Chinese ride-hailing giant Didi Chuxing is looking to spin off its car services unit and hoping to raise between US$1-US$1.5 billion for the deal, in preparation for its upcoming IPO, according to a report by Caijing on Monday (link in Chinese).
Didi’s current car services, which are still part of its main platform, promise to be a ‘one-stop’ solution for car owners and includes rental and maintenance options and just underwent a re-branding in April (link in Chinese). Overall, Didi’s car services already raked in 37 billion yuan (US$ 5.54 billion) in total transacted amount last year, with a target of 90 billion yuan (US$ 13.48 billion) this year, according to figures given by the company recently.
Softbank, one of Didi’s key investors, is expected to be one of the backers for the new independent car services unit, although plans have not been finalized, the report said.
Didi declined to comment on the deal when asked by 36KR. 36KR is KR Asia’s parent company.
The move comes days after the South China Morning Post reported that Didi may be slowing down in its fundraising plans ahead of a widely tipped upcoming IPO. It has also rebranded its high-end car-hailing services at the start of the month, creating a separate service with its own dedicated app called Didi Premier.
Chinese tech companies have sometimes adopted the practice of spinning off units if they feel the units have huge potential. Internet giant Tencent, for instance, intends to list its music and entertainment arm Tencent Music in an estimated $30 billion listing on a North American stock exchange. Anonymous sources told Reuters that Didi values the car services unit to be between US$2 -US$3 billion.
The car services market is growing in China unlike the more saturated car-hailing market, where Chinese O2O tech giant Meituan entered the sector this year. The automotive aftermarket industry, which includes car maintenance services but also vehicle parts, is expected to hit 1.2 trillion yuan (US$ 180 billion) in 2019, according to figures provided by research house Analysys (link in Chinese).
While Didi’s IPO is set to be one of the biggest events in recent years given its more than $50 billion valuation, the company has never publicly confirmed its IPO plans. Differing media reports put the IPO date between the later half of this year to next year.
Editor: Nadine Freischlad