Apple Inc. hasn’t had the smoothest ride in China in recent months, with its Apple Entertainment content platform taken offline by regulators only months after becoming available on the mainland, local competition bumping the Apple’s iPhone from the top of the smartphone tree and a Beijing court ruling against the tech giant in a trademark infringement case.
In response to these hiccups, Tim Cook decided this month would be a good time for a seemingly hastily cobbled together visit to China for government meetings. And then today, the company announces a $1 billion dollar investment in Didi Chuxing, the Chinese ride sharing app in fierce competition with Uber in China.
This kind of large investment is not the kind of thing Apple does every day, so its timing after months of setbacks in China and right before its Chief Executive sits down with Communist Party officials seems unlikely to be a coincidence.
China’s government has a history of taking care of its own in the face of international competition, so it certainly won’t hurt to be seen to be publicly (and expensively) backing a homegrown Chinese company that is battling head to head with an international rival for market share.
The timing of this investment is awkward for a number of reasons. Though Didi Chuxing dominates the ride sharing market in China, with their own data suggesting they have cornered 87 percent of the Chinese market and undertake 11 million rides a day, their reputation has also taken something of a beating recently.
Last week the story of a Didi Chuxing driver murdering a 24-year-old schoolteacher in Shenzhen broke, and has been a hot topic on Chinese social media ever since, with some Weibo users calling for a boycott of Didi’s services until they can more strictly screen drivers.
Last month, Shenzhen authorities ordered Didi Chuxing to improve their screening processes when it was revealed that more than 3,000 drivers in the city had “significant” drug problems or criminal records. Also last month, a Didi driver in Guangzhou was found guilty of raping a passenger, while in March a similar rape and robbery case was heard in the city of Wuhan, with the driver eventually sentenced to eight years in prison.
The almost constant flow of accusations against Didi drivers in recent months has caused a serious PR problem for the company. Having not had the rosiest run of public opinion in China recently, it seems an odd time for Apple to get into bed with Didi, especially since their own public image among Chinese consumers hasn't completely recovered from allegations from 2013 that the company treated and charged Chinese people differently than its customers elsewhere.
Having said this, there are some obvious long-term advantage of this Didi Chuxing investment for Apple – the opportunity to collect valuable data, the potential to put Apple Pay, which is a relatively new entrant into China’s already competitive mobile payment market, and maybe even the opportunity to work together to test out the driverless cars Apple is rumoured to be working on.
As Cook himself said when announcing the deal: "We are making the investment for a number of strategic reasons, including a chance to learn more about certain segments of the China market. Of course, we believe it will deliver a strong return for our invested capital over time as well."
