Amid the recent insurgence of Uber, partnered with Baidu Inc., China’s two taxi-hailing applications for mobile phones are considering a merger. For Chinese companies, the two players are Kuaidi Dache, backed by Alibaba Group Holding Ltd., and Didi Dache, backed by Tencent Holdings Ltd.
Both of these Internet giants believe that merging would end their ongoing competition for clientele as well as form a true dominant taxi-haling application. This would provide plenty of cost-saving benefits for the two firms, as they have been locked into a heated battle for market share. Sources report that in the event of the merger, so long as neither company puts in any capital, this new alliance would be valued at $6 billion. It would be a rare case where two of the most commanding players in China’s Internet sector, Alibaba and Tencent, join forces.
While this deal may seem like a no-brainer at first glance, it does have some roadblocks to consider. Primarily, the two companies are concerned with which payment system to use: Kuaidi’s, which has more users, or Didi’s, which attracts more passengers. One possible resolution to this dilemma would be for the new application to accept both payment systems, which would provide a route to split revenue.