The two largest taxi-hailing apps in China are in “advanced” talks to merge in a deal that would create a formidable obstacle to Uber Technologies’ ambitions in the country, The Wall Street Journal reports.
Didi Dache and Kuaidi Dache, which are backed by internet giants Tencent Holdings Ltd (TCEHY) and Alibaba Group Holding Ltd (BABA), could announce the deal formally “in the coming days,” the WSJ reported people familiar with the situation as saying.
If it comes to fruition, the deal would be one of the rare occasions when two of China’s largest private companies bury their rivalry and cooperating, implicitly admitting that neither side can conclusively win a battle for market share that has been going on for months. Expensive promotional campaigns and aggressive discounting have sapped the profitability of what ought to be a lucrative business.
The WSJ said that stumbling blocks to the deal included such issues as which payment system the merged company would use. Both Tencent and Alibaba are keen to promote the growth of their own system.
For Uber, which recently attracted investment from Chinese search giant Baidu Inc. (BIDU), the deal could have mixed results. Although its operations would be dwarfed by the Didi-Kauidi combo, the merger might allow prices in the mass segment of the market to rise to a more attractive level. So far, the company has concentrated on offering its premium Uber Black service in a handful of China’s richest cities.