Rival taxi-hailing companies plan to merge in an ultimate deal that will bring together China's largest Internet companies, Alibaba Group and Tencent Holdings.
According to a spokesperson from Alibaba, the company is "supportive of this merger as it will promote the healthy development of the taxi app and expand city travel options for users."
Both companies are popular in making mobile apps that make taxi booking and ride-sharing from a mobile phone possible.
The merger was earlier reported by the Wall Street Journal, which mentioned that both Alibaba and Tencent could hold equal shares or stakes in the resulting entity. Further, the merger will also see two chief executives taking the decision-making posts.
It was projected that the combined company would have a value of over $6 billion based on the recent fundraising valuations. Last month, Kuaidi Dache was able to raise $600 million, while Didi Dache had more than $700 million in the latest fundraising round in December.
Both Alibaba and Tencent have seen the potential of taxi-hailing apps and encouraged more passengers and drivers to use their services. Although the companies have not figured out how to make constant revenues in the future, they are offering discounts and rewards to produce loyal customers. Also, they hope to utilize China's 500 million smartphone users to use their mobile payment services.
However, the increasing popularity of taxi-hailing apps has caught the attention of the government, which is making moves to regulate this kind of business.
Just last month, China's transport ministry forbade private-car owners to use their cars for profit in the ride-hailing apps. Didi and Kuaidi said that they are not affected by the government's scrutiny because they connect passengers to rental agencies and not privately owned cars.
