Companies set up $1.5 billion China ride-hailing venture

by SpeedLux
china map

Alibaba, Tencent, Suning, and automakers such as Chongqing Changan Automobile have set up a $1.5 billion Chinese ride-hailing venture, a move that could test the significance of ride-sharing giant Didi Chuxing.

Chongqing Changan stated on Friday that it spent 1.6 billion yuan ($238.36 million) in the Nanjing-based investment company together with partners such as the investment units of Alibaba, Tencent and retailer Suning.Com Co, and automakers FAW and Dongfeng Motor.

China is home to the largest ride-hailing market, estimated by consulting firm Bain & Co to be worth $23 billion. Didi Chuxing takes 90 percent of all bookings.

However, a large number of automakers, from BMW, Geely to SAIC as well as other tech companies such as Meituan Dianping have also released their own mobility services in a bid to grab a share of the fast growing market.

Didi, which has the backing of Japan’s SoftBank Group and Uber Technologies, also has joint ventures with BAIC Motor and Volkswagen.

Wijaya Ng, who tracks China’s automotive industry at Ipsos Business Consulting, stated the new venture dovetails with a larger, worldwide trend wherein traditional automakers are moving into the ride-hailing sector.

“They see that moving forward, if car-hailing is going to be the future, they want to tap into this market sooner rather than later,” stated Ng.

Changan stated that itself, Dongfeng and FAW are going to have a 15 percent stake in the joint venture, that will set up a ride-sharing company with a focus on new energy vehicles.

Suning will be the biggest shareholder with a 19 percent stake whereas Alibaba and Tencent’s investment units will together hold the remaining shares with some other funds, it said.

The new ride-hailing company and its investors, that come from a range of fields, will help establish “business synergies which will help enrich the companies’ ecosystems”, Suning stated.

FAW and Dongfeng verified the venture whereas Alibaba and Tencent refused to comment beyond the Changan statement. Didi refused to discuss.

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