Chinese Car-Booking Services Kuaidi, Didi Merge Into $6B Company To Fend Off Uber

As Uber, the San Francisco-based ride-booking service, begins expanding in China, the mainland’s two largest providers of apps that link passengers to drivers announced their merger on Saturday, forming a $6 billion company. The new entity brings together two rivals that will retain their separate brand identities and will have the home-field advantage against the foreign rival.

"The new company after the merger will be an important provider in the global mobile transport sector," said a joint statement from Kuaidi Dache, which is controlled by Chinese e-commerce company Alibaba Inc., and Didi Dache, which boasts media and Internet company Tencent Holdings as a major investor.

The two ride-booking services, which until Saturday were locked in close competition, together almost completely control the Chinese ride-booking market, which hit 150 million users last fall, according to Chinese data-tracking firm Analysis International.

Just last year the two companies spent a combined $160 million to attract both drivers and passengers to their respective platforms, with Kuaidi coming out ahead with about a 54 percent market share compared to Didi’s 45 percent. Both companies launched in 2012 with service in more than 300 cities, according to their websites.

Each company has raised about $800 million through several rounds of financing, according to the South China Morning Post of Hong Kong.

China’s efforts to reduce traffic congestion and gasoline demand could help both ride-booking (services that use phone apps to link passengers to taxi or livery service) and car-sharing (services that allow consumers to reserve cars in short-term rental arrangements) by lowering the number of cars on the road.

Last week, Chinese online car service provider Yongche Inc., Pateo Corp., which makes wireless systems for automakers in China, and Chery Automobile Co. agreed to create an electric smart-car ride-sharing service. The newly formed company, called Yiqitaixing, aims to start offering car-sharing before the end of next year.