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Massive Losses Blamed for Uber's China Exit

| Aug 27, 2016 09:04 PM EDT

Uber has finally decided to call it quits for its China operations after a two-year struggle.

After finally raising the white flag and announcing its exit from China, new reports detail how much ride-sharing service provider Uber has lost in its effort to penetrate the market.

In a report delivered to investors on Friday, Uber's head of finance Gautam Gupta said that the company has already incurred a loss of $520 million in the first quarter of 2016 alone. The second quarter proved worse, with a $750 million loss, Bloomberg reported.

Much of the loss was attributed to the subsidies the company provides its drivers around the world. Competition with other rideshare providers have caused Uber to enter into price wars with them, offering cheaper fares. However, in order to keep drivers from leaving, Uber had to subsidize the income they lost due to lower rates.

Gupta said that the biggest of such price wars was in China, where the company struggled through a losing battle with local rival Didi Chuxing for dominance of the lucrative market. In July, Uber finally hung up the towel and made a deal with Didi in which the latter will purchase the entirety of the former's China operations while giving Uber and its investors, including Chinese internet giant Baidu, a 17 percent stake in its operations.

Uber reportedly lost more than $2 billion in its two-year foray into the Chinese market.

The company is also reportedly pulling out of Macau, just 10 months after it began offering its services id city. According to the company's Asia Regional Manager Mike Brown, the planned exit was due to the $1.25 million loss because of fines incurred by its drivers, Fortune reported.

Back in the United States, Uber is also in a tight price war with San Francisco-based Lyft, Inc. this year, which has also incurred significant losses despite Uber still maintaining its majority share of the market.

"You won't find too many technology companies that could lose this much money this quickly," New York University business professor Aswath Damodaran remarked. However, Damodaran noted that the company still has a lot of capital to fall back to.

Uber currently has almost $8 billion in assets and is also expected to receive $1 billion in cash from Didi as part of the deal.

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