Uber is losing $1 billion every year to compete in China

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By Larry Banks

Uber is apparently burning over a billion dollars each year in China as it tries to compete with local rival Didi Kuaidi, said its Chief Executive.

The firm’s Chinese business helped boost its valuation last month to over $8 billion, after it managed to raise $1 billion in its latest round of funding. But the US-based ride hailing app still isn’t profitable in China due to the fierce competition.

“We’re profitable in the USA, but we’re losing over $1 billion a year in China, said Uber CEO Travis Kalanick.

“We have a fierce competitor that’s unprofitable in every city they exist in, but they’re buying up market share. I wish the world wasn’t that way”.

The figure of $1 billion was also confirmed by Uber in China, according to an email received by Reuters on Thursday.

Uber and China’s Didi Kuaidi have spent heavily to subsidise fares in order to gain market share, betting on China’s Internet-linked transport market becoming the world’s biggest.

In an emailed statement, Uber China said Did Kuaidi was spending many multiples more than the US firm to increase market share, also adding that Uber’s China business was backed up by profitable operations in other parts of the world.

A Didi Kuaidi spokesman, said that Uber’s spending claims were untrue, and that it’s benefitting from its larger size.

“Smaller competitors have to bleed subsidies to make up for their insufficient driver and rider network” , the spokesman said in comments to Reuters, adding that the company operates in 400 cities and had already reached break-even point in half of those cities.

In January this year Kalanick said spending on such pricing strategies is “how you win” in China, adding that the company aimed to beat Didi Kuaidi through spending more efficiently. Uber operates in more than 40 Chinese cities and plans to be in 100 by the end of the 2016.

SOURCE: Reuters.

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