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Alibaba, Tencent, car manufacturers set up a $1.5 billion China ride-hailing venture

BEIJING (Reuters) – Alibaba, Tencent, Suning, and car makers including Chongqing Changan Automobile up to $1.5 billion Chinese ride-hailing venture, a move that could test the dominance of the ride-sharing giant Didi Chuxing.

FILE PHOTO: A man stands near the logo of the Alibaba Group at the company’s newly launched office in Kuala Lumpur, Malaysia 18 June 2018. REUTERS/Lai Seng Sin/File Photo

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

China is home to the world’s largest ride-hailing market, estimated by the consulting firm Bain & Co to a value of $23 billion. That Didi Chuxing takes 90 per cent of all bookings.

However, a part of the car manufacturers, the BMW, Geely to SAIC as well as other tech companies such as Meituan Dianping have also started their own mobility services in an attempt to grab a share of the fast-growing market.

Didi, which is backed by japan’s SoftBank Group Corp. and Uber Technologies, also has joint ventures with BAIC and Volkswagen.

Wijaya Ng, which tracks China automotive industry at Ipsos Business Consulting, said the new company coincides with a larger global trend in which the traditional car manufacturers are entering the ride-hailing sector.

“They see that ahead, as a car comes going to be the future, they want to be on this market sooner rather than later,” said Ng.

Changan said that himself, Dongfeng and FAW will each have a 15 percent stake in the joint venture, which will set up a ride-sharing company with a focus on new energy vehicles.

Suning will become the largest shareholder, with 19 percent of the shares, while Alibaba and Tencent investment units will be in the possession of the rest to share with a number of other funds, it added.

The new ride-hailing company and its investors, who come from a range of fields, will assist in the formation of “business synergies that will help to enrich the code of ecosystems”, Suning said in a statement.

FAW and Dongfeng, confirmed that the company, while Alibaba and Tencent declined to comment outside the Changan declaration. Didi declined to comment.

Shares of Changan and Dongfeng Automobile Co Ltd jumped the daily maximum allowed 10 percent after the news. FAW Car Co Ltd shares climbed 6.6 percent.

The growing popularity of ride-hailing services for commuting and running errands in busy cities such as Beijing and Shanghai is showing the first signs of reduction of private car ownership.

However, the industry and Didi came under stricter government supervision and regulation of last year after A passenger was raped and murdered by her chauffeur.

Reporting Yilei Sun, and Josh Horwitz, Additional Reporting by Julie Zhu in Hong Kong and Shanghai newsroom; Writing by Brenda Goh; Editing by Shreejay Sinha and Muralikumar Anantharaman

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