.
Comments
If Apple's vision for cars in the future is to solve this, which I believe it is, then I applaud them for being bold and not being selfish, or clinging to the traditional role that the car has had for so long. Instead they seem to approach the mindset that the car should not have to be owned, but rather hopped on, hopped off when needed, like in Didi/ Uber.
Only a very non selfish organisation could embark on such a project.
Think Lyft meets Tinder.
But in China this is going to happen faster, by environmental and economic necessity.
I am convinced that Apple knows this and is focusing on that future market, not the one that exists now. Skate to where the puck will be. For Apple, that means transportation as a service, requested by an iPhone, and delivered with high, consistent quality, safety, and respect for local laws and regulations. In other words, a non-shady version of Uber.
If, as rumored, Apple is going to build a car for individuals, as is rumored, then they're most certainly not trying to solve this. They may be trying to solve building a better car that's better for the environment, but that's not the same thing.
If they're going to build a modern taxicab, then maybe they'll help a little (but not much). Maybe I lack vision, but I can't see how they'll ever make back a $billion investment. I know China has a huge population, but even at 70 Yuan per ride (which most Chinese couldn't afford) and assuming that the driver gets half, Didi gets a quarter and Apple getting a quarter, we're talking about 400 million rides to break even if Apple had no other expenses. I also don't see how getting billing information from riders who don't pay cash gets Apple anything that they wouldn't have gotten anyway by consumers ordering via iTunes, etc.
China has been building mass transit systems everywhere and it's really remarkable how fast they've gotten built. But they're still doomed unless they get the masses back onto bicycles.
As an aside, in the U.S., not only do I see Americans unwilling to give up driving, I have severe doubts about the willingness of Americans (especially macho men) to give up control of driving to automated self-driving cars. About the only place in the U.S. where the masses use mass transit is in New York City, which has seen subway usage climb back to 1940s levels. Obviously there are systems in Boston, Chicago, San Francisco, Washington and Los Angeles and smaller systems in a few other places, but they have much lower ridership.
According to the NY MTA:
And that doesn't include buses, cabs or commuter trains.
Date-A-Car?
Apple is sitting on an enormous pile of cash. There is no reason why they shouldn't try to make a better return on that cash rather than letting just sit there in a pile.
It was trying to make a right turn from Dana onto Castro northbound against a red light.
Completely stopped halfway through the turn, even though nobody was crossing the intersection.
Stayed stuck until long after the light had turned green, partially blocking me and other traffic on Dana.
P.S. Yeah, that was me in the black Daring Fireball t-shirt.
This sounds like a horrible idea.
Expect to see them in the U.S. and other countries soon.
With Apple future technology, they will rule
Go Didi, go, go, go!
He arrived at his new flat for the first time and couldn't find a parking space. So, he drove around for a bit…
Half an hour later, he got back to his new flat. He had to park his car so far away that he had to take the underground back to his place.
About a year later, I think, he sold his car and signed on with a car share scheme. He never looked back.
No insurance.
No road tax.
No depreciation
No servicing bills.
The car is always pristine when he takes charge of it, and he's never had one break down.
Now, I'm not sure if Apple's investment is really an investment, or just the cost of doing business in China, but I think it's clear they're working on some sort of car, and I think it will be a service rather than selling to end customers.
Dealerships won't allow the AppleCar on their forecourts, which means they'll have to open their own dealerships.
Apple is also aware of how people spend money: The more expensive the item then the longer people will go before replacing it. Apple would not see upgrades for ten to fifteen years.
Didn't someone say that if it appreciates in value then buy it; if it depreciates then rent it?