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Three Chinese auto giants drive together into ride-sharing market in competition with Didi

Looking to develop China’s auto market and explore self-driving car technologies, will T3 bring a good fight?

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Three Chinese auto giants drive together into ride-sharing market in competition with Didi

Three Chinese automobile firms have created an entity – T3 Mobile Travel Services – to explore the ride-sharing and autonomous driving market together, announced the new venture last Friday.

The three firms – FAW Group, Dongfeng Motor Corporation, and Changan Automobile – first inked an agreement last December in Wuhan, the capital of China’s central Hubei province. According to the agreement, all parties involved would cooperate in creating new technologies, operating on the automotive value chain, expanding overseas, and developing the Chinese auto market.

In a press release published on FAW’s website yesterday, the company noted that the three parties will take advantage of each other’s resources, whether in terms of talents, technology, organisation, capital and market information. In the future, it said, T3 can also leverage on the three companies’ understanding and knowledge of the self-driving car market, and bring greater value to all users.

At the moment, the three companies have not shared how much capital each firm had put into this new venture, or what plans they have in mind.

FAW, a state-owned enterprise, is by no means a stranger to futuristic transport ideas and technologies. In June 2018, KrASIA‘s parent company 36Kr reported that FAW had led a US$500 million Series B round in Byton, an electric vehicle (EV) startup. FAW also has a 10 per cent stake in Chinese bike-sharing company Mobike’s car-sharing arm, which it will provide electric vehicles for.

Additionally, Dongfeng is looking at mass-producing EVs by 2020, a move aligned with its ‘smart future’ plan. Changan, as well, has formally agreed to work with Huawei to set up a joint innovation facility and promote smart automobiles.

Chinese automakers are not the only ones looking to break into the ride-hailing market. German automobile manufacturers Daimler and BMW announced in March this year that the two firms will merge their ride-hailing and car-sharing arms. Both car-makers have acquired, invested and incubated a number of companies within the taxi and electric car space in Germany and beyond. Examples include Daimler’s purchase of Car2go, a car-sharing startup.

Similarly, in Japan, for example, automobile giant Toyota made news with a US$1 billion investment into Southeast Asian ride-hailing ‘superapp’ Grab last month, a move Anthony Tan, CEO of the Singapore-based company said created tremendous momentum for the company’s fundraising efforts.

Fighting with Didi

Currently, the Chinese ride-sharing market is dominated by Didi, a company that merged its business with Uber’s China operations in 2016. Didi has been said to be gunning for a rumoured IPO, a move catalysed by its strongest competitor Meituan’s plans for an IPO as well.

In April this year, Didi also announced its partnership with German carmaker Volkswagen to produce self-driving vehicles. Herbert Diess, the CEO of Volkswagen, shared that automobile firm will invest around US$18 billion in new technology in China, including developing EVs, and self-driving technologies.

Soh Weiming, who is responsible for strategy at Volkswagen China, also told the WSJ, “The joint venture with Didi is not just about ride-hailing. We want to explore mobility projects as well as autonomous driving and robo-taxis.”

Could Didi’s partnership with Volkswagen and other major foreign automakers be the wake-up call for the traditional car industry in China? The question these three firms need to answer is if conglomerates are able to think and work like startups. If not, T3 might end up moving slower with their collective weight upon it.

While facing an increasing amount of competition back home, Didi has not stopped expanding overseas. It has launched its services in Mexico, a new market where it is currently fighting with its old frenemy Uber.

In markets that it has not expanded into, it has invested in the competitors of Uber; in Southeast Asia, for example, Didi invested in Grab, which later went on to acquire Uber’s operations in this part of the world.

Didi also announced today that it will be working with Booking Holdings, the parent of Booking.com and Agoda, to offer users of both parties a way to book hotels via Didi and on-demand taxis via the hospitality apps, making it even more of an everyday app.

Editor: Ben Jiang