Didi poses an existential threat to Uber with Mexico expansion

Key Points
  • Didi Chuxing will reportedly make its ride-hailing services available in Mexico next year, a move that threatens Uber's growth in Latin America.
  • The ride-hailing giants have a complicated relationship: Didi is an Uber shareholder; Uber has a one-fifth stake in Didi; and the two will soon share a major investor in Softbank.
Jean Liu, the president of Didi Chuxing
Jason Lee | Reuters

On Thursday, Reuters reported that China's ride-hailing giant Didi Chuxing will launch in Mexico next year. The move would mark Didi's first expansion of its services beyond China. It also underscores Didi's existential threat to Uber, its U.S. counterpart.

The companies will soon share a major investor in Softbank, which has led to speculation they would get out of each other's way in the global market. But history seems likelier to repeat itself, at this point.

Didi has the potential to checkmate Uber in Latin America, if not the Americas entirely.

The two companies have been in a slow-moving war for years. In 2016, Didi muscled Uber out of its home base of China. Uber had rolled out its ridehailing services in 60 different cities there, with 150 million trips driven per month through its platform. But Uber was also racking up losses of more than $1 billion in China annually.

What Uber had going then, was a huge amount of equity funding, and other eager investors waiting in the wings. Then Didi managed to raise $1 billion from Apple for growth. And it became clear that Uber would not be able to out-spend its rivals on their home turf.

The chief executive of Uber Technologies, Dara Khosrowshahi.
Adriano Machado | Reuters

By the summer of 2016, Uber agreed to sell its China-based business to Didi in a merger which gave it a one-fifth stake in Didi and granted ex-Uber CEO Travis Kalanick a non-voting board seat at Didi.

Didi also invested $1 billion of its own money into Uber.

At that time, Didi had expressed interest in expanding its services to Macau, Japan, South Korea and Russia.

Now, it's not entirely a surprise that Didi is moving west.

This past February, Didi set up a division for international expansion. Next, it established a Mountain View, California, outpost where it has begun working on self-driving technology. And most recently, Didi launched an English-language version of its app, which was previously only available in Chinese.

Uber has long been one of venture capital's most lavishly funded companies, with more than $12 billion in equity funding. Now, Didi has surpassed it with $15.1 billion in venture funding.

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Correction: Softbank is in the process of investing in Uber through a tender offer. The deal has not yet closed.