Uber‘s China aspirations may hit a huge roadblock. Kuaidi Dache and Didi Dache, the country’s two biggest taxi-calling apps, are reportedly considering a merger. The Wall Street Journal reports that discussions are “advanced,” but still need the approval of each company’s main investors.
One of Kuaidi Dache’s lead investors is e-commerce leader Alibaba, while Didi Dache is backed by Tencent, another one of China’s largest Internet firms and the owner of WeChat messaging app. Alibaba declined to comment on the WSJ’s report. TechCrunch has also contacted Tencent and will update this post if we get a response.
Kuaidi Dache and Didi Dache are believed to account for a whopping 95 percent of China’s taxi app market. If the deal goes through, the combination of Kuaidi Dache and Didi Dache would leave very little room for other players. Kuaidi Dache said in January that it has 200 million users in 300 cities and holds 54.4 percent of the mobile taxi booking market in China.
Didi Dache, meanwhile, claims over 100 million registered users and is also available in 300 cities. One of the reasons for Didi Dache’s success is because users of WeChat, which is China’s top mobile messenger with 468 million monthly active users, have been able to call a taxi directly through the app since January 2014.
A marriage of Kuaidi Dache and Didi Dache would be unwelcome news for Uber and Baidu (an Alibaba/Tencent rival). The two signed a strategic agreement in December that includes the integration of Uber into Baidu Maps and prominent display of Uber-related links in results from Baidu’s search engine, which is the largest in China.
Despite its partnership with Baidu, however, Uber is still at a disadvantage simply because the vast majority of people who use taxi apps in China are already accustomed to Kuaidi Dache and Didi Dache.
Furthermore, a Kuaidi Dache and Didi Dache deal would also give the combined company a legal advantage, particularly in cities like Shanghai and Beijing that have restricted taxi drivers from using multiple apps.
If drivers no longer have to pick between Kuaidi Dache and Didi Dache, they may also chose to forgo Uber altogether. Piling together the financial resources of Kuaidi Dache and Didi Dache would also make it easier to get around new regulations that require taxi apps to only use cars owned by taxi or car-hire companies, which is more expensive and complicated than simply serving as a platform to connect drivers and passengers.
Reports that China’s two biggest taxi apps are considering a merger may be a foreshadowing of future industry consolidation, particularly in the Asia-Pacific. For example, SoftBank has invested in taxi app companies throughout the region, including Kuaidi Dache, India’s Ola, and Southeast Asia’s GrabTaxi. A SoftBank representative told TechCrunch last month that there are no immediate plans to link-up Ola and GrabTaxi, but that it nonetheless “expects to see some business synergies in the near future.”Featured Image: TonyV3112/Shutterstock