China’s Didi partners with SoftBank to launch taxi-hailing services in Japan

Uber’s tangled relationship with investors Didi and SoftBank is about to get more complicated after the duo inked an agreement to introduce taxi-hailing services that will compete directly with Uber in Japan.

Didi dominates the Chinese market — thanks in no small amount to its acquisition of second-placed Uber China — but this year it has expanded to Brazil via an acquisition and Taiwan via a franchise model, and also moved into bike-sharing and vehicle rentals. Didi has raised nearly $20 billion including a $4 billion round for global expansion which closed in December.

Right now, Didi and SoftBank say they are exploring opportunities. The two companies expect to launch a joint venture in Japan soon with plans to start pilot programs in Osaka, Kyoto, Fukuoka, Tokyo and other locations this year.

“Didi and SoftBank will diligently study local market conditions and policies, and will actively engage with industry practitioners, policymakers and other stakeholders, with the aim of building an open and inclusive platform that will be available to all of Japan’s taxi operators,” the Chinese firm said in an announcement.

The focus is on taxi drivers and taxi operator firms because peer-to-peer ride services are not legal in Japan. Indeed, Uber works with licensed chauffeurs and licensed taxi drivers in Japan, but the U.S. firm hasn’t cracked the market like it has in other countries.

Line, the messaging app company, has been the most successful new entrant with its Uber-like ride-hailing service, but Japanese taxi companies have adapted to the competition by bringing on-demand features their services, as the Financial Times recently reported.

Indeed, the competition is heating up. Toyota said today it will invest 7.5 billion JPY — $68 million — in taxi firm Nihon Kotsu’s tech division to develop an on-demand service for passengers and drivers.

The link between Uber and Didi brings another wrinkle to the complicated relationship between ride-sharing firms and their investors. SoftBank recently became Uber’s largest shareholder after it completed a drawn-out $7.7 billion investment in Uber, which included a $1.1 billion direct investment, and yet it has also backed Didi via its Delta Fund, a $5 billion sister vehicle to its massive $100 billion Vision Fund.

Then there’s Didi, which is also an Uber shareholder after picking up equity following its acquisition of Uber’s China business.

Complications and conflicts are nothing new. SoftBank has backed Uber rivals Ola and Grab, and it even considered a stake in Lyft. Now, however, those relationships are moving into new levels of complication when SoftBank and Didi directly create a new competitor in a market where Uber is present.