As Uber finally tests its self-driving car, Apple’s $1 billion Didi investment looms large

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Uber finally released photos of its self-driving prototype on Thursday, a week after Apple announced a $1 billion investment in Uber’s Chinese rival Didi Chuxing (Didi Kuaidi, or simply Didi). With news that Didi’s partner and investee Lyft will have its GM-powered autonomous prototype on the roads by the end of 2016, Apple is now squarely in the middle of a global war that includes two separate ridesharing companies, software giants and car manufacturers.

A report a week before the announcement claimed Apple was looking into buying 800,000 sq. ft. of testing space for autonomous vehicles. At the same time, Alphabet was looking for a 400,000 sq. ft. facility of its own.

“We are making the investment for a number of strategic reasons, including a chance to learn more about certain segments of the China market,” Apple CEO Tim Cook told Reuters on Friday. “Of course, we believe it will deliver a strong return for our invested capital over time as well.”

It’s certainly an opportunity to grab additional data about demand and to integrate more of Apple’s services, perhaps Apple Pay, into other businesses’ apps in the future.

Uber vs. Lyft. Apple vs. Google?

Didi is also an investor in Lyft’s ridesharing business. As Uber does not permit its investors to invest in competitors as well, it places Apple on one side of a cross-industrial battle for the world’s next big consumer product.

Tim Cook in Beijing earlier this week ahead of the announcement of a $1 billion investment in Didi (image, Apple)
Tim Cook in Beijing earlier this week ahead of the announcement of a $1 billion investment in Didi. Photo credit: Courtesy of Apple

Google, Baidu, Microsoft, and Amazon’s Jeff Bezos are all investors in Uber. Microsoft has partnerships with Volvo and Toyota; Baidu has a partnership with BMW; BMW, Daimler and Audi are part of a consortium that bought out HERE’s mapping technology. Audi works with Delphi and, being a brand of VW’s, is connected to VW companies Porsche, which works with BOSCH.

On the other side, Lyft has investors like General Motors, Autotech Ventures, Alibaba, Tencent and Rakuten. GM has purchased startup Cruise Automation. Lyft, Didi, Ola and Grab compose an international alliance of rideshare startups. Now Apple is a direct investor in this web, squarely on one side of a global battle over the future of transportation.

The Lyft mustache gets shaved in Austin (CC BY 2.0 Raido via Flickr)
The Lyft mustache gets shaved in Austin. (CC BY 2.0 Raido via Flickr)

Apple might be entering at just the right time, as fissures seem to be emerging between Uber and Google as the latter’s Waze rolls out its RideWith service. The move toward self-driving cars isn’t merely to save money on paying drivers. It also represents a massive pivot for companies like Uber and Lyft, and now presumably Didi.

Uber and Lyft pivot from ridesharing, Apple and Google diversify from phones and ads

Uber and Lyft are the poster children for the 2015-2016 tech bubble. They are huge, (probably over-)valued startups with no profitability to show for billions of dollars worth of venture capital investments that could be fueling the growth of more profit-promising startups. They are feeling the pressure to develop a clear strategy beyond a saturated, extremely competitive ridesharing industry. That is leading them to pivot toward the car of the future and presumably an extended line of services.

Photo Credit: PR/ Uber
Uber and its rivals face a number of challenges turning a profit in the ridesharing space (Photo Credit: PR/ Uber)

Didi knows this, too. Although Uber is unlikely to challenge their 400-town strong service across China, there is only so much that the rideshare business has been able to show for its efforts.

As Apple's iPhone sales dip and other electronics like the Apple Watch fizzle quickly, the company is looking to expand its offerings with self-driving car services probably near the top of the list (Photo Credit: Apple)
As Apple’s iPhone sales dip and other electronics like the Apple Watch fizzle quickly, the company is looking to expand its offerings with self-driving car services probably near the top of the list. Photo Credit: Apple

Apple not being profitable for a single quarter hardly indicates the iPhone is dying, but just like Google is pivoting from advertising revenue, the company is preparing to expand its own product and service offerings by jumping into the software end (and perhaps the hardware end) of autonomous vehicles. More tech giants are getting involved, so expect an investors’ arms race worth tens of billions of dollars to continue and massive cross-industry partnerships to develop.

Featured image credit: Uber

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