Didi Kuaidi will raise $2B for the fight against Uber

China’s ridesharing app battlefield is fast turning into a cash-burning party. That’s how it looks today following the reports that Didi Kuaidi plans to raise a whopping US$2 billion to help secure its spot at the top of the ridesharing app market. Both Uber and Didi have been planning to raise additional funds in China for some time now, but Didi’s number in particular keeps climbing – first it was rumored to be US$1 billion, then US$1.5 billion, and now here we are at US$2 billion. Uber, meanwhile, reportedly plans to raise up to US$1 billion of its own specifically for the China market.

Although neither company has officially shared numbers, both Didi Kuaidi and Uber are probably losing money in China. Uber is apparently losing money globally, and its high subsidies in China likely make the country an area of significant loss. Similarly, Didi is spending hundreds of millions on promotion alone and giving away free rides – I would be surprised if the company was turning a profit.

In principle, there’s really nothing wrong with that. Operating at a loss during expansion in order to secure a bigger slice of the market is an approach that many highly successful tech startups have adopted over the years. But the sums being spent in China’s ridesharing app market are so massive now that one wonders how long this kind of battle can really be sustainable. Neither company will want to lower its discounts and subsidies and chase profits until it has secured a significant hold on the market and the Chinese government has giving ridesharing apps a regulatory pass. But there’s no way of knowing when, if ever, the latter could happen. If it takes China five years to legalize the Uber model, can either company afford to keep pouring billions into the market that entire time?