Apple Manufacturer Foxconn Is Now Betting on Ride-Hailing Company Didi Chuxing

By Markets Fool.com


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Last week.Reuters reported that Apple's (NASDAQ: AAPL) key device manufacturer, Foxconn, has invested about $120 million in the China-based ride-hailing start-up Didi Chuxing.

By itself, the news isn't all that surprising. Tech companies like Foxconn invest in other start-ups all the time, so why should this one be any different? Well, because Didi is the third most valuable tech start-up right now and is one of the most powerful ride-hailing companies in the world. In short, Didi is transforming the automotive landscape, and large tech companies want in on the action.

For those who haven't been following along at home, Didi offers a myriad oftransportation services across China, including taxi-hailing services, rental cars, social sharing rides, bus passes, and, of course, its ride-hailing services that are similar to what Uber does here in the U.S.

The company offers its services in more than 400 cities in China and completes about 11 million rides every single day.

As if all that weren't enough, the company just bought Uber's business in China last month. That included Uber's brand in China and all of the data it owned on its Chinese customers. Uber didn't walk away empty-handed, though. The company now has a 17.7% stake in Uber and the CEOs of each company are now on the other's board.

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The Foxconn investment, through its Foxteq Holdings subsidiary, adds yet another high-profile tech company as a Didi Chuxing investor. The list now includes Uber, Chinese tech juggernauts Alibaba and Tencent, and Apple. You may remember that the iPhone maker threw $1 billion into Didi's pot just four months ago.

All of those investments, as well as the Uber deal, have helped push Didi's valuation up to $33.7 billion.For comparison's sake, Uber is valued at $68 billion.

Foxconn's investment isn't all that much compared to what Apple and others have invested, but it brings Didi's total of investments over the past year to more than $7 billion, most of which has come over the past few months.

Clearly, one of the most important things Didi has done with that money is to eliminate one of its major competitors, Uber, in the Chinese market. Uber was probably just as excited to strike a deal as Didi was, considering the U.S. based ride-hailing company had reportedly blown through $2 billion in two years trying to outpace Didi.

But Didi will also use the influx of cash from Foxconn and its other investors to focus on China's growing rental car market as well. Earlier this month, the company announced that it will lease vehicles and then rent them out to its customers as it tries to snatch up market share in the burgeoning $7.6 billion Chinese rental car market.

The Foxconn investment is yet another signpost pointing to Didi Chuxing's success in China's automotive market. Didi is proving to be one of the most influential transportation start-ups in the world, and with a fresh influx of cash, the Uber deal working its way through legal approval, and a new step in rental car direction, this company is clearly just getting started.

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Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.