A woman uses the Uber app on a Samsung smartphone in Berlin, Germany, on Sept. 2, 2014. (Photo : Getty Images)
The chief executive of ride-sharing app Uber revealed that the company is burning more than $1 billion each year in China, where it faces fierce competition with local rival Didi Kuaidi in luring consumers.
Uber boosted its valuation in China in January to more than $8 billion after raising more than $1 billion in its latest funding round, but the San Francisco-based firm has yet to become profitable in mainland China, Reuters reported on Thursday.
"We're profitable in the USA, but we're losing over $1 billion a year in China," Uber CEO Travis Kalanick told Canadian tech website Betakit. "We have a fierce competitor that's unprofitable in every city they exist in, but they're buying up market share. I wish the world wasn't that way."
Uber officials confirmed Kalanick's comments in an email to Reuters on Thursday.
Didi Kuaidi, backed by Chinese Web giants Tencent and Alibaba, has an almost 80 percent share of the market, according to Analysys International, while Uber grew its market share to 11 percent within nine months through huge subsidies to drivers--a decision that many industry analysts claim as unsustainable.
Uber China said in a statement that Didi Kuaidi spent "many multiples" more than the U.S. company to bolster its share in the market, adding that Uber's China is supported by profitable operations outside the region.
When asked for a comment, spokesman for Didi Kuaidi told Reuters that Uber's claims regarding its spending were untrue and that it is relying on its bigger size.
"Smaller competitors have to bleed subsidies to make up for their insufficient driver and rider network," the spokesman said, adding that Didi Kuaidi now offers services in 400 cities and has managed to break even in half of those cities.
Earlier in January, Kalanick said that investing in such strategies is "how you win" in China, pointing out that Uber plans to beat is local competitors by deploying its investments more efficiently.
Uber currently operates in more than 40 cities and plans to expand it to 100 by the end of the year.
"I prefer building rather than fundraising," Kalanick added in the interview with Betakit. "But if I don't participate in the fundraising bonanza, I'll get squeezed out by others buying market share."
