No, Didi and Uber aren’t merging (but that rumor might mean something)

Photoshop by TiA. Original image from Wikimedia

UPDATE 8/1: Whoops, I got this one wrong! Looks like Uber and Didi were lying when they denied being in discussions, because today both confirmed that Uber has sold its China business to Didi.

This week has seen the rise of one of the least credible rumors I’ve ever come across in China tech: Didi and Uber China are planning a merger, or at least some kind of cease-fire.

They’re not, of course. After the rumor began swirling earlier this week, both Didi and Uber China have directly denied it. There is no impending merger or cease-fire.

Still, the rumor that gave rise to those denials is worth looking at in a little more detail. On Thursday, Chinese tech news site Sina Tech reported that a major Uber investor is pushing the company towards some kind of deal with Didi, saying that the era of cash-burning in China’s ride-hailing market has to come to a close. Anonymous sources reportedly told the site that investors on both sides were interested in ending the highly expensive competition between the two companies, and one investor reportedly said that Uber investors had met with Didi investors numerous times already and still hope to work something out.

It’s not clear how much of that is true. Possibly none of it. Certainly, a merger or cease-fire between the two companies is not imminent. If investors really are pushing for peace, neither has yet been willing to do it publicly.

I wouldn’t be surprised if some investors really are thinking about ending the cash-burning era.

At the same time, though, it is true that the competition between Didi and Uber in China is costing both companies a ton. Neither company has shared much in the way of financial numbers, but both have repeatedly smashed global fundraising records over the past couple of years, in part to fund the continued subsidies and expansions needed to ensure they’re keeping pace with the competition.

In that sense, both companies would probably appreciate a truce. Exact numbers are hard to come by, but most estimates suggest that both companies control a big enough share of the market that they could potentially prosper if their market shares remained the same – China is, after all, a huge market.

Didi is, by most accounts, well ahead of Uber, so “losing” that market might grind on Uber founder Travis Kalanick’s ego. But it’s certainly possible that some Uber investors are starting to feel as though there’s not much chance of gaining enough ground over the next few years to justify the high levels of spending needed to keep pace in the current cutthroat environment.

In short, Didi and Uber aren’t merging, but I wouldn’t be surprised if some investors on both sides of the aisle really are starting to think about bringing the cash-burning bonanza to a close.