HONG KONG/TOKYO China’s largest ride-hailing company Didi Chuxing has raised $500 million for its autonomous driving subsidiary in a funding round led by SoftBank.
The investment, the largest single funding round in China’s autonomous driving sector, marks Didi’s growing ambition in developing its own self-driving fleets as competition heats up and more companies begin launching robotaxi services to the public.
Didi said on Friday that the new funds will be used for research on autonomous driving technology and fleet testing, as well as industry cooperation with an aim to achieving mass production.
The Chinese ride-hailing giant entered the autonomous driving fray as early as 2016, and it spun off its self-driving department as an independent company last August. Didi said at the time that it would launch a robotaxi fleet of about 30 cars in Shanghai, without specifying a time frame. Currently Didi has obtained open-road testing licenses in Beijing, Shanghai and Suzhou in China, and is also testing in California.
SoftBank said the investment was made directly from the company, with a plan to transfer the stake to Vision Fund 2 when it is eventually set up. SoftBank had announced a second, larger Vision Fund last year but later postponed fundraising efforts in the face of a lackluster performance by the first Vision Fund. That fund swung to a negative 1% return as of March after valuations of portfolio companies were hit by the coronavirus outbreak.
In a recent earnings conference, SoftBank Chairman and CEO Masayoshi Son indicated that some of his investments in China, including Didi, are seeing a recovery in demand. “For Uber, sales are tough in the U.S.,” he said. “On the other hand, I was recently in a video meeting with Didi, and they said ride sharing is sharply rebounding inside China.”
Didi’s U.S. counterparts Uber and Lyft started testing self-driving vehicles years ago. The rationale is that the companies can save a significant amount of money if they don’t have to pay drivers, as labor costs constitute the largest portion of their expenses.
But Feng Linyan, an analyst at Beijing-based research company EqualOcean, believes that the commercialization of driverless taxis is unlikely in the next decade and that ride-hailing companies like Didi are not in the best position to pursue the future technology.
“Talents and technology are the two most important elements for autonomous driving development,” she said, adding that she does not believes Didi has an advantage in either area. “To me, it’s more like Didi telling a good story to attract investments.”
Nevertheless, it is difficult for Didi to sit on the sidelines as China’s autonomous driving industry has boomed over the past few years. Frontrunners continue to draw capital despite the overall slowdown in investment activities. Early this year, Pony.ai, a Guangzhou- and Silicon Valley-based startup, raised $400 million from Japanese carmaker Toyota, pushing its valuation to $3 billion.
Companies are also racing to put their fleets in motion. Internet search engine Baidu, known for its self-driving vehicle platform Apollo, rolled out a fleet of 45 robotaxis in the central Chinese city of Changsha last September and then expanded the service to Beijing and Cangzhou in Hebei Province. Smaller rivals WeRide and AutoX also recently started offering robotaxi services to the public in designated areas.