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Uber Using Profits From “Elsewhere” To Fund More Than $1 Billion Losses In China

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Last month, Uber CEO Travis Kalanick revealed a crucial milestone achieved by the company — the ever elusive profitability even though it was only for the US region. However, he also admitted Uber’s China woes where the company continued to make losses and huge losses in fact- losing over $1 billion in the most populous country. And now he has revealed how the company is dealing with these losses, in addition to using investor money of course.

Uber claims to be making over $1 billion in profits in its top 30 cities all over the world and is using part of these profits to fund their losses in China.

If you took our top 30 cities today, today they’re generating over $1B in profit a year, just our top 30 cities. And that profit multiplies every year because we’re growing,”

said Kalanick on the sidelines of the Boao Forum in the Chinese island province of Hainan.(via Reuters)

He also added that even other cities, where Uber operates, were also profitable which helped them sustain their operations in China.

Kalanick also said that the key for Uber in China was to move fast. “If we launch in the U.S. and then it gets copied in China, we’ll be behind. So we’re starting to orient some of our innovation at China first,” said Kalanick indicating at the company’s fierce competition with the Chinese taxi company Didi Kuaidi.

Both companies, backed by Tencent and Alibaba, are spending heavily in China to offer discounts to customers and subsidies to drivers in order to capture the maximum market share.

Uber has seen its market share in China grow from 1 percent to 2 percent in January 2015 to about 30 percent at present. It has raised a massive amount of funds to expand its presence in China.

The valuation of its China business has reached over $8 billion in January after its latest funding round.  The company is now reportedly planning to double the number of Chinese cities in which it operates to nearly 100 by the end of this year.

On the other hand, Didi Kuaidi has also raised more than $4 billion in funds till now (in comparison Uber has raised over $10 billion in total).

In addition to China, it has also been rapidly expanding in other cities of the world and forming strategic alliances through investments and partnerships with Uber competitors(Lyft in the US, GrabTaxi in southeast Asia and Ola in India).

Kalanick had made a jibe on this expansion in his interview last month referring to “a fierce competitor that’s unprofitable in every city they exist in, but they’re buying up market share”.

Didi Kuaidi, however, had termed the claim as “outright untrue” and claimed that  their business had reached break-even in more than half of the 400 Chinese cities in which they operated.

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