San Francisco: The rivalry between ride-hailing leaders Uber and Didi just intensified—to the tune of $7 billion.

Uber Technologies Inc. raised $3.5 billion from Saudi Arabia’s sovereign wealth fund—the single biggest investment in the San Francisco company to date. Didi, meanwhile, is working to close a funding round of more than $3.5 billion, adding to a war chest made richer just last month thanks to a $1 billion investment from Apple Inc.

The new capital injection gives the two companies extra firepower to duel each other for global dominance. Nowhere is the competition fiercer than in China.

“For both of these guys, it’s still a land grab," said Anand Sanwal, the chief executive officer (CEO) of CB Insights. “It’s really, how do we get customers to adopt this—user acquisition on both the rider and driver side is probably where they’re going to be spending most of their money in China."

While Didi has formed an international coalition with the likes of Lyft Inc. in the US and Ola in India, it’s mostly focused on its home market. Didi is in 400 Chinese cities and says it has signed up 14 million drivers.

Backed by Alibaba and Tencent, the country’s two most valuable technology companies, Didi is targeting an initial public offering in New York next year, according to people familiar with the matter. The timing will depend on how the battle with Uber plays out, the people said.

Both companies are spending aggressively in China to expand, partly by subsidizing the costs of rides. Didi has handed out incentives to attract drivers and free rides to win over commuters, though drivers report that the subsidies have decreased in recent months.

“It gets expensive to recruit drivers because the incentives escalate when multiple players are trying to recruit them," Sanwal said. “It’s likely we’ll see many drivers ride for both, but you want to become the favoured providers, and people do that in different ways. They charge lower fees, some people do it by saying, ‘listen, you’ll get a lot more rides by driving for us, because we have all the passengers."’

Uber spent about $1 billion in China last year and has raised capital there that, as of January, valued the Chinese operations at $7 billion. Yet Uber has a long way to go to catch up with Didi. The US company has set a target of operating in 100 cities this year, a quarter of Didi’s reach, and is losing money in China.

Meanwhile, arch-rival Lyft is gaining on Uber in the US Lyft said in January that it had raised $1 billion, money it’s using on promotions, including $50 vouchers, to steal market share from Uber. While each company offers differing market-share numbers, they agree that Lyft is expanding in major US cities.

Uber chief executive officer (CEO) Travis Kalanick has promised shareholders that Uber will become profitable in North America by the second quarter of this year, a milestone it says it has reached in the US and Canada. The profit push may be constraining his ability to take on Lyft and other rivals.

Still, the $3.5 billion infusion from Saudi Arabia means Kalanick has plenty of cash to stay private longer and to grow without having to manage Wall Street’s expectations. Valued at $62.5 billion, Uber has $11 billion on its balance sheet to fund its global expansion and take on Lyft and Didi. Bloomberg

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