It’s unlikely that many Apple shareholders will have heard of Didi Chuxing, a Chinese ridesharing service, like Uber, that Apple has just invested $1bn in. With its well-known but still hidden automotive project, the investment seems complimentary – but a little strange.
The Chinese market is seeing a rapid rise in disposable incomes, stemming from the rise of a new middle class. That market segment is one of the quickest adopters of new consumer technologies, and of course, ridesharing services. Reports show that the Chinese roads are not coping with the rise of car ownership, with rampant congestion.
There’s now a battle for those Chinese roads, between Didi Chuxing and Uber. Didi is claiming to be winning that race, saying its drivers complete 11m trips daily, compared to Uber’s 1m.
Apple has looked somewhat confused in its IoT-related portfolio. While smartphones act as portals to interact with other IoT ecosystems, Apple hasn’t done much in the way of expanding its horizons. Its TV project has bubbled under the surface for years, and has come to the fore in a simple net top box – that may or may not act as a way for users to eventually control a smart home.
But that smart home deployment has looked garbled, at best. The HomeKit software framework is positioned as a way to let iOS interact with HomeKit-approved hardware, allowing iOS to control the user experience, likely with an iPhone as the persistent control mechanism and the Apple TV sitting inside the home to ensure that there’s always an Apple device ready to issue orders.
While it looked like the HomeKit platform was due to be launched last year, it never materialized. An Apple expansion that did appear was CarPlay, which essentially acts as a bridge between the iPhone and the car itself – allowing the driver to use the smartphone as the in-vehicle infotainment (IVI) system for the car.
What CarPlay allows an automotive OEM to do is package a fairly advanced IVI system in their cars, with very little expenditure on their part. With Android Auto, the Google-Android ecosystem is offering a very similar package, and while there might be competition between the two, they are compelling propositions to OEMs.
However, the OEMs themselves are trying to take control of the space, and with it, the control of the valuable marketing data that can be harvested from those vehicular occupants. As an industry, they are aware of the threat that Apple and Google represent, by taking control of that data. Whether Apple or Google would sell them to the outside world, instead of using that data internally to improve their own products, remains to be seen.
Google would love to augment its mapping and associated advertising platforms with the data it pulls from Android Auto, but with that volume of data, there are number of buyers that would pay hand-over-fist for it. The automotive OEMs themselves would like to see that data too, as it would provide valuable telemetry that might help them improve margins or reduce their warranty costs.
Apple would gain more insight into how its customers actually use their devices while on the go, as the cars would provide opportunities for those customers to use their iPhones inside the cars – instead of stowing them away or keeping them in pockets, while dealing with an often less-than-savory IVI system. That usage data would certainly come in handy if Apple had decided to build a car – oh wait.
The other major expected Apple product is a car of some sort. Apple’s Project Titan is regarded as the worst kept secret in Silicon Valley, although the specifics of the car itself haven’t been confirmed. Conflicting rumors suggest a focus on a purely autonomous vehicle, while other point simply to an electric drivetrain – something that seems to be generally agreed upon.
Which is why this investment seems a little strange. Apple already has a very sizeable interest in developing its own vehicles, with the logical extension being a service-oriented offering, leveraging its iOS ecosystem and even its mapping platform, to act as the basis of a ridesharing platform.
But if Apple wants to stake $1bn on gaining the experience needed to launch such a ridesharing platform, there are probably cheaper ways of gaining such expertise – poaching staff from Lyft, Uber, or the Germans being the simplest strategy. Apple’s poaching of Tesla staff has drawn a public quip from its CEO Elon Musk, the man who branded Project Titan as the Valley’s worst-kept secret.
Instead, this looks a little like an expansionist move into China itself – a market in which Apple has seen strong initial success, but needs to brace itself against the rise of the inevitable domestic competition. Apple enjoyed record sales when it entered the Chinese market, but its most recent quarter saw a 26% drop in sales – following a year in which Apple sold some $59bn worth of products into the market.
More cynically, the investment, which may in and of itself return a nice chunk of cash to Apple, may be a way towards improving relations with the Chinese regulators themselves. Some have speculated that the move would help Apple move closer to the kind of relationship that domestic technology giants Alibaba and Tencent enjoy with the Chinese government. Both companies are already investors in Didi.