(Beijing) – China's largest ride-hailing company Didi Chuxing confirmed plans to merge with its major rival Uber China on August 1, ending years of intense competition between the two for a stake in the country's growing Internet-based car-hiring industry.
The merger of Didi and Uber Technologies Inc.'s Chinese arm would create a new juggernaut in the domestic market valued at US$ 35 billion with Didi Chuxing's US$ 28 billion and Uber China's US$ 7 billion, multiple sources told Caixin.
In addition to the merger, Didi will invest US$ 1 billion in the San Francisco-based ride-sharing company valued at US$ 68 billion as part of the deal, a source said.
Didi said in a statement that Uber had agreed to take a 5.9 percent stake in the new entity. Didi's founder, Cheng Wei, and Uber's CEO, Travis Kalanick, will join the director boards of the two companies, according to the statement.
Uber started to make inroads into the growing ride-sharing market in China in 2013, but has faced fierce competition from homegrown Didi.
In the first three months of this year, Didi received more than 85 percent of all online orders for car-hire services in China, followed by Uber and two other domestic players, Yidao Yongche and Shenzhou Zhuanche, according to Internet information provider CNIT Research.
Uber had run into trouble several times with Didi's major stakeholder, Tencent Holdings Ltd., in the past, after WeChat, a messaging app owned by Tencent,blocked Uber's marketing accountsrepeatedly, citing violations of account registration rules.
Both Uber China and Didi have also gone head to head when heavily subsidizing drivers and doling out discounts to riders. Didi raked in US$ 7.3 billion in its latest round of fundraising from some of the world's largest technology companies such as Apple Inc. and Alibaba Group Holding Ltd. Uber also amassed US$ 6 billion – including US$ 3.5 billion from the investment arm of the government of Saudi Arabia – in an ongoing financing round.
"For Uber, there are only two markets – the Chinese market and the market outside China," a former senior executive of Uber China said. The company is already operating in over 60 cities in the country and plans to roll out its services in another 30 cities in the next few months.
The merged entity becomes the only company where Baidu, Alibaba and Tencent, the three Internet giants in China, have a shared interest. Alibaba and Tencent have pitched in during several rounds of Didi's fundraising, while Baidu has stakes in Uber China.
The deal came after the Chinese governmentlegalized the industryin late July, lifting a cloud of regulatory uncertainty hanging over car-hire businesses.