The spirit of Saint Valentine’s Day is in full effect in China’s taxi app space today after the country’s two biggest players — Kuaidi Dache and Didi Dache — confirmed that they will merge.
Media reports of a possible alliance surfaced late this week. Xinhua — China’s state-run news service — reported that the companies will retain their respective branding and businesses after the merger. Neither side has disclosed the price of the deal, but analysts estimate the value of the combined entity at around $6 billion. That’s because both services are believed to account for more than 95 percent of the taxi-hailing app market in China, which is estimated at 150 million monthly users.
Yet, despite their dominance, the two are coming together to end a war of attrition which has seen each side make financial concessions and cut their fees to lure taxi drivers to their platform. In short, fighting each other was bad for business — pulling in the same direction makes more sense. The alliance may also help weather future government regulation which, for now, has not cut into either business.
The duo aren’t short of backers. Kuaidi Dache and Didi Dache are backed by two of China’s most prominent internet companies, fierce rivals Alibaba and Tencent respectively, and both have raised significant amounts of capital. Didi Dache closed a $700 million funding round in December of last year, while Kuaidi Dache pulled in $600 million this January.
This coming together is a setback for Uber’s efforts to break into the Chinese market. The U.S. company raised strategic funding from Baidu — which included an integration with Baidu Maps and other services — but Kuaidi Dache and Didi Dache are largely established among drivers and consumers already. Furthermore, as TechCrunch’s Catherine Shu pointed out yesterday, the merger gives the Dache services an advantage in cities that have begun to restrict taxi drivers from using multiple apps.
The deal was announced on Weibo, but the companies’ investors are also adding their voices.
“As a shareholder in Kuaidi Dache, Alibaba Group is supportive of this merger as it will promote the healthy development of the taxi-app and expand city travel options for users,” Alibaba added in a statement.
Kuaidi Dache and Didi Dache said that they will reveal more information at a press conference that will be held after the Lunar New Year.