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CEO Tim Cook says investment will give iPhone maker greater understanding of Chinese market.
Apple has invested US$1 billion (€880.97 million) in Chinese car-hailing service Didi Chuxing, it emerged this week.
CEO Tim Cook told Reuters on Thursday that the investment was made for strategic reasons, "including a chance to learn more about certain segments of the China market," adding that he also expects "a strong return" on the invested capital over time.
Didi Chuxing claims to have an 87% share of China’s ride-hailing market, delivering more than 11 million journeys per day. It was formed from the merger last year between Tencent-backed Didi Dache and Alibaba’s Kuaidi Dache.
As well as a social car-sharing service akin to Uber, the company provides traditional taxi hailing and private car booking. It also offers a designated driving service, which dispatches a driver to a customer’s vehicle who then drives it to the requested location.
"Apple might just learn some interesting things and make some important friends," said Radio Free Mobile founder Richard Windsor, in a research note on Friday, adding that its $1 billion investment represents 0.6% of Apple’s cash balance and two days of cash flow from operations.
"Consequently, if it all goes wrong, it will be virtually unnoticed," he said.
Apple’s investment in Didi Chuxing comes amid slowing device sales and pressure in China, where fiscal second quarter revenue fell 26% year-on-year to $12.49 billion. Apple faces a maturing high-end smartphone market and stiff competition from local players such as Xiaomi, Vivo and Oppo, among others.
While hardware volumes come under pressure, Apple continues to grow its services business. Global revenue from the likes of iTunes, the App Store, Apple Pay in the most recent quarter grew to $5.99 billion from $5 billion.
